REG - Globalworth Real Est - Half-year Report
19/09/2023 07:00
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RNS Number : 8362M Globalworth Real Estate Inv Ltd 19 September 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
19 September 2023
Globalworth Real Estate Investments Limited
("Globalworth" or the "Company")
Interim Results for the six months ended 30 June 2023
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 2023 (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
Rashid Mukhtar Tel: +40 732 800 000
Deputy CFO
Panmure Gordon (Nominated Adviser and Broker) Tel: +44 20 7886 2500
Dominic Morley
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 250 professionals across Cyprus,
Guernsey, Poland and Romania the combined value of its portfolio is €3.1
billion, as at 30 June 2023. Approximately 96.9% of the portfolio is in
income-producing assets, predominately in the office sector, and leased to a
diversified array of over 700 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, Oradea and Targu Mures.
For more information, please visit www.globalworth.com
(http://www.globalworth.com) and follow us on Facebook, Instagram and
LinkedIn.
Excluded Territories
The release, publication or distribution of this announcement in jurisdictions
other than the United Kingdom may be restricted by law and therefore any
persons who are subject to the laws of any jurisdiction other than the United
Kingdom should inform themselves about, and observe, any applicable legal or
regulatory requirements. In particular, the ability of persons who are not
resident in the United Kingdom or who are subject to the laws of another
jurisdiction to elect to receive the Scrip Dividend Alternative may be
affected by the laws of the relevant jurisdictions in which they are located
or to which they are subject. Any failure to comply with applicable legal or
regulatory requirements of any jurisdiction may constitute a violation of
securities laws in that jurisdiction.
GLOBALWORTH REAL ESTATE INVESTMENTS LIMITED
INTERIM REPORT AND UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
30 JUNE 2023
FINANCIAL HIGHLIGHTS: H1-2023
Combined portfolio open market value Shareholders' equity EPRA NRV per share
€3.1bn €1.6bn €7.55
-2.4(%) on YE-22 -1.6(%) on YE-22 -8.9(%) on YE-22
IFRS Earnings before tax Adjusted normalised EBITDA Net Operating Income
-€44.3m €66.0m €73.7m
+€45.7m in H1-22 +4.1(%) on H1-22 +5.6(%) on H1-22
IFRS Earnings per share EPRA Earnings per share Dividends paid in H1-23
-11 cents 15 cents 15 cents
+15 cents in H1-22 -6.3(%) on H1-22 +15.4(%) on H1-22
Dear Stakeholders,
We have started the year amid high inflation and continued geopolitical
uncertainties that have driven interest rates to their highest levels in the
last 10 years, which will in all likelihood lead to subdued economic growth in
CEE and EU, during the next two years. Nevertheless, there are signs that
inflation is abating and in the absence of other shocks, we expect a gradual
return to a sustainable improvement of GDP growth and improving real estate
market conditions.
The European Commission has revised its EU GDP forecast upwards to 1.0% in
May, with Poland and Romania, expected to have GDP growth of 0.7% and 3.2%
respectively, in 2023.
Globalworth's performance throughout the business remained resilient, despite
global challenges, as we continued to implement our "local landlord" approach,
with an increasing focus on sustainability.
Our initiatives encompassed investments in both existing and new high-quality
properties, the diligent management of our portfolio to preserve and enhance
our operational performance, and the maintenance of an efficient and flexible
capital structure, resulting in a robust overall performance. All of this was
achieved while simultaneously providing a safe and healthy environment for our
people, tenants, and communities to work, visit, and engage with.
At this point, I would like to express my gratitude to all our team members
for their positive attitude, dedication, and commitment, as well as extend our
appreciation to our shareholders, partners, and communities for their
unwavering support in helping us achieve these results.
Investment in Our Portfolio
Our portfolio predominantly consists of Class "A" office spaces. Nevertheless,
during the first half of 2023, we directed our development efforts towards
high-quality logistics facilities in Romania and the redevelopment of two
mixed-use properties in Poland.
Consequently, in H1-2023, we successfully completed the construction of the
Targu Mures Logistics Hub, encompassing a total of 18.3k square meters of
Gross Lettable Area (GLA), fully leased to highly credible tenants.
Simultaneously, progress continued on the development of the two final phases
within Stefanesti Business Park, situated in the Bucharest Greater Area, which
upon completion will contribute an additional 13.3k square meters of GLA to
our industrial/light logistics portfolio in Romania.
In 2023, we anticipate the conclusion of refurbishment works on two out of the
three mixed-use properties in our Polish portfolio. This will result in the
enhancement and expansion of their office space offerings. For our other
existing properties, we remain committed to ongoing investments aimed at
preserving and, where necessary, enhancing their quality.
Beyond the overall positive tone of our operational performance and owing to
the prevailing economic uncertainties and challenging market conditions, the
value of our like-for-like standing commercial portfolio, as well as our total
combined portfolio, decreased during the first half of 2023 by 3.0% to €2.8
billion and 2.5% to €3.1 billion, respectively. This decline is primarily
attributable to the effects of revaluations in June 2023.
Our Leasing and Occupancy
The leasing of spaces within our portfolio constitutes a pivotal determinant
of our business's success. It brings me satisfaction to report that during the
initial half of 2023, we adeptly managed the leasing of 181.0k square meters
of commercial spaces, with a Weighted Average Lease Length (WALL) of 6.9
years. This achievement is particularly noteworthy in light of the
persistently demanding market conditions.
As of June 30, 2023, the average occupancy rate across our combined commercial
portfolio stood at 85.5% (including tenant options, this figure reached
85.7%), exhibiting marginal fluctuation in comparison to the year-end 2022
statistics, which indicated 85.6% (or 85.9% including tenant options).
Following the sale of Warta Tower in July 2023, a property that had become
fully vacant by the close of June, our standing commercial occupancy, when
adjusted, rose to 87.7%.
In both the Polish and Romanian markets, higher construction costs and
interest rates have led to a reduction in development activity and
significantly constrained new supply. Consequently, the forthcoming years are
anticipated to witness a diminished availability of top-tier office spaces in
central locations, below the average levels witnessed in previous periods,
potentially driving higher tenant demand for existing properties.
Furthermore, the divergence between A-grade properties of robust ESG
credentials and B-grade properties has been growing, both from an investment
and leasing perspective. This development is poised to generate benefits to
our portfolio of high-quality properties in the future.
Headline rental rates have remained stable, and the combination of reduced
supply and high inflation is anticipated to serve as a strong buffer against
the adverse impact of a decline in tenant demand due to a weakening economic
landscape.
Notably, total annualised contracted rent experienced a 6.8% surge, reaching
€202.2 million compared to the year-end 2022 figures. Like-for-like
annualised commercial contracted rents within our standing commercial
portfolio exhibited a 5.4% upswing, at €191.0 million by the close of the
first half of 2023.
Our Financial Results
Gross rental income increased with €5.1 million compared to the first half
of last year as an effect of indexation of 8.8% that partially offset by
the reduced rates at which existing leases were renewed for extended period or
new leases were signed.
Furthermore, a decline in service charge income amounting to €3.0 million,
offset by a reduction in operating expenses of €1.4 million, culminated in a
Net Operating Income that surged by 5.6%, reaching €3.9 million, when
compared to H1 2022.
Nonetheless, our adjusted normalised EBITDA exhibited a 4.1% increase,
reaching €66.0 million, attributable to the favourable effects stemming from
cost savings in recurring administrative and other expenditure categories.
Regrettably, our net result for the initial half of 2023 amounted to a net
loss of €25.1 million, in contrast to the net profit of €32.6 million
recorded in H1 2022. This transformation was primarily precipitated by a fair
value loss on investment property, albeit partially offset by an augmented
finance income resulting from the buyback of €100 million in bonds.
Dividend
During the March 2023, we announced the second interim dividend of €0.15 per
share in respect of the six-month financial period ended 31 December 2022 with
a scrip dividend alternative at a reference price of €2.28 per scrip to
preserve liquidity. Approximately 98.1% of the shareholders elected to receive
scrip dividend shares thus resulting in only €0.6 million cash dividend
outflow.
Similarly, on 30 August 2023, we announced for the first six-months of 2023 an
interim dividend of €0.14 per share along with a scrip dividend alternative
at a reference price based on a 20% discount to five consecutive dealing days
until the 13 September 2023. As communicated in the scrip circular, the
Company has received irrevocable undertakings from approximately 92% of its
shareholders to elect for the Scrip Dividend alternative shares in respect of
all of their full cash entitlement to the Interim Dividend. Therefore, we
expect the net cash outflow amount from the cash dividend component to be
minimal similarly to March 2023.
Balance Sheet
We are mostly focused on our liquidity initiatives, including deploying extra
cash resources in unsecured note buybacks by taking advantage of short-term
discount opportunities. We are also executing our liability management
strategy by extending near-term secured facilities and progressively arranging
new secured facilities for 5 to 10 year terms with local and regional banks in
our markets. Our strong presence in the two capital cities, Bucharest and
Warsaw, with several commercial office buildings having occupancy above 85%
and high ESG credentials, provides us with a unique strength in sourcing
additional secured facilities in the short term.
It is important to note that Globalworth has no material debt maturing until
March 2025. Additionally, as of 30 June 2023, we have €130 million in cash
and cash equivalents, which was further strengthened by the additional sale
proceeds from Warta Tower in July. We also have a further €265 million in
undrawn debt facilities, out of which €50 million is available to draw until
December 31, 2025.
In addition, during the interim period, we repurchased 2025 notes with a face
value of €100 million at a discounted price of €83.17 from utilising our
existing cash resources. This brought down our leverage ratio to 42.7% LTV,
which is the same as it was on December 31, 2022, despite a 3% decline in the
value of our like-for-like standing commercial portfolio.
The EPRA Net Reinstatement Value (NRV) as of 30 June 2023 was €1.8 billion,
or €7.55 per share. This represents an 8.9% decrease from €8.29 per share
on December 31, 2022. The decrease was primarily due to the issuance of a
€14.3 million scrip dividend shares in April 2023, which diluted the NRV per
share as well as a valuation loss on the property portfolio in H1-2023. This
was partially mitigated by higher rental growth from indexation.
Fitch Ratings re-affirmed, in July 2023, Globalworth's investment grade rating
and changed the outlook to negative following their 2023 annual review of
Globalworth. S&P downgraded Globalworth's credit rating to BB+ with a
stable outlook.
Environmental and social
We maintained our A-rating by MSCI and a low-risk rating by Sustainalytics. We
issued our fifth Sustainable Development Report during the period.
We continued investing in our green portfolio and, during the first six months
of 2023, we certified or recertified 15 properties. At the end of June 2023,
we had 52 green-certified properties valued at €2.4 billion.
In addition, our environmental target to reduce GHG emissions intensity by 46%
by 2030 versus our baseline 2019 levels (for Scope 1 and 2) was validated by
the globally recognised Science Based Targets initiative (SBTi).
Management change
Stamatis Sapkas, Group CFO, who has contributed significantly to our financial
leadership during their tenure decided to step down in June, in order to
pursue personal and professional opportunities. Stamatis' responsibilities
will be assumed by Mr. Rashid Mukhtar, a dedicated member of our team since
2013, known for his capable financial stewardship and deep understanding of
our company's financial landscape.
Outlook
Despite prevailing challenges such as inflation and heightened stresses
induced by higher nominal rates in the financing markets, there are
discernible signs of macroeconomic variables stabilising. Barring the
emergence of unforeseen disruptions, both financial and real estate markets
are anticipated to further solidify their stability.
The limited supply of office spaces is expected to act as a catalyst,
propelling rents and occupancy rates upwards, thereby fostering robust
fundamentals for the office market. However, it is imperative that risks
associated with ESG-related capital expenditures are diligently managed and
addressed in a manner that enhances overall value.
Over the past 12 months, our primary focal point has remained unwavering -
maintaining operational excellence and safeguarding a level of liquidity that
positions us to uphold a prudent capital structure while seizing investment
opportunities as they materialise.
Dennis Selinas
Chief Executive Officer
18 September 2023
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 Targu Mures Logistics Hub, adding
18.3k sqm of spaces to our portfolio.
− Two high-quality logistics facilities under construction
expected to add 13.3k 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
Review of Developments
In H1-2023, 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 three logistics facilities under construction,
of which Targu Mures Logistic Hub was delivered in the first half and the
other two to be delivered in the second half of the year, while the
refurbishment/repositioning works of two (of the three) mixed-use properties
continued throughout the period.
New Delivery
In the first half of 2023, we delivered our first project in Targu Mures with
a leasable area of 18.3k sqm. At the end of June, the project, which is held
through a JV partnership, was 100% let to two large multinational companies,
Friesland Campina and EKR Elektrokontakt (Nexans Group).
Delivery
Targu Mures Logistic Hub*
Location Targu Mures
GLA (k sqm) 18.3
Occupancy (%) 100.0%
Development Cost** (€ m) 16.2
GAV (€ m) 13.2
Contracted Rent (€ m) 1.5
WALL (years) 10.2
Estimated Yield on Development Cost 9.0%
(*) Joint Venture in which Globalworth owns 50%; figures shown on 100% basis.
(**) Development cost includes amounts to be spent post delivery in order to
accommodate additional tenant requests that yet to be reflected in GAV value
at 30 June 2023
Current Developments & Refurbishment / Repositioning Projects
In the first 6 months of 2023, we continued with the developing of the second
and third phase of our Business Park Stefanesti which is located Northeast of
Bucharest, expecting that these facilities will, on completion, further
increase our footprint with 13.3k sqm of high-quality GLA.
Business Park Stefanesti, which is our second small business units investment
in Bucharest area, offers easy access to the Bucharest Ring Road and allows
for a quick connection to the centre of Bucharest via the A3 motorway. The
project comprises three buildings, the first one being delivered in November
2022 and, as of June 2023, being 100% leased to Delivery Solutions SRL, one of
the leading delivery companies in Romania, while the second and third phase
are, in average, 34.8% pre-let by the end of June 2023.
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 in Renoma and Supersam are expected to be completed in 2023.
Developments - In progress
Business Park Stefanesti II* Business Park Stefanesti III*
Location Bucharest Bucharest
Status Under construction Under construction
Expected Delivery 2023 2023
GLA (k sqm) 5.9 7.4
Development Cost (€ m) 4.2 5.2
GAV (€ m) 5.2 6.5
100% Rent (€ m) 0.4 0.6
Estimated Yield on Development Cost 10.1% 10.7%
(*) 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 H2-2023 H2-2023
GLA - on Completion (k sqm) 48.2 26.7
CAPEX to 30 Jun 23 (€ m) 19.4 3.8
GAV (€ m) 114.9 49.8
Estimated CAPEX to Go (€ m)* 7.8 2.2
ERV (€ m) 9.5 4.5
Estimated Yield on Completion of Project** 9.2% 10.6%
* 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 and regional cities in Romania and Poland, covering a
total land surface of 1.2 million sqm (comprising 2.7% 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 785.7k sqm of high-quality GLA to our standing portfolio footprint.
In the first half of 2023, we sold a plot of land of 3.2k sqm located in the
northern part of Bucharest.
These projects, which are classified as "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 Postponed Postponed Postponed Planned Planned Planned
GLA (k sqm) 17.7 17.2 33.4 525.8 165.2 26.4
CAPEX to 30 Jun 23 (€ m) 8.5 2.5 5.2 12.3 7.0 7.4
GAV (€ m) 7.8 8.3 6.9 37.2 11.0 12.9
Estimated CAPEX to Go (€ m)** 29.7 23.9 38.5 243.6 63.5 39.7
ERV (€ m) 3.1 3.5 5.2 27.7 6.9 6.5
Estimated Yield on Development Cost 8.1% 13.2% 12.0% 10.8% 9.8% 13.8%
(*) 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
· 181.0k sqm of commercial space taken-up or extended at an average
WALL of 6.9 years despite continued challenging market conditions
· Leasing activity equally divided between new take-up and
renewals, improving our overall WALL to 4.9 years.
− New leases (including expansions) accounted for 50.0% of our
leasing activity at a WALL of 8.1 years, with renewals signed at a WALL of 5.9
years
· Total annualised contracted rent increased by 6.8% to €202.2
million compared to year end 2022
· Total combined portfolio value decreased by 2.5% to €3.1
billion, mainly due to revaluations and disposals
− Like-for-like appraised value of standing commercial properties
decreased to €2.8 billion (3.0% lower compared to 31 December 2022)
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 2023, the Group successfully negotiated the take-up
(including expansions) or extension of 181.0k sqm of commercial spaces in
Poland (26.4% of transacted GLA) and Romania (73.6% of transacted GLA), with
an average WALL of 6.9 years. Between 1 January and 30 June 2023, our leasing
activity involved new take-up of available spaces, with such leases accounting
for 50.0% of our total leasing activity signed at a WALL of 8.1 years, while
renewals were signed at a WALL of 5.9 years.
The leasing market remains challenging, as the CEE economy continues to
recover at a moderate pace with inflation returning to single-digits coupled
with the stabilization and general acceptance of the hybrid work model. As
such, most of our large multinational and national corporates have begun
taking decisions on their future occupational plans, re-defining the role of
the office as a place for collaboration and creativity, part of their
corporate identity.
In total, we signed new leases for 90.6k sqm of GLA, with the majority
involving spaces (more than 85%) 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 46 tenants for 80.4k sqm of GLA at a
WALL of 8.6 years. The majority were for office spaces, accounting for 58.2%,
with the remainder involved industrial (39.3%) and retail/other commercial
spaces. The largest new leases in this period were with EKR-Elektrokontakt
(14.1k sqm) in Targu Mures Logistics Hub, Banca Transilvania (9.6k sqm) in
Green Court Complex, Dante International (9.6k sqm) in Globalworth Square in
Bucharest and Leverx Poland (3.3k sqm) in Retro Office House (Wroclaw).
In addition, 15 tenants signed new leases, expanding their operations by 10.2k
sqm at an average WALL of 5.2 years.
We renewed leases for a total of 90.4k sqm of GLA with 52 of our tenants at a
WALL of 5.9 years. The most notable extensions involve Honeywell (24.4k sqm)
in BOC Tower, Deutsche Bank (12.9k sqm) in BOB Tower, Huawei (12.5k sqm) in
Globalworth Tower and Ailleron (5.2k sqm) in Podium Park while c.84.3% of the
renewals by GLA signed were for leases that were expiring in 2024 or later.
Summary Leasing Activity for Combined Portfolio in H1-2023
GLA (k sqm) No. of Tenants* WALL (yrs)
New Leases (incl. expansions) 90.6 60 8.1
Renewals / Extensions 90.4 52 5.9
Total 181.0 107 6.9
*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
seen a widening gap between A-grade properties with strong ESG credentials and
B-grade properties from a leasing and investment perspective, which should
benefit our portfolio of high-quality properties in the future.
Our leases typically adjust annually and in the first quarter of the year. In
the first half of 2023, eligible leases were indexed at an average of 8.8%.
Nevertheless, this positive impact was partly offset by the rates at which
leases were renewed or new leases signed throughout the period.
At the end of June 2023, our average headline rent in our standing properties
for office, retail/commercial and industrial spaces were €15.2/sqm/month
(€14.2 at YE-2022), €15.7/sqm/month (€14.2 at YE-2022) and
€4.2/sqm/month (€4.0 at YE-2022) respectively.
Office leases signed in the first half of the year were at an average rent of
€14.4/sqm/month, industrial spaces at €4.6/sqm/month, and retail spaces at
€15.2/sqm/month. The overall commercial GLA take-up during the first six
months of 2023 was at an average rent of €12.6/sqm/month.
Contracted Rents (on annualised basis)
Total annualised contracted rent across our portfolio in Poland and Romania
increased by 6.8% to €202.2 million compared to year-end 2022, driven by
active asset management, indexation and lease-up in our development projects.
Total annualised contracted rents in our standing commercial portfolio were
€192.5 million on 30 June 2023, up by 6.2% compared to 31 December 2022,
increasing to €193.1 million when including rental income generated by
renting 137 residential units and other auxiliary spaces in Upground, the
residential complex in Bucharest which Globalworth partially own.
Like-for-like annualised commercial contracted rents in our standing
commercial portfolio also increased by 5.4% to €191.0 million at the end of
the first half of 2023 compared to 31 December 2022, mainly as an effect of
rent indexation.
Annualised Contracted Rent Evolution H1-2023 (€m)
Poland Romania Group
Rent from Standing Commercial Properties ("SCP") 31 Dec 2022 86.6 94.7 181.3
Less: Space Returned (8.9) (3.9) (12.8)
Plus: Rent Indexation 6.2 6.8 13.0
Plus/Less: Lease Renewals (net impact) & Other (0.0) (1.4) (1.4)
Plus: New Take-up 3.2 7.6 10.8
Total L-f-L Rent from SCP 30 Jun 2023 87.2 103.8 191.0
Plus: Standing Commercial Properties Acquired During the Period - - -
Plus: Developments Completed During the Period - 1.5 1.5
Total Rent from Standing Commercial Properties 87.2 105.3 192.5
Plus: Residential Rent - 0.6 0.6
Total Rent from Standing Properties 87.2 105.9 193.1
Plus: Active and Pre-lets of Space on Projects Under Development / 8.7 0.3 9.1
Refurbishment
Total Contracted Rent as at 30 Jun 2023 95.9 106.2 202.2
Combined Annualised Commercial Portfolio Contracted Rent Profile as at 30 June
2023
Poland Romania Group
Contracted Rent (€ m) 95.9 105.6 201.5
Tenant origin - %
Multinational 64.0% 84.3% 74.7%
National 34.8% 14.4% 24.1%
State Owned 1.2% 1.3% 1.3%
Note: Commercial Contracted Rent excludes c.€0.6 million from residential
spaces as at 30 June 2022
Annualised Contracted Rent by Period of Commencement Date as at 30 June 2023
(€m)
Active Leases H2-2023 H1-2024 H2-2024 >2024 Total
Standing Properties 182.4 6.9 1.8 2.0 - 193.1
Developments 7.8 1.1 0.1 0.1 - 9.1
Total 190.2 7.9 1.8 2.2 - 202.2
Annualised Commercial Portfolio Lease Expiration Profile as at 30 June 2023
(€m)
Year H2-2023 2024 2025 2026 2027 2028 2029 2030 2031 >2031
Total 9.1 20.0 18.6 19.2 27.6 23.1 20.2 31.6 11.7 20.3
% of total 4.5% 9.9% 9.2% 9.5% 13.7% 11.5% 10.0% 15.7% 5.8% 10.1%
The Group's rent roll across its combined portfolio is well diversified, with
the largest tenant accounting for 5.1% of contracted rents, while the top
three tenants account for 10.8% and the top 10 account for 24.3%.
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.
Overall, in the first half of 2023, we successfully negotiated the take-up
(including expansions) or extension of 181.0k sqm of commercial spaces in our
portfolio. The weighted average effective rent for these new leases was
€9.1/sqm/month with a WALL of 6.9 years. Industrial leases completed in the
period, which accounted for 18.9% of the total space leased, resulted in lower
average headline and effective rents.
The difference between headline (base) and effective rents in the first half
of 2023 was, on average, 27.8%, which is higher than for FY2022 (average of
26.1%) reflecting the fact that competition remained challenging.
In total, new leases signed in the first six months of the year will generate
a future rental income of €202.9 million (including auxiliary spaces), with
leases from office properties accounting for 82.0% of future rental income.
Weighted Average Effective Rent (€ / sqm / m) - H1-2023
Poland Romania Group
Headline Commercial Rent 16.7 11.1 12.6
Less: Rent Free Concessions (1.7) (1.3) (1.4)
Less: Tenant Fitouts (2.1) (1.6) (1.7)
Less: Broker Fees (0.5) (0.3) (0.4)
Effective Commercial Rent 12.5 7.9 9.1
WALL (in years) 5.1 7.9 6.9
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 2023
remained high at 99% 1 (#_ftn1) (over 99% for 2022FY), 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 and ensure sustainable
cash flow generation.
Portfolio Valuation
In line with our practice of biannual valuations, our entire portfolio in
Poland and Romania was revalued as of 30 June 2023. The valuations were
performed by Knight Frank for our properties in Poland, with Colliers and
Cushman & 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 2023).
Assigning the appraisal of our portfolio to four independent and experienced
service providers makes the process of determining the value of properties
transparent and impartial. Through our oversight, we ensure that a consistent
methodology, reporting, and timeframe are respected. Our portfolio has been
growing since the inception of the Group, driven by 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, the total combined portfolio value was €3.0 billion at the end of
2019 and remained effectively unchanged in 2020 due to the impact of the
COVID-19 pandemic. It increased to €3.2 billion at both 31 December 2021 and
31 December 2022, thanks to additions made in the last two full years.
The portfolio decrease in the first half of 2023 is mainly attributed to
continued challenging market conditions across our markets, which led to
marginal changes in key market indicators used by valuation companies. Our
combined portfolio value as of 30 June 2023 was €3.1 billion, representing a
2.5% decrease compared to 31 December 2022. The like-for-like appraised value
of our standing commercial properties was €2.8 billion at the end of the
period, reflecting a 3.0% decrease compared to 31 December 2022.
In valuing our properties, the key market indicators used by the four
independent appraisers, although varying, 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 2022, with
Effective Rental Values (ERVs) remaining stable and yields marginally
decompressing in our markets of interest.
Combined Portfolio Value Evolution 30 June 2023 (€m)
Poland Romania Group
Total Portfolio Value at 31 Dec 2022 1,584.5 1,574.4 3,158.9
Less: Properties Held in Joint Venture (*) - (119.3) (119.3)
Total Investment Properties at 31 Dec 2022 1,584.5 1,455.1 3,039.6
Plus: Transactions - (10.9) (10.9)
o/w New Acquisitions - - -
o/w Disposals - (10.9) (10.9)
Plus: Capital Expenditure 7.0 1.2 8.2
o/w Developments 7.0 1.2 8.2
o/w Standing Properties - - -
o/w Future Developments - - -
Plus: Net Revaluations Adjustments (58.4) (25.6) (84.0)
o/w Developments 3.5 1.2 4.7
o/w Standing Properties (62.0) (26.1) (88.0)
o/w Lands, Future Developments & Acquisitions - (0.7) (0.7)
Total Investment Properties at 30 Jun 2023 1,533.1 1,419.8 2,952.9
Plus: Properties Held in Joint Venture (*) - 127.1 127.1
o/w Capital Expenditure & Acquisitions - 1.8 1.8
o/w Net Revaluation Adjustments - 6.0 6.0
Total Portfolio Value at 30 Jun 2023 1,533.1 1,546.9 3,080.0
STANDING PORTFOLIO REVIEW
· Standing portfolio footprint increased by 17.3k sqm to 1,422.9k
sqm of GLA, mainly attributed to the delivery of our first logistic /
light-industrial facility in Targu Mures, Romania
· Total combined standing GLA of 1.4 million sqm, with total
standing portfolio value at €2.8 billion
· Average standing occupancy of our combined commercial portfolio
of 85.5% (85.7% including tenant options), marginally lower vs. year-end 2022
(85.6% or 85.9% including tenant options)
− Average commercial standing occupancy, adjusted for Warta Tower,
which was sold in July and was fully vacant as of 30 June 2023, was 87.7%
· Total contracted rent of €193.1 million in our standing
properties (over 85% coming from standing office properties)
· Standing commercial WALL increasing to 5.0 years (versus 4.4
years at year-end 2022) due to renewals and new leases signed in the period
· All our properties in Poland are now internally managed,
resulting in 87.1% of our combined standing commercial portfolio by value
(97.0% of office and mixed-use standing properties) being internally managed
by the Group
Standing Portfolio Evolution
Our combined portfolio of standing properties expanded in the first half of
2023 with the addition of our first logistic/light industrial facility in
Targu Mures, Romania. The Targu Mures Logistic Hub offers a total of 18.3k sqm
of high-quality Gross Lettable Area (GLA) and, as of 30 June 2023, was fully
leased to two large multinational companies, with an average Weighted Average
Lease Length (WALL) of 10.2 years.
In general, our standing portfolio primarily comprises 30 Class "A" offices
(comprising a total of 50 properties) and a mixed-use investment (comprising a
total of five properties) in central locations in Bucharest (Romania), Warsaw
(Poland), and five of the largest office markets/cities in Poland (Krakow,
Wroclaw, Katowice, Gdansk, and Lodz). These locations collectively account for
88.5% of the value of our standing portfolio.
Furthermore, in Romania, we fully own five logistics/light-industrial parks
with ten facilities located in Timisoara, Arad, Oradea, and Pitesti. We also
own the majority stake in two small business unit projects in Bucharest, each
with two standing facilities. Additionally, we have a 50% ownership stake
through joint venture agreements in three other logistics/business parks (with
four standing facilities) in Bucharest, Constanta, and Targu Mures. Moreover,
we own a portion of a residential complex in Bucharest.
As of 30 June 2023, our combined standing portfolio consisted of 42
investments (compared to 41 on 31 December 2022) encompassing 72 buildings
(compared to 71 on 31 December 2022) in Poland and Romania.
During the period, the total Gross Lettable Area (GLA) of our standing
commercial portfolio increased by 18.6k sqm, representing a growth of 1.3%,
reaching a total of 1,401.8k sqm by the end of June. This expansion was
primarily attributed to the completion of the Targu Mures Logistic Hub, which
contributed a total GLA of 18.3k sqm, as well as the remeasurement of certain
areas within our portfolio.
In total, our standing portfolio (comprising commercial and other properties)
increased in GLA by 1.2% to reach 1,422.9k sqm. This increase was influenced
by the sale of residential units in our Upground Residential project.
The appraised value of our combined standing portfolio as of 30 June 2023
amounted to €2.8 billion, with more than 98% of this value attributed to
commercial properties. This value reflected a decrease of 2.6% compared to 31
December 2022. This overall decline is primarily attributable to negative
revaluation differences, partially offset by the completion and addition of
the Targu Mures Logistic Hub. The value of like-for-like standing commercial
properties decreased by 3.0% as of 30 June 2023 compared to 31 December 2022,
with a 3.6% reduction in the value of like-for-like standing office and
mixed-use properties partly offset by an increase in the value of our
industrial properties. (Additional information can be found in the "Asset
Management Review").
Globalworth Combined Portfolio: Key Metrics
Total Standing Properties 30 Dec. 2021 31 Dec. 2022 30 Jun. 2023
Number of Investments 39 41 42
Number of Assets 66 71 72
GLA (k sqm) 1,302.3 1,405.6 1,422.9
GAV (€ m) 2,866.3 2,893.6 2,819.5
Contracted Rent (€ m) 175.4 182.0 193.1
Of which Commercial Properties 30 Dec. 2021 31 Dec. 2022 30 Jun. 2023
Number of Investments 38 40 41
Number of Assets 65 70 71
GLA (k sqm) 1,272.0 1,383.2 1,401.8
GAV (€ m) 2,810.3 2,850.3 2,778.6
Occupancy (%) 88.5% (88.7%*) 85.6% (85.9%*) 85.5% (85.7%*)
Contracted Rent (€ m) 174.5 181.3 192.5
Potential rent at 100% occupancy (€ m) 201.2 211.6 224.8
WALL (years) 4.7 4.4 5.0
(*) Including tenant options
Evolution of Combined Standing Portfolio over H1-2023
31 Dec. 2022 LfL Change* New Acq. New Deliv. Sales 30 Jun. 2023
(& Other Adj**)
GLA (k sqm) 1,405.6 (0.0) - 18.3 (1.0) 1,422.9
GAV (€ m) 2,893.6 (85.0) - 13.2 (2.2) 2,819.5
(*) Like-for-Like change represents the changes in GLA or GAV of standing
properties owned by the Group at 31 December 2022 and 30 June 2023.
(**) 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 2023 stood
at 85.5% (85.7% including tenant options), indicating a marginal 0.1% decrease
over the past six months (compared to 85.6% as of 31 December 2022, or 85.9%
including tenant options).
The addition of the Mures Logistic Hub, fully leased as of 30 June 2023, was
counterbalanced by mixed occupancy trends in our markets. In Poland, standing
commercial occupancy decreased by 8.1% compared to 30 December 2022, primarily
influenced by excess supply in our Regional Polish submarkets. In contrast, in
Romania, it increased by 4.5% during the first half of 2023.
When adjusting for Warta Tower, which was sold in July and was entirely vacant
as of 30 June 2023, our standing commercial occupancy reached 87.7% (87.8%
including tenant options). On a like-for-like basis, occupancy experienced a
slight decline of 0.3%, settling at 85.4% by the end of the first half of
2023. Like-for-like standing commercial occupancy, adjusted for Warta Tower,
remained unchanged at 87.5% as of 30 June 2023, compared to the figures on 31
December 2022.
Across the portfolio, as of the end of the first half of 2023, we had 1,199.2k
sqm of commercial Gross Lettable Area (GLA) leased to more than 630 tenants,
with an average Weighted Average Lease Length (WALL) of 5.0 years. The
majority of these tenants are national and multinational corporates, renowned
within their respective markets.
Additionally, we had 47.8k sqm leased in the two mixed-use properties
currently undergoing refurbishment/repositioning, and 4.6k sqm pre-let in our
two facilities under construction in Business Park Stefanesti. These figures
are not included in our standing portfolio metrics.
Occupancy Evolution H1-2023 (GLA 'k sqm) - Commercial Portfolio
Poland Occupancy Romania Occupancy Group Occupancy
Rate (%) Rate (%) Rate (%)
Standing Available GLA - 31 Dec. 22 542.1 841.0 1,383.2
Acquired GLA - - 0.0
New Built GLA - 18.3 18.3
Remeasurements, reclassifications 0.0 0.3 0.3
Standing Available GLA - 30 Jun. 23 542.1 859.6 1,401.8
Occupied Standing GLA - 31 Dec. 22 440.6 81.3% 743.7 88.4% 1,184.3 85.6%
Acquired/Developed Occupied GLA - 18.3 18.3
Expiries & Breaks (50.2) (22.2) (72.4)
Renewals* 28.4 60.9 89.3
New Take-up 14.6 54.2 68.8
Other Adj. (relocations, remeasurements, etc) (0.2) 0.4 0.2
Occupied Standing GLA - 30 Jun. 23 404.8 74.7% 794.4 92.4% 1,199.2 85.5%
* Renewals are neutral to the occupancy calculation.
Standing Properties Operation and Upgrade Programme
Providing best-in-class real estate spaces to our business partners stands as
a fundamental component of our strategy at Globalworth.
We firmly believe that employing a "hands-on" approach, coupled with
continuous active management and investment in our portfolio, enables us to
preserve and augment the value of our properties, yield long-term income, and
offer top-tier real estate spaces to our business partners.
To cater to the requirements of our current and prospective business partners,
we persistently (re)invest in our properties, ensuring the maintenance and,
where necessary, enhancement of the quality of our buildings and services.
We are pleased to report that all our properties in Poland are now under
internal management by the Group. In Romania, we manage all but one of our
offices in-house. Collectively, we internally oversee 962.3k sqm of
high-quality office and mixed-use space, with an appraised value of €2.4
billion. Within our total standing commercial portfolio, internally managed
properties account for 87.1% by value (comprising 97.0% of office and
mixed-use standing properties) as of 30 June 2023.
Our Upgrade Programme has returned to a more conventional pace since 2021,
following a temporary scaling back in 2020 due to COVID-19. As a result of our
ongoing in-house initiatives and property additions, we possess a modern
portfolio. Notably, 54 of our standing commercial properties, constituting
77.4% by Gross Lettable Area (GLA) and 76.4% by commercial portfolio value,
have either been delivered or significantly refurbished in or after 2014. In
the first half of 2023, we invested €24.1 million in selected improvement
initiatives within our standing portfolio.
Internally Managed Commercial Portfolio as at 30 June 2023 Poland Romania Group
Internally Managed GLA (k sqm) 542.1 426.1 968.3
% of Commercial GLA 100.0% 49.6% 69.1%
% of Office and Mixed-Use GLA 100.0% 90.9% 96.4%
Internally Managed GAV (€ m) 1,360.6 1,058.2 2,418.8
% of Commercial GAV 100.0% 74.7% 87.1%
% of Office and Mixed-Use GAV 100.0% 92.5% 97.0%
SUSTAINABLE DEVELOPMENT UPDATE / OTHER INITIATIVES
· 15 properties were certified or recertified with BREEAM Very Good
or higher certifications in our portfolio in H1-2023
· Overall, 52 green certified properties in our portfolio valued at
€2.4 billion accounting for 87.1% from our combined standing commercial
portfolio value.
· 95.8% of our office and mixed-use properties by value have a WELL
Health-Safety rating, further demonstrating the quality of our portfolio
· Issued the fifth sustainable development report for the Group for
FY 2022
· Globalworth maintained its low-risk rating by Sustainalytics and
A by MSCI
· c. €150k contributed to over 15 initiatives in Romania and
Poland
Green Buildings
Consistent with our commitment to energy-efficient properties, during H1-2023
we certified or recertified 15 properties in our portfolio with BREEAM Very
Good or higher certifications.
Overall, as of 30 June 2023, our combined standing portfolio comprised 52
green-certified properties, accounting for 87.1% of our standing commercial
portfolio by value. BREEAM-accredited properties account for 82.0% of our
green-certified standing portfolio by value, with the remaining properties
being holders of other certifications (LEED Gold or Platinum, Edge).
At Globalworth, we are aiming for 100% of our portfolio to be
green-accredited. We are currently in the process of certifying or
recertifying 20 other properties in our portfolio, principally targeting
BREEAM certifications.
Furthermore, as part of our overall green initiatives, we kept our policy of
securing 100% of the energy used in our Polish and Romanian properties from
renewable sources.
In addition, as of 30 June 2023, 50 of our standing commercial properties had
a WELL Health-Safety Rating, with a total value of €2.4 billion accounting
for 95.5% of our standing office and mixed-use properties by value. Overall,
95.8% of our office and mixed-use portfolio by value (including Renoma and
Supersam) is rated for WELL Health-Safety, standing as further evidence of the
quality of our portfolio.
Social Initiatives
In the first half of 2023, Globalworth and the Globalworth Foundation
continued with their very active social programme, contributing €154k to
over 20 initiatives in Romania and Poland.
Initiatives to which we contributed included:
· Primo Hub Center: As part of our 'Space for Ukraine' initiative
in the BOB building, we offered support to DGASMB in opening a much-needed
educational center for over 160 refugee children. The 'Space for Ukraine'
initiative is an aid program that we've put in place since the beginning of
the Ukrainian conflict. It is aimed at providing shelter and support for the
better integration of refugees into our communities.
· Heart to Heart
· Globalworth Foundation's activities include concern for
children's health. By organizing a fundraising campaign among Globalworth
tenants it was possible to raise funds to support little patients with heart
defects. The campaign started on Saint Valentine's Day.Thanks to the
initiative an INR apparatus to measure coagulation, which is necessary after
heart operations was purchased. Globalworth Foundation donated a treatment
chair for the cardiac surgery unit at paediatric hospital in Warsaw
· 'Zaczytane Bibiloteki', Book-crossing in hospitals and care
centres for children in Katowice
· The Globalworth Foundation, together with the Zaczytani.org
Foundation, has opened four "Zaczytane Bibiloteki" in hospitals and care
centers for children in Katowice, Krakow Warsaw and Wroclaw. The books were
collected among employees of companies that are tenants of Globalworth
properties. Thanks to the campaign, it was possible to collect more than 1,000
books, which will receive a second life and give others a chance to read them.
The aim of the campaign is to help children undergoing treatment in hospitals
and wards of childcare centres by making their time more pleasant and
providing permanent access to literature.
In addition to these we had several campaigns within our communities among
which it is noteworthy to mention:
· Super Woman - where we offered to the astonishing women from our
buildings a special gift: their own super-hero icon tote bags, based on their
unique powers
· Coffee Talks - since offices are more than simply physical
spaces, Globalworth continued to strive to offer its community the greatest
workplace experiences. In May, we went on a tour of our buildings and offered
our community the best coffee in town
· Office Moji Day - To celebrate World Emoji Day in July, we
encouraged our tenants' creative communication by replacing conventional
language with emojis
· "Bike services" for our tenants in Poland - The celebrate the
start of spring and summer season Globalworth Poland organized in May a series
of Bike Days in our office buildings in Poland. Skilled technicians were on
hand to provide basic maintenance and repairs, ensuring that our tenants'
bikes were in excellent condition for their upcoming adventures
Reporting
As part of our effort to improve disclosure in relation to our sustainable
development strategy, initiatives and performance, we published Globalworth's
"2022 Sustainable Development Report".
This is the fifth 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).
PORTFOLIO SNAPSHOT
Our real estate investments are in Poland and Romania, the two largest markets
in the CEE. As at 30 June 2023, our portfolio was spread across 13 cities,
with Poland accounting for 49.8% by value and Romania 50.2%.
Combined Portfolio Snapshot (as at 30 June 2023)
Poland Romania Combined Portfolio
Standing Investments((1)) 19 23 42
GAV((2)) / Standing GAV (€m) €1,533m / €1,361m €1,546m / €1,458m €3,080m / €2,819m
Occupancy 74.7% 92.4% 85.5%
(92.6% incl. tenant options) (85.7% incl. tenant options)
WALL((3)) 4.0 years 5.8 years 4.9 years
Standing GLA (k sqm)((4)) 542.1k sqm 880.8k sqm 1,422.9k sqm
Contracted Rent (€m)((5)) €95.9m €106.2m €202.2m
GAV Split by Asset Usage
Office 81.8% 74.2% 78.0%
Mixed-Use 18.2% 0.0% 9.0%
Industrial 0.0% 18.5% 9.3%
Others 0.0% 7.3% 3.7%
GAV Split by City
Bucharest 0.0% 83.1% 41.7%
Timisoara 0.0% 6.5% 3.3%
Pitesti 0.0% 3.8% 1.9%
Constanta 0.0% 4.2% 2.1%
Arad 0.0% 1.1% 0.6%
Oradea 0.0% 0.4% 0.2%
Targu Mures 0.0% 0.9% 0.4%
Warsaw 44.9% 0.0% 22.4%
Krakow 19.8% 0.0% 9.8%
Wroclaw 16.6% 0.0% 8.3%
Katowice 11.0% 0.0% 5.5%
Lodz 4.1% 0.0% 2.0%
Gdansk 3.6% 0.0% 1.8%
GAV as % of Total 49.8% 50.2% 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 2023
3. Includes pre-let commercial standing and development/re-development assets.
WALL of standing commercial properties in Poland, Romania and the Combined
portfolio are 4.0 years, 5.8 years and 5.0 years, respectively.
4. Including 21.1k sqm of residential assets in Romania
5. Total rent comprises commercial (€192.5 million) and residential (€0.6
million in Romania) standing properties, rent in assets under redevelopment
(€8.8 million in Poland) and development pre-lets (€0.3 million in
Romania).
CAPITAL MARKETS UPDATE
· The first half of 2023 was characterised by continued high
volatility in the economic and business environment, negatively, impacting
capital markets
· Globalworth's share price in this period traded consistently
below its last reported 31 December 2022 EPRA NRV
· GWI 18/25 and 20/26 bonds yields were at 14.9% and 13.2% at 30
June 2023 respectively vs 7.9% and 8.9% at 30 June 2022
· In June 2023, considering the market context, we have purchased
€100.0 million of the 2025 Eurobond notes, and in the future, we aim to
acquire more of our outstanding notes in order to proactively manage debt
maturities
· Fitch re-affirmed the investment grade rating following their
2022 year-end review of Globalworth and changed the outlook to negative, while
S&P downgraded the group's corporate credit rating to BB+ with a stable
outlook
Equity Capital Markets and Shareholder Structure Update
The first half of 2023 was characterised by continued high inflation, rising
interest rates and the continuation of the war in Ukraine, all of which we
expect continue to impact in the near and medium term the economic
environment, maintaining higher volatility in the capital markets.
During the first half of 2023, real estate valuations encountered notable
headwinds stemming from restricted access to capital markets and general
uncertainty in investment in most asset classes. A resulting heightened
investor risk aversion led to an elevation in demanded risk premia,
subsequently contributing to an escalation in discount rates. This, coupled
with a modest yield decompression observed within our targeted markets,
culminated in diminished equity valuations as of 30 June 2023.
As of 30 June 2023, it is essential to place Globalworth's share price
performance in the context of the prevailing macroeconomic landscape.
Throughout the first half of 2023, the FTSE EPRA Developed Europe index
demonstrated a negative performance, registering a decline of -11.8%.
Conversely, the FTSE EPRA Global index exhibited a positive performance,
reflecting an increase of +2.5%.
In contrast, despite several favourable factors such as the high quality of
its portfolio, robust leasing activity, and the company's presence in
high-growth, low office stock markets, Globalworth's share price experienced a
notable decline of -22.9%. It is pertinent to acknowledge that this decline
can be attributed in part to the limited free float of the Group.
Throughout this period, Globalworth's share price consistently traded below
its last reported EPRA Net Reinstatement Value (NRV) as of 31 December 2022,
which stood at €8.29 per share. The share price reached its lowest closing
point on 5 June 2023, at €2.41 per share, and its highest price on 1 July
2022, at €5.05 per share.
Zakiono Enterprises Ltd, which is jointly and equally owned by CPI Property
Group S.A. ("CPI") and Aroundtown SA ("Aroundtown"), holds 60.7% of the share
capital of the Group, followed by Growthpoint Properties Ltd with 29.4%.
Globalworth Shareholding
30 June 22 30 June 23
CPI Property Group Together: Zakiono Enterprises 60.6% 60.7%
Aroundtown
Growthpoint Properties 29.4% 29.4%
Oak Hill Advisors 5.3% 5.3%
Other 4.7% 4.6%
Basic Data on Globalworth Shares (Information as at 30 June 2023)
Number of Shares 235.9m plus 0.8m shares held in treasury
Share Capital €1.7bn
WKN / ISIN GG 00B979FD04
Symbol GWI
Free Float 9.8%
Exchange London AIM
Globalworth Share Performance
H1-2022 H1-2023
Market Capitalisation (€ million) - 30 June 1,188 715
30-June Closing Price (€) 5.36 3.03
52-week high (€) 6.68 5.05
52-week low (€) 5.25 2.41
Dividend paid per share 0.13 0.15
Bonds Update
We finance ourselves through a combination of equity and debt, and we compete
with many other real estate companies for investor trust to support our
initiatives.
At the beginning of the year, we had two Eurobonds outstanding for a total of
€950 million with a weighted average maturity of 2.8 years.
These 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 raised in June 2022 from the IFC, provide us with a simplified
capital structure and improve the efficiency of our capital allocation.
Globalworth is rated by two of the three major agencies, with Fitch
maintaining their investment credit rating following their review of the Group
and changing the outlook to negative while S&P downgraded the group's
corporate credit rating to BB+ with a stable outlook considering the volatile
and challenging market environment.
In the first six months of 2023, our bonds performance has been impacted by
rising interest rates and bond investor risk aversion. On average, our 18/25
and 20/26 bonds traded at 11.4% and 10.4%, respectively, during the period.
However, yield to maturity increased as the year progressed, closing at 14.9%
and 13.2% on 30 June 2023.
Considering the context, the board decided to launch in June a cash tender
offer for our outstanding notes due 2025 and 2026 in line with proactively
managing the Company's debt maturity profile and, as a result, we have
purchased €100.0 million of the 2025 notes. The Company may, in the future,
depending on market conditions, acquire more of the notes issued under the two
Eurobonds outstanding with the aim of addressing its bond debt maturities.
Rating
S&P Fitch
Rating BB+ BBB-
Outlook Stable Negative
Basic Data on the Globalworth Bonds
GWI bond 18/25 GWI bond 20/26
ISIN XS1799975922 XS2208868914
SEDOL BD9MPV -
Segment Euronext Dublin, BVB Euronext Dublin
Minimum investment amount €100,000 and €1,000 thereafter €100,000 and €1,000 thereafter
Coupon 3.000% 2.950%
Issuance volume €550 million €400 million
Outstanding 30 Jun. 2023 €450 million €400 million
Maturity 29 March 2025 29 July 2026
Performance of the Globalworth Bonds
H1-2022 H1-2023
GWI bond 18/25
30 June closing price 88.29 82.80
Yield to maturity at 30 June 7.92% 14.95%
GWI bond 20/26
30 June closing price 80.54 75.38
Yield to maturity at 30 June 8.85% 13.22%
1. Introduction and Highlights
Gross rental income saw a 5.4% increase, primarily due to a like-for-like rise
in rental income due to indexation, which amounted to 8.8%. However, this
growth was mitigated by the reduced rates at which leases were renewed or new
leases were secured during the period. Consequently, our combined occupancy
level remained stable at 85.5%, maintaining the same level as in December
2022. This outcome underscores our commitment to the "local landlord"
approach, which centres on cultivating strong tenant relationships and
addressing their specific requirements.
In our financial performance analysis, we employ a range of metrics,
encompassing both IFRS and EPRA measures. These metrics are deliberately
designed to augment transparency and facilitate comparisons within the
European real estate sector.
Revenues NOI1
€119.1 €73.7m
2.1% on H1-2022 +5.6% on H1-2022
IFRS Earnings per share2 Combined Portfolio Value (OMV)1
€3.1bn
-11 cents
-2.4% on 31 Dec. 2022
+15 cents in H1-2022
EPRA NRV1,3 EPRA NRV per share1,3
€1,781.1m
€7.55
-2.96% on 31 Dec. 2022
-8.9% on 31 Dec. 2022
Adjusted normalised EBITDA1,4 EPRA Earnings per share1,2
€66.0m
+4.1% on H1-2022 15 cents
-6.3% on H1-2022
LTV1,5 Dividends paid in H1-2023 per share
42.7%
15 cents
42.7% at 31 Dec. 2022
15.4% on H1-2022
1. See Glossary 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 23 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 2023 was €119.1 million, up by
2.1% from the prior year results.
Gross Rental income continued to grow, reaching €95.3 million for H1-2023,
higher by €5.1 million compared H1-2022, decreasing to €80.5 million when
accounting for tenant incentives which are amortised during the life of the
lease.
Net Rental Income increase with €5.3 million compared to the same period in
2022, as follows:
· additional rental income of €0.4 million from industrial
developments delivered over the past 12 months to our portfolio (Catted
Chitila, TAP 2 B3 and Catted Stefanesti) and the additional rental income of
€4.9 million from like-for-like standing properties in Romania (€3.5
million increase representing 9.7%) and Poland (€1.4 million increase
representing 3.9%), and
The overall consolidated revenue increased by €2.5 million, compensated by
€3 million lower (a decline of 8%) service charge income from standing
properties when net rental income grew by 7.1% to €80.5 million. As a result
of an average decrease in service charge rate per square metre across our
standing portfolio and predominantly due to decline in the occupancy in Poland
on like-for-like basis.
Overall, our revenues remained relatively evenly split between our two markets
of operation, with Poland accounting for 49% (52% in H1-2022) and Romania 51%
(48% in H1-2022).
Net Operating Income ("NOI"), after taking into account property and fitout
costs, was €73.7 million, higher by 5.6% compared to H1-2022. Overall
operating expenses in our portfolio decreased by €1.4 million to €45.3
million of which c.84% 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 €1.0 million across.
· NOI was split 48% Poland / 52% Romania, compared to 51% Poland / 49%
Romania in H1-2022.
Adjusted normalised EBITDA (including share of minority interests) was €66.0
million, higher by 4.1% compared to H1-2022 (€63.4 million), as the increase
in NOI was partially offset by higher administrative and other expenses.
Net finance costs were €9.7 million for the period, lower by 63% (or €16.7
million lower) compared H1-2022 (€26.4 million), due to:
· higher finance income (by €17.0 million) from the one-off gain
related to the bond buyback of €15.8 million, income from bank deposits
€1.0 million and interest received from joint ventures €0.3 million; and
· higher finance expenses by 1% overall (€0.4 million) as a result of
numerous factors;
a) decline in interest costs on public notes by €4.5 million due to
repayment of FY2022 notes in prior year and €0.6 million reduction in bank
charges and other financial expenses, which mitigated,
b) €1.5 million increased expense from higher Euribor rates and
additional €3.6 million interest expenses from new loan facilities
outstanding in last 12 months as compared to 30 June 2022.
Joint ventures generated net gains in H1-2023 and our share of these amounted
to €2.6 million increased with 30% as compared to H1-2022. This positive
result is mainly due to an improvement in operating performance of the
existing assets and our share of the net profit generated by the addition of
Targu Mures during.
Earnings before tax turner to a loss of €44.3 million for H1-2023 (€45.7
million profit in H1-2022), mainly as a result of the €102.9 million
revaluation loss recorded versus the valuation gain of €7.0 million recorded
in H1-2022.
· €31.8 million and €71.1 million net fair value loss in Romania
and Poland respectively (€11.7 million gain and €4.7 million loss recorded
in Romania and Poland respectively in H1-2022)
EPRA earnings for the first six months of 2023, however, amounted to €34.2
million (or 15 cents per share), lower by 0.4%, EPRA earnings per share
decreased as the weighted average number of shares was 228.4 million in
H1-2023 (221.4 million in H1-2022).
IFRS earnings, similar to earnings before tax, which turned to a loss in
H1-2023 due to the valuation loss recorded in the period, was 11 cents per
share negative compared to positive 15 cents per share in H1-2022. The IFRS
earnings were €24.6 million negative compared to €33.5 million positive in
H1-2022. The lower income tax expense by €31.9 million (due to deferred tax
impact on revaluation loss) compared to H1-2022 helped to reduce the magnitude
of the negative result. Excluding the effects of investment property
valuations, the net result for H1-2023 was €54.8 million, 15.6% higher than
for H1-2022 (€32.2 million).
IFRS to EPRA earnings bridge (€cents)
€cents
IFRS EPS (11)
Add/(subtract):
FV loss on properties 45
Loan close-out costs (18)
JVs & NCI (1)
EPRA EPS 15
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 2023.
Overall, the combined market value of the portfolio decreased by €77 million
to €3,080 million (31 Dec. 22: €3,157 million), comprising of €2,953
million included in our investment property and €127 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), of €2,953 million as at 30 June 2023, was €84.9 million
lower compared to year-end 2022. The reduction is due to the fair value losses
on freehold properties of €102.9 million, with a split of 69% in Poland and
31% in Romania, which capital expenditure on development projects and standing
assets helped to reduce the effect of the valuation losses on the overall
portfolio value.
In June 2023 we proceeded with the buyback of €100 million of our FY2024
notes which principally contributed in lowering our cash position to €130.5
million at 30 June 2023 (€163.8 million at 31 Dec. 22).
Total assets at the end of the period were €3,260 million, lower by 3%
compared to 31 December 2022 (€3,369 million).
EPRA NRV was €1,781.1 million as of 30 June 2023, lower by 3% compared to 31
December 2022 (€1,835.5 million). As a result, EPRA NRV per share also
increased to €7.55 per share (31 December 2022: €8.29 per share) by 8.9%.
The decrease was largely due to the €102.9 million negative effect of fair
value gains on the portfolio and increase in the fully diluted number of
shares.
EPRA NAV per share (€)
€
EPRA NRV 31 Dec 2022 8.29
EPRA Earnings 0.15
Bond gain 0.07
FV loss (0.45)
S. shares (0.50)
Others (0.01)
EPRA NRV 30 June 2023 7.55
( )
4. Dividends
Globalworth distributes bi-annually at least 90% of its EPRA Earning to its
shareholders. On 8 March 2023, the Board of Directors of the Company approved
the distribution of an interim dividend in respect of the six-month financial
period ended 31 December 2022 of €0.15 per ordinary share, with the option
to receive their net dividend in the form of Globalworth shares ("Scrip
Dividend Shares") or cash. As a result, on 18 April 2023, the Company paid
€630,224 in cash and issued 14,305,676 Scrip Dividend Shares at a reference
price of €2.28 per share.
On 30 August 2023, 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 2023 of €0.14 per ordinary share with the
same option to receive their net dividend in the form of Globalworth shares
("Scrip Dividend Shares") or cash.
The results for the period are set out in the consolidated statement of
comprehensive income on page 30.
5. Financing Review
The global business and economic landscapes have encountered turbulence amid
the persistent uncertainty in the public debt market. This uncertainty can be
attributed to the surge in inflation, escalating interest rates, and the
heightened probability of an impending recession. Consequently, the outlook
has become notably uncertain.
Throughout this period, our unwavering focus has remained on maintaining
liquidity. Concurrently, we have diligently executed our liability management
strategy, especially with regard to forthcoming debt maturities in 2025.
Additionally, we have steadfastly implemented our "local landlord" approach to
drive effective management of our business operations.
Debt Summary
The total debt of the Group at 30 June 2023 was €1.389 billion (31 Dec.
2022: €1.456 billion) comprising of medium to long-term debt, denominated
entirely in Euro. The majority of the debt is in two bonds totalling €0.85
billion, with bank loans of €0.5 billion.
In the first half of 2023, we bought back €100m nominal value of our €550
million bond by paying a cash consideration of €83.2m thus reducing the
debt maturing March 2025.
In addition, during the period in the first half of 2023, we:
· paid the annual coupon of the 2025 bond;
· drew the €110 million ten-year term secured debt facility which was
signed with Erste Group Bank AG and Banca Comerciala Romana SA in December
2022 for refinancing of the Company's logistics / light industrial portfolio
in Romania. Out of the €110 million, €96.5 million was made available to
the Group and the difference to one of the Group's joint venture companies;
· repaid the €60 million outstanding balance on the RCF.
The Group continuously strives to maintain a low weighted average interest
rate cost, which as at 30 June 2023 was 3.29% (2.89% at 31 Dec 2022), a small
increase having in view the despite EURIBOR increasing c.130 basis points in
the first half of the year while the average maturity period improved to 3.4
years (3.3 years at 31 December 2022), as depicted in the chart below.
In this higher inflation 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 rates (77.3%) or floating interest rates which
are however hedged (7.7%).
Weighted average interest rate vs debt duration to maturity
31 Dec 20 30 Jun 21 31 Dec 21 30 Jun 22 31 Dec 22 30 Jun 23
Weighted average interest rate 2.73% 2.73% 2.73% 2.55% 2.89% 3.29%
Weighted average duration to maturity 4.5 4.0 3.5 3.8 3.3 3.4
Servicing of Debt During 2023
In the first half of 2023, we repaid bank debt principal of €63.4 million,
€100million nominal value of the 2025 Eurobond for a cash consideration of
€83.2million and total accrued interest of €24.6million on the Group's
outstanding debt facilities.
Maturity profile (by year) of the principal loan outstanding at 30 June 2023
(€m)
2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Bonds 450.00 400.00
Bank Loans 3.27 39.56 116.10 6.48 68.77 91.58 142.09 4.32 4.34 61.40
Minority shareholder debt 0.80
Liquidity & Loan to value ratio (LTV")
Managing our financial and operational 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 of 30 June 2023, the Group had cash and cash equivalents of €130.5
million (31 December 2022: € 163.8 million) of which an amount of €5.6
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 €265million.
The Group's loan to value ratio on 30 June 2023 was 42.7%, same as at 31
December 2022. 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 2023
Debt Structure - Secured vs. Unsecured Debt
The majority of the Group's debt on 30 June 2023 is unsecured: 67.4% (31
December 2022: 75.4%), 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 (22.7%
of the outstanding balance compared to 19.3% on 31 December 2022), or at a
fixed interest rate (77.3% of the outstanding balance compared to 80.7% at 31
December 2022).
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 on 30 June 2023, an increase of 100 basis points
in the EURIBOR will result in an increase of interest expense of €2.1
million per annum.
Debt Covenants
As of 30 June 2023, 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 2023 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 2022, 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
· 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 in interest
environment
· Breach of loan covenants
· Changes in Interest and Foreign Exchange Rates, and
· Compliance with fire, structural, health and safety, or other
regulations
There have been no new risks identified during the six-month period ended 30
June 2023, and the identified risks are expected to continue to remain
relevant during the second half of 2023.
7. Going Concern
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
2024. These projections take into account the available cash balance of the
Group as of 30 June 2023 of €130 million (see note 15 to the financial
statement), the available undrawn financing facilities of €265 million, the
latest contracted rental income, 99% collections rate of rents invoiced and
due, 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 due until cash
flow projection period and value accretive CAPEX. During this assessment, the
Group has also considered, but not relied upon, other options available to
generate or conserve additional cash, to reduce debt levels and to fund value
accretive capital expenditure and tenant incentives. These include but are not
limited to extension of debt falling due in projected period, the potential
disposal of assets; the opportunity to offer scrip alternative instead of cash
dividend and the potential raising of additional funds.
GLOBALWORTH REAL ESTATE INVESTMENTS LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2023
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2023
30 June 30 June
2023 2022
Note €'000 €'000
Revenue 7 119,050 116,551
Operating expenses 8 (45,306) (46,696)
Net operating income 73,744 69,855
Administrative expenses 9 (7,755) (6,484)
Acquisition costs - (7)
Fair value (loss)/gain on investment property 3 (102,884) 7,019
Share-based payment expense 20 (167) -
Loss on disposal of subsidiary (164) -
Depreciation and amortisation expense (289) (309)
Other expenses (1,182) (720)
Other income 2,215 295
Foreign exchange (loss)/gain (569) 307
(Loss)/gain from fair value of financial instruments at fair value through (121) 73
profit or loss
(Loss)/ Profit before net financing cost (37,172) 70,029
Finance cost 10 (27,945) (27,547)
Finance income 18,224 1,179
Share of profit of equity-accounted investments in joint ventures 22 2,613 2,012
(Loss)/ Profit before tax (44,280) 45,673
Income tax expense 11 19,701 (12,245)
(Loss)/Profit for the period (24,579) 33,428
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 (24,579) 33,464
(Loss)/Profit attributable to: (24,579) 33,428
- ordinary equity holders of the Company (25,078) 32,606
- non-controlling interests 499 822
Total comprehensive income attributable to: (24,579) 33,464
- ordinary equity holders of the Company (25,078) 32,642
- non-controlling interests 499 822
Cents Cents
Earnings per share
- Basic 12 (11) 15
- Diluted 12 (11) 15
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
Note 30 June 31 December
2023 2022
Unaudited Audited
€'000 €'000
ASSETS
Investment property 3 2,864,290 2,945,460
Goodwill 12,349 12,349
Advances for investment property 5 6,102 4,393
Investments in joint ventures 22 72,645 67,967
Equity investments 7,629 7,521
Other long-term assets 1,724 1,784
Prepayments 210 226
Deferred tax asset 11 5,888 161
Non-current assets 2,970,837 3,039,861
Financial assets at fair value through profit or loss 3,433 3,554
Trade and other receivables 14 21,919 22,337
Contract assets 4,598 9,967
Guarantees retained by tenants 99 98
Income tax receivable 371 840
Prepayments 6,679 2,430
Cash and cash equivalents 15 130,545 163,767
167,644 202,993
Investment property held for sale 3.3 121,138 126,009
Total Current assets 288,782 329,002
Total assets 3,259,619 3,368,863
EQUITY AND LIABILITIES
Issued share capital 1,736,955 1,704,476
Treasury shares 20.2 (4,827) (4,859)
Fair value reserve of financial assets at FVOCI (5,469) (5,469)
Share-based payment reserve 20 156 156
Retained earnings (96,123) (37,798)
Equity attributable to ordinary equity holders of the Company 1,630,692 1,656,506
Non-controlling interests 1,361 862
Total equity 1,632,053 1,657,368
Interest-bearing loans and borrowings 13 1,365,191 1,433,631
Deferred tax liability 11 138,958 154,866
Lease liabilities 3.2 19,426 19,861
Guarantees retained from contractors 2,834 1,995
Deposits from tenants 2,894 3,897
Trade and other payables 78 1,034
Non-current liabilities 1,529,381 1,615,284
Interest-bearing loans and borrowings 13 24,078 21,600
Guarantees retained from contractors 4,625 3,652
Trade and other payables 32,013 35,679
Contract liability 2,126 1,743
Other current financial liabilities 50 67
Current portion of lease liabilities 2,313 1,669
Deposits from tenants 20,221 17,477
Income tax payable 468 382
85,894 82,269
Liabilities directly associated with the assets held for sale 3.3 12,291 13,942
Total current liabilities 98,185 96,211
Total equity and liabilities 3,259,619 3,368,863
The financial statements were approved by the Board of Directors on 18
September 2023 and were signed on its behalf by:
Andreas Tautscher,
Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2023
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 2022 1,704,476 (4,917) 156 - 38,914 1,738,629 - 1,738,629
- - -
Interim dividends 18 - 58 - - (59,829) (59,771) - (59,771)
Shares issued in a newly acquired subsidiary - - - - - - 5 5
Settlement of fair value reserve of equity instruments designated at FVOCI in - - - (78) 78 - - -
cash
Total comprehensive income for the period - - - (5,391) (16,961) (22,352) 857 (21,495)
As at 31 December 2022 1,704,476 (4,859) 156 (5,469) (37,798) 1,656,506 862 1,657,368
Interim dividends paid in cash and scrip dividend 17,18 32,617 32 - - (33,247) (598) - (598)
Transaction costs on issuance of scrip dividend shares (138) - - - - (138) - (138)
Total comprehensive income for the period - - - - (25,078) (25,078) 499 (24,579)
As at 30 June 2023 1,736,955 (4,827) 156 (5,469) (96,123) 1,630,692 1,361 1,632,053
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 2022 1,704,476 (4,917) 156 - 38,914 1,738,629 - 1,738,629
Interim dividends - 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
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2023
30 June 30 June
Note 2023 2022
€'000 €'000
(Loss)/profit before tax (44,280) 45,673
Adjustments to reconcile profit before tax to net cash flows
Fair value loss/(gain) on investment property 3.4 102,884 (7,019)
Loss on sale of investment property 97 654
Share-based payment expense 20 167 -
Depreciation and amortisation expense 289 309
Net movement in allowance for doubtful debts 16.2 769 9
Foreign exchange loss/(gain) 569 (307)
Loss/(gain) from fair valuation of financial instrument 121 (73)
Loss on disposal of subsidiary 3.5 164 -
Share of profit of equity-accounted joint ventures 22.4 (2,613) (2,012)
Net financing costs 9,721 26,368
Operating profit before changes in working capital 67,888 63,602
Decrease/(increase) in trade and other receivables 4,951 (4,888)
Decrease in trade and other payables (2,346) (2,699)
Interest paid (24,625) (29,286)
Interest received 1,168 207
Income tax paid (3,278) (974)
Interest received from joint ventures 173 250
Cash flows from operating activities 43,931 26,212
Investing activities
Expenditure on investment property completed and under development or (29,102) (33,642)
refurbishment
Payment for land acquisitions - (1,732)
Proceeds from disposal of subsidiary 4,000 501
Payment for acquisition of investment property - (5,584)
Proceeds from sale of investment property 2,278 6,331
Payments for equity investments (108) (483)
Investment in and loans given to joint ventures 22 (8,360) (17,173)
Proceeds from joint ventures for loans given 22 7,135 2,377
Payment for purchase of other long-term assets (232) (156)
Cash flows used in investing activities (24,389) (49,561)
Financing activities
Payment of transaction costs on issuance of scrip dividend shares (138) -
Proceeds for issuance of new shares in subsidiary from non-controlling - 5
interest
Proceeds from interest-bearing loans and borrowings 13 96,500 146,825
Payments of interest-bearing loans and borrowings 13 (146,554) (324,545)
Payment of interim dividend (net of scrip) 18 (598) (28,779)
Payment for lease liability obligations 3.2 (2,079) (1,630)
Payment of bank loan arrangement fees and other financing costs (1,206) (2,152)
Cash flows from financing activities (54,075) (210,276)
Net decrease in cash and cash equivalents (34,533) (233,625)
Effect of exchange rate fluctuations on cash and bank deposits held 1,311 (414)
Cash and cash equivalents at the beginning of the period 15 163,767 418,748
Cash and cash equivalents at the end of the period 15 130,545 184,709
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.
On 23 July 2021 Zakiono Enterprises Limited, a company wholly owned by Tevat
Limited, become a controlling shareholder by holding 60.6% share capital of
the company through public offer. Tevat Limited is a joint venture between CPI
Property Group S.A. and Aroundtown SA.
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 main country of
operation of the Company is Guernsey. The Group's principal activities and
nature of its operations are mainly investments in real estate properties,
through both acquisition and development, as set out in the Strategic Report
section of the 2022 Annual Report.
Directors
The Directors of the Company are:
· Dennis Selinas, Executive, Chief Executive Officer, Member of the
Investment Committee
· Martin Bartyzal, Independent Non-Executive, Chair of the Board,
Member of the Remuneration Committee
· Norbert Sasse, Non-Executive, Member of the Investment Committee
· Richard van Vliet, Independent Non-Executive, Member of the Audit
& Risk Committee and Remuneration Committee
· Andreas Tautscher, Senior Independent Non-Executive, Chair of the
Audit and Risk Committee, Member of Nomination Committee
· David Maimon, Independent Non-Executive, Member of the Audit
& Risk Committee and Investment Committee
· Piotr Olendski, Independent Non-Executive, Chair of the
Remuneration Committee, Member of the Investment Committee
· Daniel Malkin, Independent Non-Executive, Chair of the Nomination
Committee, Member of the Audit & Risk Committee
· Favieli Stelian, Independent Non-Executive, Chair of the
Investment Committee, Member of the Remuneration Committee
· Panico Theocharides, Non-Executive, Member of the Nomination
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 2023 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
2024. These projections take into account the available cash balance of the
Group as of 30 June 2023 of €130 million (see note 15), the available
undrawn financing facilities of €265 million, the latest contracted rental
income, 99% collections rate of rents invoiced and due, 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 due until cash flow projection
period and value accretive CAPEX. During this assessment, the Group has also
considered, but not relied upon, other options available to generate or
conserve additional cash, to reduce debt levels and to fund value accretive
capital expenditure and tenant incentives. These include but are not limited
to extension of debt falling due in projected period, the potential disposal
of assets; the opportunity to offer scrip alternative instead of cash dividend
and the potential raising of additional funds.
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 2022, 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 2022.
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. Non-controlling interest represents the portion of profit or loss, other
comprehensive income and net assets not held by the Group and is presented
separately in the income statement and within equity in the consolidated
statement of financial position, separately from net assets and profit and
loss attributable to the equity holders of the Company.
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;
· Trade and other receivables, see note 14;
· Share-based payment reserve, see note 20;
· Investment in Joint Ventures, see note 22; and
· Investment in Subsidiaries, see note 23.
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
156,001 30,850 39,300 21,669
1 January 2022 2,718,260 2,944,411 2,966,080
Investment property acquisition 3.1 5,584 - - - 5,584 - 5,584
Land acquired during the year 3.1 - - - 1,785 1,785 - 1,785
Subsequent expenditure 24,897 11,512 12,430 1,258 50,097 - 50,097
Net lease incentive movement 15,411 1,664 134 - 17,209 - 17,209
Capitalised borrowing costs 10 - 119 46 - 165 - 165
Transfer to completed investment property 18,600 - (14,700) (3,900) - - -
Disposal during the year (14,120) - - - (14,120) - (14,120)
Additions to nominal lease liability - - - - - 2,814 2,814
Fair value gain /(loss) on investment property (69,078) (16,915) 690 1,757 (83,546) (608) (84,154)
2,699,554 152,381 29,450 40,200 2,921,585 23,875 2,945,460
31 December 2022
Subsequent expenditure 24,052 6,987 321 25 31,385 31,385
Net lease incentive movement (4,894) (731) (1) - (5,626) (5,626)
Capitalised borrowing costs - - 144 - 144 144
Disposal during the year (2,219) - - (7,000) (9,219) (9,219)
Transfer to completed investment property 4,000 - (4,000) - - -
Fair value gain /(loss) on investment property (102,556) 6,044 467 (1,025) (97,070) (784) (97,854)
2,617,937 164,681 26,381 32,200 23,091
30 June 2023 2,841,999 2,864,290
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.
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".
3.3 Assets Held for Sale
Judgements and Assumptions Used in the Classification of Investment Properties
as Held for Sale
In 2021, the Group entered into a preliminary agreement to sell the following
properties: Batory Building 1, Bliski Centrum, Philips, Nordic Park. and Warta
Tower, for a total consideration of €125.2 million. The original transaction
date was delayed from the initial disposal date as the buyer has to reorganise
the financing arrangement with a new consortium of banks, to provide the
secured financing for the SPA, as some banks in the initial consortium
organised by the buyer in September 2021 withdrew due to the start of the war
in Ukraine.
Warta Tower was sold in July 2023 (please refer to note 28 for further
details) and terminated the original SPA for remaining four properties. The
disposal of two properties is expected to conclude by end of 2023 and the
remaining during first half of 2024.
All the assets under held for sale group are available for immediate sale in
their present condition subject only to terms that are usual and customary for
sales of such assets. The management has an active disposal programme with
appropriate approvals from the Board and is planning to complete the sale in
the near future by signing a new SPA with a new buyer(s).
The carrying values of investment properties held for sale at 30 June 2023 are
fair valued after taking into account the existing SPA and management's
intention to actively market these assets for sale at a price that is
reasonable in relation to its current fair value under present market
conditions. Therefore, the Group continues to classify the carrying value of
this investment under investment property held for sale and disclose
separately the
liabilities directly associated with the assets held for sale.
Note 31 December 2022 CAPEX Fair value loss Movement during the period 30 June 2023
Completed Investment property 3.1 116,199 159 (4,707) (4,548) 111,651
Investment property - leasehold 3.2 9,810 - (323) (323) 9,487
Investment property held for sale 126,009 159 (5,030) (4,871) 121,138
Lease liabilities 3.2 8,877 - - 109 8,986
Deferred tax liability 11 5,065 - - (1,760) 3,305
Liabilities directly associated with the assets held for sale 13,942 - - (1,651) 12,291
Net assets held for sale 112,067 - - (3,220) 108,847
3.4 Investment property - Fair value gain/(loss)
30 June 2023 30 June 2022
Note €'000 €'000
Fair value (loss)/gain on investment property (102,884) 7,019
- Related to investment property -freehold 3.1 (97,854) 10,939
- Related to investment property -held for sale 3.2 (5,030) (3,920)
3.5 Sale of land plot
In the first half of 2023, the Group sold a fully owned subsidiary, Nord 50
Herastrau Premium SRL, owning a non-core plot of land of 3.2k sqm located in
the northern part of Bucharest for total consideration of €7.0 million out
of which €4.0 million was paid in cash and remaining €3.0 million is
receivable in January 2024. At the disposal date, the subsidiary held net
asset of €7.2 million thus result in a net loss of €0.2 million.
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... 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
2023 (2022: 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 2023 31 December 2022 Valuation Country Input 30 June 31 December
Technique 2023 2022
€'000 €'000
Completed Investment Property 1,360,590 1,422,550 DCF Poland Rent per sqm €11.50 - €24.00 €11.50 - €26.00
Completed held for sale
Completed Investment Property (111,651) (116,199)
Discount rate 5.11%-12.72% 4.67%-12.30%
Exit yield 5.45%-8.50% 5.45%-8.00%
1,328,100 1,350,000 DCF Romania Rent per sqm €2.00 - €35.00 €2.00 - €35.00
Discount rate 8.00% - 9.75% 8.25% - 9.50%
Exit yield 6.5% - 7.75% 6.25% - 7.75%
Sub-total 2,577,039 2,656,350
40,900 43,205 SC Romania Sales value (sqm) €1,939 €1,934
2,617,939 2,699,554
Investment property 7,780 9,550 RM Poland Rent per sqm €13.50 €13.50
under development
Discount rate 6.92%-7.78% 6.76%-7.53%
Exit yield 6.65% 6.50%
Capex (€m) € 27.05 € 26.64
15,200 19,900 RM Romania Rent per sqm €11.50 - €15.50 €4.60 - €15.00
Discount rate 8.25% - 9.50% 8.00% - 9.25%
Exit yield 6.5% - 7.75% 6.25% - 7.75%
Capex (€m) € 75.68 € 77.43
11,700 - DCF Romania Rent per sqm €5.20 - €9.70 -
Discount rate 8.75% - 8.75% -
Exit yield 7% -
Investment property under refurbishment 164,680 152,380 DCF* Poland Rent per sqm €13.25 -€14.25 €13.50 -€15.00
Discount rate 6.84% - 8.36% 7.49% - 8.67%
Exit yield 6.58%-6.80% 7.18%-8.06%
Capex (€m) € 10.0 € 21.00
Land bank - 9,500 9,500 SC Romania Sales value (sqm) € 27 - € 2,215.19 € 27 - € 2,215.19
for further development
Rent per sqm €3.25-€18.50 €2.75-€18.00
14,400 30,700 RM Romania Exit yield 7.00% - 8.25% 6.90% - 8.25%
TOTAL 2,841,199 2,921,585
*Properties were valued using RM as of 31 December 2022
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 sqm(1) 25 bps change in market yield 5% change in Capex €50 change in sales prices per sqm(2) 2.5% change in vacancy in Perpetuity(3)
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 2023 Poland 36,670 (36,690) (58,450) 63,300 - - - - (31,400) -
2023 Romania 29,400 (29,400) (49,000) 53,000 - - 1,300 (1,200) (15,300) 12,500
2022 Poland 38,490 (38,530) (62,280) 67,730 - - - - (32,450)
2022 Romania 31,600 (31,200) (49,900) 54,600 - - 1,300 (1,300) (15,700) 12,400
Under 2023 Poland 1,410 (1,410) (1,600) 1,720 (1,320) 1,320 (1,060)
development 2023 Romania 3,000 (3,100) (3,600) 3,800 (3,400) 3,400 - - (200) 100
2022 Poland 1,450 (1,450) (1,670) 1,810 (1,320) 1,320 - - (1,060)
2022 Romania 2,200 (2,200) (1,800) 2,100 (1,900) 2,000 - - -
Under 2023 Poland 5,160 (5,160) (7,130) 7,710 (4,030)
refurbishment 2022 Poland 4,760 (4,750) (6,120) 6,560 (210) 200 - - (3,740) -
Further 2023 Poland - - - - - - - - -
development 2023 Romania 2,100 (2,000) (2,000) 2,300 (2,000) 2,200 400 (500) -
2022 Poland - - - - - - - - - -
2022 Romania 3,200 (3,100) (3,600) 4,000 (3,400) 3,500 400 (500) - -
1. The quantitative sensitivity analysis was computed as €0.25 change
in rental value per month, per sqm for four industrial properties (2022: 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 2022 37,400 13,700 35,600 86,700
Land acquired during the period 8 1,592 802 2,402
Subsequent expenditure 964 22,167 92 23,223
Net lease incentive movement (17) 155 - 138
Capitalised borrowing costs 92 336 - 428
Transfer to investment property 34,700 (34,700) - -
Transfer to investment property under development - - (28) (28)
Fair value gain/(loss) on investment property 553 5,150 434 6,137
31 December 2022 73,700 8,400 36,900 119,000
Subsequent expenditure 1,400 1,823 224 3,447
Net lease incentive movement (95) 110 - 15
Transfer to completed investment property 13,200 (13,200) - -
Fair value gain/(loss) on investment property 22.3 1,695 2,867 123 4,685
30 June 2023 22.3 89,900 0 37,247 127,147
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 three 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 2023 31 December 2022 Valuation technique Country Input 30 June 31 December 2022
2023
€'000 €'000
Completed Investment 89,900 73,700 DCF Romania Rent per sqm €2.00 - €10.00 €2.00 - €9.00
property Discount rate 8.50% - 9.00% 8.50% - 9.00%
Exit yield 7.00% -7.25% 7.00% - 7.25%
Investment property under development - 8,400 RM Romania Discount rate - 8.75%
Exit yield - 7.25%
Capex (€m) - €2.38
Land bank - for further development 37,247 36,900 SC Romania Sales value sqm €30.00 - €70.00 €30.00 - €70.00
TOTAL 127,147 119,000
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 2023 Romania 2,400 (2,400) (3,200) 3,300 - - - - (1,300) 1,100
2022 Romania 2,300 (2,200) (2,500) 2,700 - - - - (1,000) 900
- Under 2023 Romania - - - - - - - - - -
development 2022 Romania 600 (500) (400) 400 (100) 100 - - - -
- Further 2023 Romania - - - - - - 1,400 (1,400) - -
development 2022 Romania - - - - - - 1,400 (1,400) - -
5. Advances for investment Property
30 June 31 December 2022
2023
€'000 €'000
Advances for land and other property acquisitions 2,000 2,000
Advances to contractors for investment properties under development 4,102 2,393
6,102 4,393
6. Commitments
Commitments for Investment Property
As at 30 June 2023 the Group committed to future capital expenditure, for the
next 12 months from the statement of financial position date, in respect of
completed investment property of €14.4 million (2022: €10.9 million),
investment property under development of €0.02 million (2022: €0.7
million) and had committed with tenants to incur incentives (such as fit-out
works, leasing fees and other lease incentives) of €9.8 million (2022:
€10.3 million).
The Group's Joint Ventures were committed to the construction of investment
property for the amount of €1.0 million at 30 June 2023 (2022: €1.3
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 (2022: 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
2023 2022
€'000 €'000
Not later than 1 year 185,623 169,880
Later than 1 year and not later than 5 years 545,890 426,748
Later than 5 years 201,399 152,843
932,912 749,471
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 2022
2023 €'000
€'000
Rental income 80,527 75,214
Revenue from contracts with customers 36,870
Service charge income 39,888
Fit-out services income 1,187 1,301
Asset management fees 58 31
Marketing and other income 408 117
38,523 41,337
119,050 116,551
The total contingent rents and surrender premia recognised as rental income
during the period amount to €1.1 million (30 June 2022: €0.4 million) and
€0.3 million (30 June 2022: nil), respectively.
8. Operating Expenses
30 June 2023 30 June
€'000 2022
€'000
Property management, utilities and insurance 42,933 44,739
Property maintenance costs and other non-recoverable costs 958 825
Property expenses arising from investment property that generate rental income 43,891 45,564
Property expenses arising from investment property that did not generate 11 11
rental income
Fit-out services costs 1,404 1,121
45,306 46,696
9. Administrative expenses
30 June 2023 30 June
€'000 2022
€'000
Directors' emoluments 366 463
Salary and remuneration costs 4,240 3,783
Accounting, secretarial and administration costs 302 240
Legal and other advisory services 842 592
Audit and non-audit services 491 182
Corporate social responsibility 64 256
Travel and accommodation 130 78
Marketing and advertising services 739 414
Post, telecommunication, and office supplies 292 252
Stock exchange expenses 270 224
Exceptional and non-recurring expenses 19 -
7,755 6,484
10. Finance Cost
30 June 2023 30 June
Note €'000 2022
€'000
Interest on secured loans 6,300 3,410
Interest on unsecured credit facilities 2,432 116
Interest on fixed rate bonds 14,034 18,230
Debt cost amortisation and other finance costs 10.1 4,075 4,368
Interest on lease liabilities 3.2 965 909
Bank charges 139 514
Gross finance cost 27,945 27,547
Less borrowing costs capitalised on investment property 144 156
28,089 27,703
The average capitalisation rate used to determine the borrowings eligible for
capitalisation was 3.29% (30 June 2022: 3.33%).
10.1 Debt cost amortisation and other finance costs
30 June 2023 30 June 2022
€'000 €'000
Debt issue cost amortisation - secured bank loans 338 298
Debt issue cost amortisation - unsecured facility 755 744
Debt issue cost amortisation - fixed rate bonds 2,982 3,326
4,075 4,368
11. Taxation
30 June 2023 30 June 2022
€'000 €'000
Current income tax expense 3,781 (572)
- Related to current period 4,360 777
- Related to prior period (579) (1,349)
Deferred income tax expense/(income) (23,482) 12,817
(19,701) 12,245
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 from 1 March 2020
until 31 May 2022 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; the most significant future sources of income of the Group
subsidiaries registered in Cyprus are dividend and interest income. 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.
Deferred tax (asset)/liabilities
Note 30 June 31 December 2022
2023 €'000
€'000
Deferred tax asset (5,888) (161)
Deferred tax liabilities directly associated with the assets held for sale 3.3 3,305 5,065
Deferred tax liabilities 138,958 154,866
136,375 159,770
Deferred income tax expense
Consolidated statement of financial position Consolidated statement of comprehensive income
30 June 31 December 2022 30 June 30 June
2023 2023 2022
Net Deferred Tax €'000 €'000 €'000 €'000
Subsidiary sold during the year - - - -
Valuation of investment property at fair value 155,079 181,070 (25,991) 9,326
Deductible temporary differences (1,950) (1,247) (703) 814
Interest expense and foreign exchange loss on intra-group loans (15,323) (18,743) 3,420 2,019
Discounting of tenant deposits and long-term deferred costs 67 68 (1) (7)
Share issue cost recognised in equity (7) (7) - -
Valuation of financial instruments at fair value 50 72 (22) 52
Recognised unused tax losses (1,541) (1,443) (183) 613
136,375 159,770 (23,480) 12,817
As at 30 June 2023, the Group has unused assessed tax losses carried forward
of €56.7 million (2022: €49.7 million) in Romania and €18.4 million
(2022: €19.1 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 €1.5 million (2022: €1.4 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 €12.5 million (2022:
€10.7 million), calculated at the corporate income tax rates of 16% in
Romania and 19% (9% for small entities) in Poland, respectively.
Expiry year 2023 2024 2025 2026 2027 2028 2029 2030 Total
Total available deferred tax assets (€m) 1.7 4.4 0.7 2.3 0.9 1.3 0.5 0.8 12.6
From the above total available deferred tax assets, of €9.1 million (2022:
€9.2 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
There are also temporary non-deductible interest expenses and net foreign
exchange losses of €231.8 million, €40.9 million in Romania and €190.9
million in Poland (2022: €276.5 million, €38.9 million in Romania and
€237.6 million in Poland) related to intercompany and bank loans. 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 €15.2
million (€1.1 million in Romania and €14.1 million in Poland) deferred tax
asset was recorded (2022: €18.7 million, €1.1 million in Romania and
€17.7 million in Poland).
In Romania such temporary non-deductible interest expenses can be carried
forward indefinitely until they are 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. As of 31 December 2022, out of the total €14.1 million (2022:
€17.7 million) deferred tax asset on interest expense and foreign exchange
loss recognised in Poland, €2.2 million (2022: €2.6 million) is available
for utilisation in five years from the origination.
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. Based on the above assessment, the Group
recognised deferred tax expense related to deferred tax asset for fiscal
losses carried forward for an amount of €2.2 million (2022: €2.0 million)
representing derecognition of deferred tax assets of €2 million (2022:
derecognition of €1.5 million) in Romania, due to improved actual tax
results and transition of some subsidiaries to a taxable profit position, and
derecognition of deferred tax assets of €0.2 million (2022: derecognition of
€0.5 million) in Poland, due to improved actual tax results.
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 2022 At the beginning of the year 221,373 221,373
30 June 2022 Shares in issue at period-end (basic) 221,373 221,373
Jan- Jun 2022 Effect of dilutive shares 97 54% 52
30 June 2022 Shares in issue at period-end (diluted) 221,470 221,425
1 Jan 2023 At the beginning of the year 221,373 221,373
30 June 2023 Shares in issue at year-end (basic) 235,679 228,287
Jan- Jun 2023 Effect of dilutive shares 150 124
30 June 2023 Shares in issue at period-end (diluted) 235,829 228,411
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
2023 2022
€'000 €'000
(Loss)/Profit attributable to equity holders of the Company for the basic and (25,078) 32,606
diluted earnings per share
IFRS earnings per share Cents Cents
- Basic (11) 15
- Diluted (11) 15
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):
ff
Note 30 June 2023 30 June 2022
€'000 €'000
Earnings per IFRS income statement (25,078) 32,606
Changes in value of investment property 102,884 (7,019)
Changes in value of ROFO 121 (73)
Losses/(income) on disposal of investment properties 3.4 (67) 585
Loan close-out costs (15,809) -
Changes in fair value of financial instruments and associated close-out costs (163) (283)
Acquisition costs on share deals - 7
Deferred tax charge in respect of above (26,013) 9,378
Non-controlling interests share of above 356 821
Adjustments in respect of joint ventures for above items (2,045) (1,694)
EPRA earnings attributable to equity holders of the Company 34,186 34,329
EPRA earnings per share Cents Cents
- Basic 15 16
- Diluted 15 16
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
16.
30 June 31 December 2022
2023 €'000
€'000
Current 9,568 3,845
Secured loans and accrued interest
Unsecured loans and accrued interest 14,510 17,755
Sub-total 24,078 21,600
Non-current 443,270 353,978
Secured loans
Unsecured fixed rate Bonds and unsecured credit facilities 921,921 1,079,653
Sub-total 1,365,191 1,433,631
TOTAL 1,389,269 1,455,231
13.1 Key terms and conditions of outstanding debt
30 June 2023 31 December 2022
Face value Carrying Face value Carrying
value value
Facility Nominal interest rate Maturity date €'000 €'000 €'000 €'000
Loan 16 EURIBOR 1 month + margin May 2025 11,615 11,613 12,220 12,218
FY18/25 Bond Fixed rate March 2025 453,449 451,086 562,522 558,569
Loan 381 Fixed/Floating rate + margin May 2025 100,113 100,020 100,115 99,874
Loan 41 EURIBOR 3 month + margin March 2029 85,848 85,308 85,552 84,959
Loan 43 EURIBOR 3 month + margin December 2024 33,812 33,729 34,522 34,423
Loan 44/45 Fixed rate February 2027 62,293 62,089 62,295 62,062
Loan 46 Fixed rate November 2029 65,043 64,478 65,045 64,462
Loan 47 EURIBOR 3 month + margin April 2024 - - 60,060 60,060
FY20/26 Bond Fixed rate July 2026 410,863 400,382 405,011 392,658
Loan 49 Fixed rate March 2029 457 457 449 449
Loan 50 Fixed rate March 2029 4,480 4,435 1,429 1,421
Loan 51 EURIBOR 6 month + margin May 2028 85,198 84,211 85,162 84,076
Loan 53 EURIBOR 3 month + margin December 2032 92,491 91,461 - -
Total 1,405,662 1,389,269 1,474,382 1,455,231
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
In June 2023, the Company successfully completed a buyback of €100
million nominal value of FY18/25 bonds by paying a cash consideration
of €83.2 million.
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 for successive periods of 1 month each, until 27 March
2023 when it was repaid in full.
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%.
13.2 Secured facilities
New facilities
On 17 March 2023, the Group drew down the €110 million a ten-year term
secured debt facility (Loan 53), which was signed Erste Group Bank AG and
Banca Comerciala Romana SA for refinancing of the Company's logistics/light
industrial portfolio in Romania. Out of the €110 million, €96.5 million
was drawn by the subsidiaries of the Group and the difference of €13.5
million by Black Sea Vision SRL, one of the Group's joint venture companies,
which was used the funds to refinance the existing debt held with Banca
Comerciala Romana SA and part of the debt held with the Group.
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% (2022: 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% (2022:
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% (2022: 250%), which was
applicable to two properties as at 30 June 2023 (31 December 2022: 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 €965.3 million at 30
June 2023 (2022: € 794.4million) and also carry pledges on rent and other
receivable balances of €4.3 million (2022: €7.4 million), VAT receivable
balances of €0.3million (2022: €0.8million) and a movable charge on the
respective bank accounts (refer to note 15).
The Group is in compliance with all financial covenants and there were no
payment defaults during the period ended 30 June 2023 (2022: same). As of 30
June 2023, the Group had undrawn borrowing facilities of €265 million (2022:
€300 million) out of this €215 million is available to draw until March
2024 and remaining €50 million until December 2025.
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 (loan 49 and loan 50), representing 25% of CAPEX investment in
the projects which were financed through shareholders loans from the minority
shareholder in proportion to the equity interest in the Company. The loans are
unsecured and carry a fixed interest of 4%.
14. Trade and Other receivables
30 June 31 December
2023 2022
€'000 €'000
Rent and service charges receivable 17,101 19,201
VAT and other taxes receivable 940 2,616
Consideration receivable for the sale of land (note 3.5) 3,000 -
Advances to suppliers for services 166 177
Sundry debtors 712 343
21,919 22,337
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 €4.6 million (2022: €4.1 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 16.2). For the terms and conditions for related party
receivables, see note 25.
15. Cash and Cash Equivalents
30 June 2023 31 December 2022
€'000 €'000
Cash at bank and in hand 110,248 151,343
Short-term deposits 20,297 12,424
Cash and cash equivalents at period end 130,545 163,767
Cash at bank and in hand includes restricted cash balances of €5.6 million
(2022: €7.8 million) and short-term deposits include restricted deposits of
€0.1 million (2022: €0.1 million). The restricted cash balance can be used
to repay the outstanding debts and repayment of deposits to tenants.
Details of cash and cash equivalents denominated in foreign currencies are
disclosed in note 20.
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 2.70% (2022: minus 0.60% to positive
0.01%) per annum, for RON deposits from 5.33% to 5.81% (2022: 0.68% to 6.25%)
per annum and for PLN deposits from 2.19% to 4.44% (2022: minus 0.24% to
4.56%) per annum. For RON deposits highest interest rate was earned on
overnight deposits.
16. 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.
· Liquidity risk.
Refer to the Principal Risks & Uncertainties section on the Annual Report,
pages 58 to 64, for further details on the Group's Risk Management Framework,
covering Business Environment Risks, Property Portfolio Risks, Financial,
Financing & Liquidity Risks and Regulatory Risks.
16.1 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;
(b) interest-bearing assets and liabilities, (c) investments in equity
instruments - refer to note 17 and (d) fair value of investment property -
refer to note 4, to the extent that these are exposed to general and specific
market movements.
16.1 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 2023 31 December 2022
Denominated in Denominated in
Amounts in €'000 equivalent value RON PLN GBP USD RON PLN GBP USD
ASSETS
Cash and cash equivalents 22,050 26,312 143 5 16,691 20,817 11 20
Trade and other receivables 12,144 8,879 - - 13,720 7,037 - -
Contract assets 3,299 1,153 - - 4,760 5,063 - -
Income tax receivable 33 338 - - 33 1,629 - -
Total 37,526 34,203 143 5 35,204 34,546 11 20
LIABILITIES
Trade and other payables 11,095 14,258 - - 16,028 12,984 - -
Lease liability - 30,725 - - - 30,407 - -
Income tax payable 256 215 - - 197 (6) - -
Guarantees from subcontractors 959 4,038 - - 959 2,672 - -
Deposits from tenants 3,784 6,973 - 5 3,784 7,081 - 5
Total 16,094 56,209 - 5 20,968 53,138 - 5
Net exposure 21,432 (19,527) 143 - 14,236 (18,592) 11 15
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 2023 31 December 2022
Profit or (loss) Equity Profit or (loss) Equity
All amounts in €'000
RON (1,072) (1,072) (712) (712)
PLN 976 976 930 930
USD - - (1) (1)
GBP (7) (7) (1) (1)
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.
16.1 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 2023, the total outstanding balance of
interest-bearing loans and borrowing 77.3% (2022: 80.7%) 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 2023, the fair value
of such fixed rate debt was lower by €124.6 million (2022: higher with
€133.6 million) than the carrying value as disclosed in note 17.2 in the
fair value hierarchy table.
Furthermore, as at 30 June 2023, from the total outstanding interest-bearing
loans and borrowing balance 22.7% (2022: 19.3%) 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 19.3%
(2022: 21.6%) 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 2023, 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 €2.1 million per annum (2022: €2.8 million per
annum), with a corresponding impact on equity for the same amount,
respectively.
16.2 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 2023 31 December 2022
Note €'000 €'000
Financial assets measured at fair value through profit or loss 3,433 3,554
Loan receivable from joint venture 22 48,689 47,324
Trade receivables - net of provision 14 17,101 19,201
Contract assets 14 4,598 9,967
Other receivables 712 343
Guarantees retained by tenants 99 98
VAT and other taxes receivable 14 940 2,616
Income tax receivable 371 840
Cash and cash equivalents 15 130,545 163,767
206,488 247,710
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 (such as macroeconomic forecasts of
unemployment, economic sentiment indicator, real GDP growth, inflation rate)
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 2022
2023 €'000
€'000
Opening balance 4,112 5,776
Provision for specific doubtful debts 862 263
Reversal of provision for doubtful debts (163) (219)
Utilised - (1,658)
Foreign currency translation income (190) (50)
Closing balance 4,621 4,112
The analysis by credit quality of financial assets, cumulated for rent,
service charge and property management, is as follows:
30 June 2023 (€'000) Neither past due nor impaired due but not impaired
<90 days <120 days <365 days >365 days TOTAL
Trade and other receivables - gross 9,936 5,548 710 1,573 3,954 21,721
Less: Specific provision - 140 22 143 3,954 4,260
Less: Expected credit loss 4 198 7 152 - 361
Carrying amount 9,932 5,210 681 1,278 - 17,101
Expected credit loss rate 0.0% 3.8% 1.0% 11.9% -
31 December 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 11,785 6,334 162 1,416 3,616 23,313
Less: Specific provision - 80 11 44 3,616 3,751
Less: Expected credit loss 4 198 7 152 - 361
Carrying amount 11,781 6,056 144 1,220 - 19,201
Expected credit loss rate 0.0% 3.3% 4.9% 12.5% -
The Group considers that a default on a trade receivable occurs when the
counterparty fails to make contractual payments within 90 days of when they
fall due. The customer balances which were overdue but for which no specific
loss allowance was recorded are due to the fact that the related customers
committed and started to pay the outstanding balances subsequent to the
year-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 64% (2022: 60%) of the cash and
cash equivalents balance of the Group, in lower medium grade range (BBBs) for
36% (2022: 40%) of the cash and cash equivalents balance of the Group and
insignificant amounts (2022: 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 2023 1,389,269 674,120 - 552,113 1,266,233
(Note 14)
2022 1,455,231 800,385 - 521,275 1,321,660
Other current financial liabilities 2023 50 50 - 50
2022 67 - 67 - 67
Financial asset at fair value through profit or loss 2023 3,433 - 3,433 3,433
2022 3,554 - - 3,554 3,554
Lease liabilities (note 3) 2023 21,739 - 21,739 21,739
2022 21,530 - - 21,530 21,530
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.
16.3 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 2023
Interest-bearing loans and borrowings 17,373 33,683 1,281,212 238,649 1,570,917 (181,648) 1,389,269
Lease liability - 2,314 13,614 113,914 129,842 (99,117) 30,725
Trade payables and guarantee retained from contracts (excluding advances from 22,716 8,686 2,713 161 34,276 (458) 33,818
customers)
Other payables 16 - - - 16 - 16
Deposits from tenants 18,718 1,522 2,556 924 23,720 (605) 23,115
Total 58,823 46,205 1,300,095 353,648 1,758,771 (281,828) 1,476,943
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 2022
Interest-bearing loans and borrowings 19,897 26,082 1,335,002 235,216 1,616,197 (160,966) 1,455,231
Lease liability - 2,151 13,614 113,914 129,679 (99,272) 30,407
Trade payables and guarantee retained from
contracts (excluding advances from customers) 21,235 12,963 2,948 16 37,162 260 37,422
Other payables 20 - - - 20 - 20
Deposits from tenants 17,303 186 3,336 1,251 22,076 (702) 21,374
Total 58,455 41,382 1,354,900 350,397 1,805,134 (260,680) 1,544,454
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 2023 (2022: €0.07
million). The fair value of derivative was developed in accordance with the
requirements of IFRS 13.
A financial income of €0.3 million (30 June 2022: €0.3 million),
representing the fair value movement during the period, was recognised in the
income statement for the period ended 30 June 2023.
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.
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.
17. Issued share capital
30 June 2023 31 December 2022
€'000 Number €'000 Number
Opening balance 1,704,476 222,427 1,704,476 222,427
Share issued for scrip dividends 32,617 14,305 - -
Transaction costs on issuance of shares in cash (138) - - -
Closing balance 1,736,955 236,732 1,704,476 222,427
On 8 March 2023, the Company offered a scrip dividend alternative to the
interim dividend so that qualifying shareholders can elect to receive new
ordinary shares at a reference price of €2.28 per scrip dividend share
instead of cash dividend of €0.15 per share. The reference price was
determined on the basis of a discount of 20% to the average of the middle
market quotations on the five consecutive dealing days from and including the
Ex-Dividend Date.
Approximately 98.1% of the qualifying shareholders (excluding shares held in
treasury), elected to receive scrip dividend shares in respect of their
entitlement to the interim dividend resulting in the issuance of 14,305,676
new shares on 18 April 2023 to qualifying shareholders.
18. Dividends
30 June 31 December
2023 2022
€'000 €'000
Distributed during the period
First Interim dividend 2023: €0.15 per share 33,247 59,771
First Interim dividend 2022: €0.13 per share
Second Interim dividend 2022: €0.14 per share
On 8 March 2023, the Board of Directors of the Company approved the
distribution of an interim dividend in respect of the six-month financial
period ended 31 December 2022 of €0.15 per ordinary share.
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 2022
2023 €'000
Note €'000
Net assets attributable to equity holders of the Company 1,630,692 1,656,506
Number of ordinary shares used for the calculation of: Number ('000) Number ('000)
- NAV per share 12 235,679 221,373
- Diluted NAV and EPRA NRV per share 12 235,829 221,470
€ €
NAV per share 6.92 7.48
Diluted NAV per share 6.91 7.48
30 June 31 December 2022
EPRA NRV Per Share 2023 €'000
Note €'000
Net assets attributable to equity holders of the Company 1,630,692 1,656,506
Exclude:
V) 50% of deferred tax in relation to fair value gains of IP 11 155,079 181,070
VI) Fair value of financial instruments 16.3 (357) (194)
VII) Goodwill as a result of deferred tax (5,697) (5,697)
IX) Adjustment in respect of Joint venture and NCI for above items 1,433 3,798
EPRA NRV attributable to equity holders of the Company 1,781,150 1,835,483
€ €
EPRA NRV per share 7.55 8.29
20. Share-Based Payment Reserve
30 June 2023 31 December
2022
Share-based payments reserve Note €'000 €'000
Executive share option plan reserve 20.1 156 156
30 June 30 June
2023 2022
Share-based payments expense Note €'000 €'000
Expense during the period 167 -
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 (currently 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.
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 a 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. The warrants were exercisable in whole or in part during a period
ending in 10 years from the date of admission.
On 9 July 2021, two Non-Executive Directors exercised 20,000 vested warrants
at €5.00 per share under the contractual terms for an amount of €0.1
million and a corresponding €2,000 share-based payment reserve was also
transferred to share capital. These warrants were vested during 2017 at the
weighted average market share price of €7.71. There have been no
cancellations or modifications to any of the plans during the period ended 30
June 2023.
The following table analyses the total cost of the executive share option plan
(Warrants), together with the number of options outstanding:
30 June 2023 31 December 2022
Cost Number Cost Number
€'000 ('000) €'000 ('000)
Closing balance 156 - 156 -
Weighted average remaining contractual life (years) 0.08 0.58
There were no warrants vested and exercisable at 30 June 2023 (31 December
2022: same)
20.2 Treasury shares
30 June 2023 31 December 2022
Amount Number Amount Number
€'000 ('000) €'000 ('000)
Opening balance (4,859) 1,056 (4,917) 1,053
Dividend on treasury shares held by a subsidiary 32 - 58 -
Closing balance (4,827) 1,056 (4,859) 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 2022
Note 2023 €'000
€'000
Interest-bearing loans and borrowings (face value) 13 1,405,662 1,474,382
Less:
Cash and cash equivalents 15 130,545 163,767
Group Interest-bearing loans and borrowings (net of cash) 1,275,117 1,310,615
Add: 14,518 11,764
50% Share of Joint Ventures interest-bearing loans and borrowings
50% Share of Joint Ventures cash and cash equivalents (1,655) (1,524)
Combined Interest-bearing loans and borrowings (net of cash) 1,287,980 1,320,856
Group open market value as of financial position date 2,952,850 3,037,784
Add:
50% Share of Joint Ventures open market value as of financial position date 22 63,574 59,500
Open market value as of financial position date 3,016,423 3,097,284
Loan-to-value ratio ("LTV") 42.70% 42.70%
Since the carrying value of the lease liability closely matches the fair value
of the investment property - leasehold at 30 June 2023 under the applicable
accounting policy as per IFRS 16, both asset and liability, related to the
right of perpetual usufruct of the lands, are excluded from the above
calculation.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 2023 2022
€'000 €'000
Opening balance 20,643 16,917
Investments in the joint ventures (including acquisition costs) 700 507
Share of profit during the period 2,613 3,219
Sub-total 23,956 20,643
Loans receivable from joint ventures
Opening balance 47,324 31,991
Loan provided to the joint ventures 7,660 28,033
Loan repayments from the joint ventures (7,135) (13,429)
Interest repayment from the joint ventures (173) (797)
Interest income on the loans to joint ventures 1,013 1,526
Sub-total 48,689 47,324
TOTAL 72,645 67,967
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 2023 and 31 December
2022, 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 2023 and 31 December 2022, the investment properties were
classified as industrial segment for the Group.
In September 2022, the Group's subsidiary, Globalworth Holdings Cyprus
Limited, entered into a joint venture agreement with Global Vision Business
Development SRL through which it acquired a 50% shareholding interest (€0.07
million investment) in Targu Mures Logistics Hub SRL ("Targu Mures Logistics
Hub"), an unlisted company in Romania, owning land for further development, at
acquisition date, in Mures, Romania. As at 30 June 2023 and 31 December 2022
the land was classified as an industrial segment for the Group.
Judgements and assumptions used for Joint Ventures
At the time of acquisition, the Group considered whether the acquisition
represented an acquisition of a business or an acquisition of an asset. In the
absence of an integrated set of activities required for a business other than
the property, the Group concluded the acquisition of the joint venture does
not represent a business therefore accounted for it as an acquisition of a
group of assets and liabilities. The cost to acquire the entity is allocated
between the identifiable assets and liabilities of the entity based upon their
relative fair values at the acquisition date and no goodwill or deferred tax
is recognised.
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.
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 2023 30 June 2023 30 June 2023 30 June 2023 31 December 2022 31 December 2022 31 December 2022 31 December 2022
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Constanta Business Park Chitila Logistics Hub Tg Mures Combined Constanta Business Park Chitila Logistics Hub Tg Mures Combined
Completed investment property 27,100 49,600 13,200 89,900 26,300 47,400 - 73,700
Investment property under development/ Land bank - for further development 37,247 - - 37,247 36,900 - 8,400 45,300
Other non-current assets 26 410 135 571 470 41 8 519
Total non-current assets 64,373 50,010 13,335 127,718 63,670 47,441 8,408 119,519
Other current assets 684 951 945 2,580 751 350 1,218 2,319
Cash and cash equivalents 1,982 1,280 47 3,309 1,134 1,437 476 3,047
Total assets 67,039 52,241 14,327 133,607 65,555 49,228 10,102 124,885
Loans payable to the Group 10,802 25,937 11,950 48,689 14,209 25,138 7,976 47,323
Bank loans (face value) 13,372 15,448 - 28,820 7,598 15,878 - 23,476
Bank loans (amortised cost) (158) (110) - (268) (107) (115) - (222)
Loan from Joint venture partner 636 2,551 306 3,493 584 3,196 302 4,082
Deferred tax liability 6,003 1,269 201 7,473 6,008 871 - 6,879
Other non-current liabilities 127 73 200 176 106 282
Total non-current liabilities 30,782 45,168 12,457 88,407 28,468 45,074 8,278 81,820
Loan from Joint venture partner - 28 - 28 - 28 - 28
Other current liabilities 568 427 234 1,229 1,477 716 2,607 4,800
Current portion of bank loans 142 73 - 215 52 - - 52
Total liabilities 31,492 45,696 12,691 89,879 29,997 45,818 10,885 86,700
Net assets 35,547 6,545 1,636 43,728 35,558 3,410 (783) 38,185
The Group has signed loan facilities amounting to €78.3 million (2022:
€63.3 million) with Chitila Logistics Hub and Constanta Business Park joint
ventures to fund the development costs of the projects, out of which €33.0
million was available for future drawdown as of 30 June 2023 (2022: €33.5
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 2023 30 June 2023 30 June 2023 30 June 2023 30 June 30 June 30 June 30 June 2022
2022 2022 2022
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Constanta Business Park Chitila Logistics Tg Mures Combined Constanta Business Chitila Logistics Tg Mures Combined
Hub Park Hub
Revenue 1,383 1,820 286 3,489 610 1,198 - 1,808
Operating expenses (428) (951) (135) (1,514) (208) (446) - (654)
Administrative expenses (47) (62) (49) (158) (28) (42) - (70)
Fair value gain/(loss) on investment property (353) 2,170 2,867 4,684 2,932 1,140 - 4,072
Foreign exchange loss (5) (6) (17) (28) - (42) - (42)
Profit before net financing cost 550 2,971 2,952 6,473 3,306 1,808 - 5,114
Finance expense (593) (842) (332) (1,767) (124) (355) - (479)
Finance income 27 3 - 30 4 6 - 10
Income tax (expense)/income 5 (398) (201) (594) (497) (188) - (685)
Total comprehensive income for the period (11) 1,734 2,419 4,142 2,689 1,271 - 3,960
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 2023 and 30 June 2022 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 2023 30 June 2023 30 June 2023 30 June 2023 30 June 2022 30 June 2022 30 June 2022 30 June 2022
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Constanta Business Park Chitila Logistics Hub Tg Mures Combined Constanta Business Park Chitila Logistics Hub Tg Mures Combined
Profit/(loss) for the period (11) 1,734 2,419 4,142 2,689 1,271 - 3,960
Group 50% share of profit/(loss) for the period (6) 867 1,210 2,071 1,345 636 - 1,981
Adjustments for transactions with the Group 142 236 164 542 56 (25) - 31
Share of profit of equity-accounted investments in joint ventures 136 1,103 1,374 2,613 1,401 611 - 2,012
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 2023 and 31 December 2022,
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 2023, the Group consolidated the following subsidiaries, being
holding companies as principal activities.
30 June 2023 31 December 2022 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 2023, 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 2023 Shareholding interest (%) 31 December 2022 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 note 3.5) - 100
Otopeni Logistics Hub SRL 23.3 100 100 Romania
West Logistics Hub SRL 23.3 100 100 Romania
North Logistics Hub SRL 23.3 75 75 Romania
Logistics Hub Chitila SRL 23.3 75 75 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
The following companies are dormant and have applied for voluntary liquation
during 2020: Zaggatti Holdings Limited, Kifeni Investments Limited, Casalia
Holdings Limited, Oystermouth Holding Limited, Pieranu Enterprises Limited,
Ramoro Limited and Vaniasa Holdings Limited.
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 Board of Directors is of the opinion that the Group is engaged mainly in
real estate business, comprising offices, mixed-use, industrial and
residential investment properties segments and property management services,
in two geographical areas, Romania and Poland. Operating segments are reported
in a manner consistent with the internal reporting provided to the chief
operating decision-makers. The chief operating decision-makers who are
responsible for allocating resources and assessing the performance of the
operating segments have been identified as the Executive Directors.
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) on a quarterly basis 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.
The industrial property segment and head office segments are presented on a
collective basis as Others in the table on the next page 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 are disclosed separately as these meet the
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 the Group level. Segment
assets and liabilities reported to Executive Management on a segmental basis
are set out below:
30 June 2023
Office Mixed-use Residential Other Inter- segment eliminations Total
€'000 €'000 €'000 €'000 €'000 €'000
Rental income - Total 67,822 5,904 802 6,233 (234) 80,527
Romania 33,492 - 802 6,233 (147) 40,380
Poland 34,330 5,904 - - (87) 40,147
Revenue from contract with customers - Total 32,509 3,660 480 3,755 (1,881) 38,523
Romania 17,102 - 480 3,755 (436) 20,901
Poland 15,407 3,660 - - (1,445) 17,622
Revenue-total 100,331 9,564 1,282 9,988 (2,115) 119,050
Operating expenses (36,479) (4,774) (480) (4,022) 449 (45,306)
Segment NOI 63,852 4,790 802 5,966 (1,666) 73,744
NOI - Romania 31,793 - 802 5,966 (509) 38,052
NOI - Poland 32,059 4,790 - - (1,157) 35,692
Administrative expenses (5,206) (217) (54) (2,278) - (7,755)
Fair value (loss)/gain on investment property (111,236) 2,489 21 5,842 - (102,884)
Depreciation and amortisation expense (268) - (8) (13) - (289)
Other expenses (940) (145) (97) - - (1,182)
Other income 266 1,948 12 5 (16) 2,215
Loss on disposal of subsidiary - - - (164) (164)
Foreign exchange loss (309) (224) (12) (24) (569)
Segment result (53,841) 8,641 664 9,334 (1,682) (36,884)
Finance cost (6,189) (251) - (21,505) - (27,945)
Finance income 853 45 34 17,292 - 18,224
Share-based payment expense (167) - - - - (167)
Gain from fair value of financial instruments (121) - - - - (121)
Share of profit of equity-accounted investments in joint ventures - - - 2,613 - 2,613
Profit/(loss) before tax (59,465) 8,435 698 7,734 (1,682) (44,280)
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 on other long-term assets (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 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
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 2023
(30 June 2022: €nil).
30 June 2023
Office Mixed-use Residential Other Inter segment eliminations Total
Segments €'000 €'000 €'000 €'000 €'000 €'000
Segment non-current assets 2,319,135 288,321 51,065 207,687 (1,918) 2,864,290
Romania 1,161,500 - 51,065 207,687 (452) 1,419,800
Poland 1,157,635 288,321 - - (1,466) 1,444,490
Total assets 2,692,541 297,510 50,087 222,363 (2,882) 3,259,619
Total liabilities 553,200 24,486 3,884 1,046,845 (849) 1,627,566
Additions to non-current assets
- Romania 5,684 - - 1,861 7,545
- Poland 11,974 6,383 - - 18,357
31 December 2022
Office Mixed-use Residential Other Inter segment eliminations Total
Segments €'000 €'000 €'000 €'000 €'000 €'000
Segment non-current assets 2,414,875 279,612 53,067 199,930 (2,024) 2,945,460
Romania 1,200,703 - 53,067 199,930 (395) 1,453,305
Poland 1,214,172 279,612 - - (1,629) 1,492,155
Assets held for sale 126,009 - - - - 126,009
Total assets 2,812,401 289,743 56,821 212,445 (2,547) 3,368,863
Total liabilities 557,192 23,334 3,983 1,113,450 (406) 1,697,553
Additions to non-current assets
- Romania 15,377 - 74 21,204 - 36,655
- Poland 27,651 13,348 - - - 40,999
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 2023 30 June 2022 30 June 2023 31 December 2022
Name Amounts €'000 €'000 €'000 €'000
Global Logistics Chitila SRL (50% Joint Venture) Shareholder loan receivable - - 25,937 25,138
Trade and other receivables - - 18 -
Finance income 439 476 - -
Office rent 6 6 - -
Asset management fees 28 20 - -
Black Sea Vision SRL Shareholder loan receivable - - 10,802 14,209
(50% Joint Venture)
Trade and other receivables - - 17 -
Finance income 252 213 - -
Office rent 6 6 - -
Asset management fees 27 9 - -
Targu Mures Logistics Hub SRL Shareholder loan receivable - - 11,950 7,976
Trade and other receivables - - 4 -
(50% Joint Venture) Finance income 212 - - -
Office rent 6 - - -
Asset management fees 11 - - -
26. New and Amended Standards
Starting from 1 January 2023 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 17 Insurance contracts: Initial Application of IFRS 17 and Jan-23
IFRS 9 - Comparative Information
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Jan-23
Liabilities arising from a Single Transaction
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
IFRS 17 Insurance Contracts Jan-23
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
Dividends
On 30 August 2023, the Company announced that its Board of Directors has
approved the payment of an interim dividend in respect of the six-month
financial period ended 30 June 2023 of €0.14 per ordinary share (which will
be paid on 10 October 2023) and intends to offer a scrip dividend alternative
to the Interim Dividend so that qualifying shareholders can elect to receive
new ordinary shares in the Company instead of cash in respect of all or part
of their entitlement to the Interim Dividend.
Qualifying shareholders who validly elect to receive the Scrip Dividend
Alternative will become entitled to a number of Scrip Dividend Shares in
respect of their entitlement to the Interim Dividend that is based on a price
per Scrip Dividend Share calculated on the basis of a discount of 20% to the
average of the middle market quotations for the Company's shares as derived
from the Daily Official List (or any other publication of a recognised
investment exchange showing quotations for the Company's shares) on the five
consecutive dealing days from and including the Ex-Dividend Date, the
"Reference Price".
Sale of Warta Tower
In July 2023 the Company sold the Warta Tower office building, a fully vacant
building, in Warsaw to a company from the Cornerstone Investment Management
platform. The transaction was valued €63.4 million (higher than book value
at 30 June 2023), out of which €20 million are deferred and will be received
in October 2025.
ADDITIONAL INFORMATION
29. EPRA NAV Metrics
EPRA NRV EPRA NRV EPRA NTA EPRA NTA EPRA NDV EPRA NDV
30-Jun-23 31-Dec-22 30-Jun-23 31-Dec-22 30-Jun-23 31-Dec-22
€'000 €'000 €'000 €'000 €'000 €'000
Net assets attributable to equity holders of the parent 1,630,692 1,656,506 1,630,692 1,656,506 1,630,692 1,656,506
Include / exclude
I) Hybrid instruments − − − − − −
Diluted NAV 1,630,692 1,656,506 1,630,692 1,656,506 1,630,692 1,656,506
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 1,630,692 1,656,506 1,630,692 1,656,506 1,630,692 1,656,506
Exclude:
V) Deferred tax in relation to fair value gains of IP 155,079 181,070 77,540 90,535 n/a n/a
VI) Fair value of financial instruments (357) (194) (357) (194) (357) (194)
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 - (1) - (1)
IX) Adjustment in respect of joint venture and NCI share for above items 1,433 3,798 1,433 3,798 3,798 n/a
Include:
IX) Fair value of fixed interest rate debt n/a n/a n/a n/a 124,521 133,571
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 1,781,150 1,835,483 1,696,958 1,738,295 1,742,507 1,777,533
Fully diluted number of shares 235,829 221,470 235,829 221,470 235,829 221,470
NAV per share (EUR) 7.55 8.29 7.20 7.85 7.39 8.03
STANDING PORTFOLIO - BREAKDOWN BY LOCATION & TYPE
(data as of 30 June 2023)
Number of Value Area Occupancy Rate Rent Contracted Headline Rent / Sqm or Unit
Investments Properties GAV GLA by GLA Contracted WALL 100% Rent Office Commercial Industrial
(#) (#) (€m) (k sqm) (%) Rent (€m) Years (€m) (€/sqm/m) (€/sqm/m) (€/sqm/m)
Office & Mixed-Use Portfolio
Bucharest New CBD 8 12 854.3 344.2 93.3% 63.1 5.5 67.1 14.7 14.7 --
Bucharest Other 4 6 279.1 118.2 96.4% 21.4 5.0 22.6 14.9 14.5 --
Romania: Office 12 18 1,133.4 462.4 94.1% 84.5 5.4 89.7 14.8 14.7 --
Warsaw 9 14 689.1 210.9 75.5% 41.4 3.9 51.9 19.4 19.6 --
Krakow 4 12 295.5 150.2 60.3% 17.7 3.5 28.0 14.7 14.8 --
Wroclaw 2 3 139.4 56.7 99.2% 10.5 5.1 10.6 14.9 14.5 --
Lodz 1 2 63.3 35.5 86.3% 5.0 3.2 5.8 12.7 12.9 --
Katowice 2 5 118.5 63.3 72.2% 8.3 4.5 11.2 13.8 13.4 --
Gdansk 1 1 54.8 25.6 87.4% 4.3 4.0 4.9 14.6 14.5 --
Poland: Office & Mixed-Use 19 37 1,360.6 542.1 74.7% 87.2 4.0 112.4 16.3 16.3 --
Total Office & Mixed-Use Portfolio 31 55 2,494.0 1,004.6 83.6% 171.7 4.7 202.1 15.5 15.5 --
Logistics / Light-Industrial
Timisoara 2 6 89.2 140.4 88.0% 6.2 5.4 7.0 7.0 4.1 3.8
Arad 1 1 17.6 20.1 100.0% 1.3 11.6 1.3 7.1 5.3 4.9
Oradea 1 1 6.8 6.9 100.0% 0.5 12.2 0.5 5.7 5.3 5.3
Targu Mures 1 1 13.2 18.3 100.0% 1.5 10.2 1.5 8.8 6.1 5.5
Pitesti 1 2 59.5 75.2 100.0% 4.3 7.6 4.3 5.3 4.7 4.7
Constanta 1 2 27.1 41.1 99.8% 2.3 5.2 2.3 7.8 4.1 3.8
Bucharest 3 3 61.1 89.2 76.7% 3.9 8.0 4.9 7.9 4.3 4.1
Total Industrial Portfolio 10 16 274.5 391.2 90.4% 19.9 7.3 21.8 7.2 4.5 4.2
Other Portfolio
Bucharest New CBD 1 1 40.9 21.1 nm 0.6 2.6 0.6 -- -- --
Upground Complex - Residential
Bucharest New CBD -- -- 10.1 6.0 97.7% 0.8 9.3 0.9 -- 11.2 --
Upground Complex - Commercial
Total Other Portfolio 51.0 27.1 nm 1.4 6.5 1.5 -- 11.2 --
Total Standing Commercial Portfolio 41 71 2,778.6 1,401.8 85.5% 192.5 5.0 224.8 15.2 12.2 4.2
Of which Romania 22 34 1,418.0 859.6 92.4% 105.3 5.8 112.4 14.3 10.1 4.2
Of which Poland 19 37 1,360.6 542.1 74.7% 87.2 4.0 112.4 16.3 16.3 --
GLOSSARY
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.
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 considering
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, 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.
Consolidated Coverage Ratio
Calculated as the aggregate amount of Adjusted EBITDA for the period of the
most recent two consecutive semi-annual periods ending on such Measurement
Date divided by the Consolidated Interest Expense for such two semi-annual
periods.
Consolidated Interest Expense
All charges, interest, commission, fees, discounts, premiums, and other
finance costs in respect of Indebtedness (but excluding such interest on
Subordinated Shareholder Debt) incurred by the Group.
Consolidated Leverage Ratio
Calculated as the Consolidated Total Indebtedness divided by Consolidated
Total Assets
Consolidated Secured Leverage Ratio
Calculated as the Secured Consolidated Total Indebtedness divided by
Consolidated Total Assets at that date
Consolidated Total Assets
Total assets (excluding intangible assets) of the Group.
Consolidated Total Indebtedness
Total Indebtedness of the Group (excluding deferred tax liabilities and income
and deposits from tenants
Contracted Rent
The annualised headline rent 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, 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 considering 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.
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 closeout 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 2022.
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 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.
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 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.
Leadership in Energy & Environmental Design ("LEED")
LEED, 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).
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)
and Knight Frank Sp. z o.o. ("Knight Frank") 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.
Passing Rent
It is the gross rent, less any ground rent payable under the head leases.
Property Under Development
Properties that are in development process that do not meet all the
requirements to be transferred to completed investment property.
RCF
Revolving Credit Facility.
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.
Secured Consolidated Total Indebtedness Consolidated
Total Indebtedness that is secured by any Security granted by any member of
the Group.
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 Accounting Return
Total accounting return is the growth in EPRA NRV per share plus dividends
paid, expressed as a percentage of EPRA NRV per share at the beginning of the
year
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.
Unsecured Consolidated Total Indebtedness
Means the Consolidated Total Indebtedness less Secured Consolidated Total
Indebtedness.
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 Broker
Panmure Gordon (UK) Limited
40 Gracechurch Street
London EC3V 0BT
United Kingdom
Investment Adviser (wholly owned subsidiary of the Company)
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
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
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)
1 (#_ftnref1) Information as at 13 September 2023.
(*) Properties held through joint ventures are shown at 100%, Globalworth owns
50% stake in the respective joint ventures.
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AnnouncementREG - Globalworth Real Est - Exchange Offer Final Results
AnnouncementREG - Globalworth Real Est - Issue of Scrip Dividend Shares & Admission to AIM
AnnouncementREG - Globalworth Real Est - Exchange Offer Early Exchange Deadline Results
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