Full year financial results to 31 December 2016

RNS Number : 4513B

Globalworth Real Estate Inv Ltd

04 April 2017

 

4 April 2017

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

Globalworth Real Estate Investments Limited

Annual Audited and Consolidated Financial Results for the year ended 31 December 2016

Globalworth Real Estate Investments Limited ("Globalworth" or the "Company") is pleased to release its Annual Audited and Consolidated Financial Results for the year ended 31 December 2016.

Highlights

•           Globalworth's total investments in Romania's real estate market rose to c.€860m¹ at the end of 2016, following an additional c.€43m invested during the year

•         Completed significant transactions in the equity and debt capital markets, raising a total of €380m

•         Welcomed Growthpoint Properties Ltd, South Africa's largest REIT, as the new cornerstone shareholder with 26.9% of the Company's issued share capital

•            Successfully negotiated commercial leases for a total of 98k of GLA²

•            Appraised portfolio value increased by €46.5m during the year to €977.5m at 31 December 2016

•            Year-end cash and cash equivalents of €221.3m (31 December 2015: €37.0m)

•            EPRA NAV³ per share of €8.57 (31 December 2015: €9.08)

•            Total revenue increased to €68.2m, c.52% higher than the previous year

•            Net Operating Income increased by c.54% to €43.6m (2015: €28.4m)

•            Normalised EBITDA⁴ of €36.3m, c.62% higher than 2015  

Dimitris Raptis, Deputy Chief Executive Officer and Chief Investment Officer of the Company, commented: "In 2016, the Romanian economy was one of the fastest growing in Europe and Globalworth remains a cornerstone investor in the Class "A" commercial real estate market. We have further improved Globalworth's positioning as it implements its strategy of becoming one of the leading real estate players in Romania and the wider CEE and SEE regions and, by strengthening our financial position and overall operating platform, have ensured that we are ready to take advantage of existing and upcoming opportunities for further investments. We look forward this year to paying our first dividend now that the investments set out at the time of our listing have all been successfully completed."

Operational update

•          Completed a €200m equity capital raise at €8.0 per share, subscribed to by Growthpoint Properties Ltd and Oak Hill

•         Completed a €180m senior secured real estate bond, subscribed to by the Canada Pension Plan Investment Board (CPPIB) and Cairn Capital

•           Delivered two Class "A" office properties in Bucharest, increasing the total number of standing properties to 14:

-- The flagship Globalworth Tower in Q1-16 (GLA: c.55k sqm)

-- The Gara Herastrau office property in Q2-16 (GLA: c.12k sqm)

•             Signed tenancies for a total of 98k sqm of commercial GLA

•             Increased commercial standing GLA by 22% to 370k sqm, resulting in total standing GLA of 420k sqm

•             Four office and light-industrial/warehouse facilities under construction in Bucharest and Timisoara

•             332k sqm of commercial space let or pre-let with a WALL of 6.5 years

•             Total average occupancy of commercial standing GLA at c.83.1%

 Financial update 

•             Secured or extended a total of €426.1m of financing from equity investors and debt providers

•             Decreased our weighted average cost of debt by 0.93% to 5.25% at 31 December 2016 (6.18% at 31 December 2015)

•             Cash and cash equivalents of €221.3m (31 December 2015: €37.0m)

•           Portfolio Open Market Value ("OMV")⁵ of €977.5m, representing a 5.0% increase on 31 December 2015 (€931.1m), mainly as a result of the revaluation of the Globalworth Tower and Gara Herastrau office properties to fair value following their completion in 2016 and of capital expenditure on investment properties under development

•              Loan to Value of 43.4 per cent, down marginally compared to 31 December 2015 (43.9 per cent)

•              NAV of €715.4m, 43.2% higher than 31 December 2015 (€499.7m)

•              EPRA³ NAV of €783.8m, 37.9% higher than 31 December 2015 (€568.3m)

•              NAV per share of €7.91⁶, down marginally compared to 31 December 2015 (€7.98)

•             In December 2016, the Company successfully completed a €200m new equity capital raise at €8.0 per share resulting in the issuance of c.27.1m⁷ new shares. The issue share price was at a:

o  58.4% premium to the closing share price on the date prior to the announcement of the transaction

o  12.6% discount to the 30 September 2016 period-end EPRA NAV of €9.15 (unaudited)

•            EPRA NAV per share⁸ of €8.57 decreased by 5.6% compared to 31 December 2015 (€9.08) as a result of the dilutive nature of the cash raised in the December 2016 equity capital raise

•            Total revenue reached €68.2m in 2016 (52.4%, or €23.5m higher than in 2015), €18.4m of which was derived from investments made in 2015

•             Following the increase in total revenues, NOI rose to €43.6m (2015: €28.4m), a significant improvement of 53.5%, or €15.2m, over 2015

•             Normalised EBITDA⁴ also increased in line with revenues and NOI rose by 62.4%

•             EPRA earnings amounted to €8.6m (2015: -€5.3m) representing an increase of €13.9m over 2015

Corporate and Social Responsibility

A key driver for Globalworth is positively impacting and improving the future prospects of the local community through its approach to business. In 2016 we:

•           Continued to support, directly or indirectly, numerous local communities, charities and hospitals in Romania, having donated more than €1.5m in charitable contributions since 2011

•            Organised a number of events and visited selected charities throughout the year, including the distribution of thousands of gifts to children between the ages of 1 and 18 over the Christmas period. Held our annual children's events and the Globalworth Camp Day at Adunatii Copaceni (Hospice of Hope)

•            Provided school scholarships for children, made space available in one of our properties to host a charity shop, and hosted a number of local and international university gatherings at our development sites as well as our standing properties

•            Continued to build a "greener" and more environmentally-friendly portfolio, by adding three "green" certified buildings to our portfolio (two in 2016 and one in 2017)

o  Green Court Building "B": LEED Gold

o  Gara Herastrau: BREEAM Excellent

o  Globalworth Tower: LEED Platinum (received in 2017), the first property to receive this level of high green accreditation in Romanian and the broader SEE region.

•           Increased the total number of green accredited properties in the portfolio to eight, with a further four under the certification process

The Annual Audited and Consolidated Financial Results for the year ended 31 December 2016 are available on the Company's website at www.globalworth.com and at

http://www.rns-pdf.londonstockexchange.com/rns/4513B_1-2017-4-3.pdf

For further information visit www.globalworth.com or contact:  

Globalworth Real Estate Investments Limited Dimitris Raptis	Tel: [phone]
Panmure Gordon (Nominated Adviser and Joint Broker) Andrew Potts	Tel: [phone]
Cantor Fitzgerald Europe (Joint Broker)       Rick Thompson David Foreman	Tel: [phone]
Milbourne (Public Relations) Tim Draper	Tel: [phone]

 

About Globalworth

Globalworth is a real estate investment company active in the CEE and SEE regions with a focus on Romania. The Company is internally managed by c.70 professionals and its portfolio at year end 2016 comprised 15 high quality real estate investments valued at c.€978m, all located in Romania.

^[1] Investment since inception of the Company in February 2013.

² GLA: Gross Leasable Area (in sqm).

³ "EPRA" The European Public Real Association Estate is a non-profit association representing Europe's publicly listed property companies.

⁴ Calculated as profit before finance cost, depreciation, amortisation of other non-current assets, gain on acquisition of subsidiaries, fair value gain on investment property, and other non-operational and / or non-recurring income and expense items.

⁵ Portfolio OMV is based on third party valuations at 31 December 2016.

⁶ The number of ordinary shares used to calculate Net Assets Value "NAV" per share as of 31 December 2016 were 90,396,948 (31 December 2015: 62,616,691). If the 1,072,962 shares that will be issued during 2017 is taken into account (see footnote 7 below), the diluted NAV per share at 31 December 2016 would amount to €7.82 per share.

⁷ The amount of new shares resulting from the December 2016 equity raise of 27,145,923 includes 1,072,962 shares that will be issued during 2017.

⁸ The number of ordinary shares used to calculate the EPRA Net Assets Value "EPRA NAV" per share as of 31 December 2016 were 91,469,910 (31 December 2015: 62,616,691).

 

GLOBALWORTH FOCUSES ON MAXIMISING VALUE FROM REAL ESTATE INVESTMENT OPPORTUNITIES IN ROMANIA AND THE BROADER CEE AND SEE REGION

CHAIRMAN'S STATEMENT

ANOTHER SUCCESSFUL STEP IN OUR EVOLUTION MARKED BY ROBUST PERFORMANCE, IMPROVED GOVERNANCE AND STRONGER CAPITAL BASE

2016 was a busy and successful year for us. We continued to grow our asset base, achieved strong operating and financial performance, raised a total of €380 million through two high-profile transactions in the debt and equity capital markets, and welcomed a new cornerstone shareholder to the Company.

Performance

Over the course of the year we made good progress with our development programme for office and light-industrial/warehouse space in Romania while adding to our footprint of Class "A" offices in Bucharest with two new properties, one of which was the landmark Globalworth Tower. We continued to actively manage our portfolio to best position our properties in the market and deliver sustainable growth for the Company, our shareholders and the wider community in which we operate.

Since Globalworth's inception in February 2013 we have invested c.€860 million in Romania's real estate market, ranking us as one of the most active investors in the country over this period, and assembled a portfolio of 15 high-quality investments valued at €977.5 million as at 31 December 2016.

This level of investment has been made possible through the support of our shareholders, our debt finance providers and the use of our own resources. I would like to highlight that, in 2016, we successfully completed two corporate transactions, which in our opinion should be included in the list of the most notable ones for the year in the region:

·      The €180 million bond transaction concluded in June 2016 with the Canada Pension Plan Investment Board (CPPIB) and Cairn Capital

·      The €200 million equity capital raise concluded in December 2016, fully subscribed by Growthpoint Properties Ltd. and Oak Hill Advisors

We are proud and grateful for the validation and support of international investors of CPPIB and Growthpoint's size and reputation.

The €200 million equity capital raise concluded in December 2016 and our continued focus on delivering attractive, risk-adjusted returns for our shareholders have resulted in our EPRA NAV rising to €783.8 million, up 38% compared to 2015. EPRA NAV per share decreased by 6% to €8.57 as a result of the dilutive nature of the cash raised in the December 2016 equity capital increase. We believe that such effect will be temporary as the capital raised is invested on accretive opportunities in line with our investment strategy, which has been successfully implemented to-date.

We are also pleased to be paying a dividend for the first time since the Company's inception. As declared in December 2016, we will be distributing €40 million (€0.44 per share) to our shareholders in two tranches for 2017 and have committed to distribute the equivalent of 90% of our Funds from Operations (FFO) in the future.

Shareholder Base

We are delighted to have Growthpoint Properties Ltd.(GRT) as the new principal shareholder in Globalworth. GRT is South Africa's largest REIT, with assets of over €7.5 billion, and a top-5 constituent of the FTSE EPRA/NAREIT emerging markets index. GRT became the largest shareholder in the Company following its participation in the €200 million equity capital raise in December 2016, in which it invested c.€186 million.

GRT's interest in further investing in the Central and South Eastern European region is aligned with that of the Company and we will be looking to leverage its support and best-in-class practices of operation and governance.

Board Operation/Memberships

We believe that a close relationship and open communication between the Non-Executive and Executive Directors is critical for the smooth operation of the Board and to provide the right guidance for the Company.

This level of close cooperation, intensified by the key bond and equity transactions contemplated and finally executed in 2016, was evidenced by our Board convening 18 times over the course of the year to ensure that all appropriate actions and decisions were taken.

We are pleased to welcome four new members to our Board of Directors, which as of February 2017 comprised 12 participants, and thank the existing directors for their ongoing cooperation and support. Norbert Sasse (CEO of GRT) and George Muchanya of Growthpoint, Peter Fechter and Richard van Vliet have joined the Board as Non-Executive Directors. We believe that their extensive experience and business acumen will help us to steer Globalworth to new levels of success.

Corporate Governance

The benefits of GRT's involvement with the Company have become immediately apparent as we have already adopted some of the practices of our new principal shareholder. We believe that these will further improve the way that we operate.

As our business grows in scale and to increase the efficiency of our operations and our Board, we have introduced a newly formed Investment Committee. This committee has been established to consider and approve or recommend to the Board (in accordance with a specified delegated authority framework) proposed investments or divestments, financing arrangements, investment policies and strategy. It comprises five members, these being Eli Alroy (Chairperson), Norbert Sasse, George Muchanya, Ioannis Papalekas and Dimitris Raptis.

The Board has also resolved to make certain changes to its committee memberships:

·      Peter Fechter has joined the Remuneration Committee and John Whittle has stepped down as Chairperson and member, with myself succeeding him as Chairperson

·      Richard van Vliet has joined the Audit Committee, replacing myself in the role

I would like to thank John for his service on the Remuneration Committee and wish my fellow members every success with their new roles and responsibilities.

Sustainability/Social Responsibility

At Globalworth we aim to do business while adhering to strict business ethics and corporate social responsibility, which we believe adds and sustains long-term value for the Company, our shareholders, the community and the environment.

We continue to focus on investing in environmentally friendly properties, having added two green certified buildings to our portfolio in 2016 and now having the first property in Bucharest and the broader SEE region to be awarded LEED Platinum. Of our commercial standing investments, 8 out of 11 have received green accreditation of BREEAM Excellent/LEED Gold or higher, and we are exploring the potential for similar accreditations for other properties in our portfolio.

We are also very proud to be able to give back to the community. Globalworth has directly or indirectly supported numerous local communities, charities and hospitals in Romania over the years, predominantly focused on young children, single mothers and those in need of palliative care.

Health and Safety

The health and safety of the people working or visiting our properties, our employees and our partners is of paramount importance to us. With over 420k sqm of standing GLA in our property portfolio and an additional 79k sqm under construction at the end of 2016, and thousands of people working on or visiting our sites on a daily basis, we work hard together with our partners to ensure that our safety record remains intact.

On our construction sites we monitor our contractors closely to ensure that proper safety measures are being applied to the workforce and, in the case of visitors, that the proper health and safety training is being performed. At our completed properties we conduct health and safety training for our tenants and undertake regular scenario exercises in order to secure the safety of employees and visitors in the event of an emergency.

With a portfolio of high-class assets, a new cornerstone investor and a robust balance sheet, Globalworth is in a strong position to pursue further asset growth through acquisitions. We already announced in February 2017 our acquisition of Dacia's main distribution centre facility in Romania and we have a strong pipeline of potential investments that we are pursuing. We also aim to simplify our debt capital structure and reduce our average cost of debt and to that end are exploring a benchmark size Eurobond issue. We are also considering means to broaden our shareholder base and enhance trading in our equity including the possibility of an additional listing.

Geoff Miller

Chairman

3 April 2017

CHIEF EXECUTIVE'S STATEMENT

DELIVERING STRONG RESULTS & PREPARING FOR THE NEXT STAGE OF GROWTH

Over the past three-and-a-half years, Globalworth has become the largest owner of Class "A" office property in Romania and one of the leading investors in the country's commercial real estate market.

We have put together what we believe to be a high-quality and resilient portfolio in our principal market of Romania, assembled through disciplined buying, development and active management of space.

We are proud to see that our hard work todate has been validated by interest in the Company from highly reputable international institutional investors. The transactions closed in 2016 with investors of CPPIB and Growthpoint's calibre mark a considerable endorsement of Globalworth and its position in the market. This has further incentivised us to continue on our growth path.

Essential to the success of the Company is the environment in which we operate. Romania remains our primary focus and its real estate market continues to provide the right foundations for us to implement our strategy. We will, however, also be looking to diversify our portfolio through acquisitions in the wider CEE and SEE regions.

In 2016, the Romanian macro environment was again positive, resulting in real GDP expanding by 4.7%, one of the highest growth rates in Europe. In addition, Romania continued to have one of the lowest public debt to GDP ratios and, with disposable income remaining strong, increased private consumption is expected to support further growth. The banking sector remains well-capitalised and competition between banks to deploy capital for good-quality real estate projects has resulted in a further improvement in financing terms. EU and national funds continue to be available to the country (more than €43 billion to be provided over a seven year period from 2014-2020), with the absorption rate expected to pick up in 2017, further incentivising investment in Romania and underpinning its growth in the short to medium term.

The strength of the macro-economic environment has been reflected in the performance of Romania's real estate sector, with demand for office and industrial estate space reaching historically high levels and significantly outweighing supply.

Investment yields in the office market were stable at 7.5% in 2016, mainly due to a limited number of transactions being completed during the year, while yields for industrial properties narrowed by an additional 50 basis points to 8.5% by year end. With a view to achieving attractive, risk-adjusted returns for our shareholders, we have invested in both standing, income-generating properties as well as properties to be developed by the Company. Our blended, stabilised NOI yield on capital invested is estimated at c.10%.

In 2016 we made good progress with our development programme for office and light-industrial/warehouse space in Romania, investing c.€39 million in six projects and an additional c.€4 million in other standing properties in our portfolio

We completed two properties located in the new Central Business District (CBD) of Bucharest offering a total of 66.7k sqm of Class A office space, thus increasing our total footprint of standing properties to 420k sqm at the end of 2016. In addition, four other properties were under construction. Three are expected to be finalised in 2017 and one at the beginning of 2018 which, upon completion, will add a further 78.5k sqm of high-quality office and industrial space to our portfolio.

We are particularly proud that our flagship development project Globalworth Tower was delivered in Q1-16. Globalworth Tower is a landmark Class "A" office property located at the heart of Bucharest's New CBD. At c.120 metres high and with GLA of 54.7k sqm, this is the second tallest tower and the second largest single office building in Romania. In addition, in 2017 the property was awarded a LEED Platinum rating, thus becoming the first building in Romania and the broader SEE region to have received the highest available Green accreditation.

In addition to Globalworth Tower, in 2016 we received Green accreditation for two other properties in our portfolio. Our commitment to investing in environmentally friendly properties is further demonstrated by the fact that over the past three-and-a-half years we have either acquired (3), developed (3) or improved the efficiency (2) of our office properties and currently 8 out of 10 of these hold Green accreditation of BREEAM Excellent/LEED Gold or higher. We are exploring the potential for similar accreditation for other properties in our portfolio, both standing and development projects.

The portfolio value at the end of year was 5% higher at €977.5 million as compared to 31 December 2015, principally due to the completion of the two development projects and to further investment made on projects under construction. On delivery, these developments (including Globalworth Campus Phase B) will add an additional c.€115 million to our portfolio ("On Completion" valuation of c.€1.1 billion).

Total revenue generated by our portfolio increased to €68.2 million (€44.8 million in 2015) following the acquisition of income-generating assets in 2014 and 2015, the completion of own-developments, and as a result of active asset management. 2016 was a record year for leasing for us, as we let or renegotiated c.98k sqm of commercial GLA in our properties. Our tenant base remains diversified in terms of both origin and sector and comprises more than 90 different national and multinational corporates, including some of the best-known blue-chip corporates from over 19 different countries and 27 sectors.

As at 31 December 2016, our standing portfolio (excluding the Upground Towers residential complex) offered GLA of 370k sqm and had an occupancy rate of 83.1%. As of year end, Globalworth had a combined total of c.330k sqm of GLA leased in our standing and development projects, while since the beginning of 2017 we have leased further space, thus increasing the overall occupancy of our portfolio.

The rise in the Company's revenues was reflected in our normalised EBITDA from ongoing operating activities increasing to €36.3 million in 2016, up 62.4% compared to 2015 (€22.4 million), and our underlying EPRA EPS of €13.33 (negative in 2015).

The Company's overall leverage remained at a moderate level, with LTV of 43.4% at 31 December 2016, marginally lower than the previous year (43.9% in 2015). We managed, however, to significantly improve our financing position through the issue of a €180 million bond, which was directly negotiated/subscribed to by the Canada Pension Plan Investment Board (CPPIB) and Cairn Capital. As a result of this landmark transaction and other bank financings completed during the year, we de-risked our balance sheet by replacing short-term liabilities with longer-term ones and reduced our weighted average cost of debt by 0.9% to c.5.3% (as at 31 December 2016).

At the end of 2016, we completed our largest and most successful equity capital issue to date in a transaction resulting in the Company raising €200 million new capital at €8.0 per share. The transaction was 93% subscribed by Growthpoint Properties, which is now the largest shareholder in Globalworth, with the remaining equity being provided by Oak Hill.

Although completed at a 13% discount to the latest (September 2016) EPRA NAV, the capital raise was priced:

·      at a 58% premium to the closing share price prior to the announcement; and

·      at a 33% premium to the previous capital raise completed in October 2015.

At this point I would like to welcome Growthpoint to the Globalworth family. l look forward to working closely with them and together steering the Company to new levels of success.

Our EPRA NAV increased by 38% to €783.8 million as of 31 December 2016, mainly as a result of the €200 million equity capital raise concluded in December 2016 and the revaluation of development projects, which were either delivered or whose construction made further progress in 2016, and of the equity raised at the end of the year. EPRA NAV per share, however, decreased by 6% to €8.57 as a result of the dilutive effect of the cash raised in December 2016 from the equity capital raise. We believe, however, that as we invest the equity raised in new, exciting opportunities and return capital through dividends, both our existing and our new shareholders will benefit from significant value creation in the near term.

Working towards this goal, in December 2016 we announced that we will be distributing €40 million (€0.44 per share, assuming no further issue of shares except for the shares issued or to be issued as part of the Dec 2016 capital raise) to our shareholders in 2017. A dividend of €0.22 per share, will be distributed in respect of the six-month financial period ending on 30 June 2017, marking the first time that Globalworth will be distributing dividends since it was established in February 2013. We are committed to continue paying dividends in the future on a semi-annual basis and, following the already announced distributions for the year, we will be paying dividends equal to not less than 90% of the Company's FFO to our shareholders.

Globalworth's continued growth could not have been achieved without its people. I would like to thank our team of 66 professionals for their consistent and continuous efforts over the years. In order to continue to progress it is important that we keep attracting, developing and supporting talent, as well as constantly improving the efficiency and effectiveness of our operations. To that end we have over the past one-and-a-half years been investing in developing our in-house ERP software. This has already improved our overall operational effectiveness and efficiency and is expected to yield further benefits in the future.

The delivery of the landmark Globalworth Tower development marks the completion of a major chapter for the Company, as all the investments identified at the time of the Company's IPO of July 2013 have now materialised. Looking at what we were hoping to realise back then and what we have actually to-date achieved, I cannot be anything but proud.

With a new cornerstone investor, a Company with a solid portfolio, sound operations, a robust balance sheet, and an improving real estate market, I am excited about the next chapter in Globalworth's evolution.

Ioannis Papalekas

Chief Executive Office

3 April 2017

MANAGEMENT REVIEW

READY TO TAKE ADVANTAGE OF EXISTING AND UPCOMING OPPORTUNITIES

2016 was a year in which management focused on improving the fundamentals of the business and better positioning Globalworth as it implements its strategy of becoming one of the leading real estate players in Romania and the wider CEE and SEE regions.

Efforts were concentrated on making significant progress with our development programme, actively managing our portfolio of real estate assets, strengthening the Company's balance sheet and continuing to optimise the way in which Globalworth operates.

As a result, no new third-party real estate acquisitions were completed during the year, although we remained active in sourcing a pipeline of exciting opportunities, one of which has already been announced in Q1 2017 and more are expected to be concluded during the course of the year.

Progress with Globalworth's Development Programme

Globalworth has a very active development programme. The Company was engaged with projects involving six new buildings in 2016 which, upon completion, will offer c.200k sqm of Gross Build Area (GBA) and c.145k sqm of Gross Leasable Area (GLA).

At the beginning of the year, the Company was in the process of finalising its flagship Class "A" Globalworth Tower office property and had three other office buildings under construction, all located in the New CBD of Bucharest. Our development programme expanded further in 2016 following agreements signed with Valeo Lighting and Litens Automotive, which will result in further growth at our TAP light-industrial complex in Timisoara, with two new facilities currently under construction.

One of our primary targets for 2016 was to deliver to market two Class "A" offices, our flagship Globalworth Tower and the smaller Gara Herastrau office property, thus increasing our total footprint of standing office GLA by c.66.7k sqm. We are very proud to have met this target, with Globalworth Tower opening its doors to tenants in February and the Gara Herastrau office property in June.

Our footprint of standing properties is expected to increase further in 2017/18 as we currently have two active projects at different stages of development which, upon completion, will offer total GLA of 78.4k sqm. In Bucharest, phase A of our Globalworth Campus project is under construction (total GLA 56.9k sqm), with Tower I expected to be completed in 2017 and Tower II at the beginning of 2018. In Timisoara we completed a facility let to Valeo Lightning in Q1-17 and a second pre-let to Litens Automotive is scheduled for delivery in 2017, adding c.21.5k sqm of GLA to our TAP complex.

In 2016 we invested c.€42.7 million in the development and extraordinary maintenance of our real estate portfolio, c.90% of which was in 6 projects under development.

Overall, we are very pleased to have been able to deliver according to plan in 2016 and to have done so within the scheduled delivery dates and budget, as well as to be on track for the projects currently under construction. Completing real estate projects on time and within budget is key to the success of our business and our ability to do so is a reflection of the capabilities of our internal project management team, in conjunction with those of our partners, and has been key to our successful track record todate.

Investment in Standing Portfolio

In 2016, Globalworth maintained its commitment of having a modern portfolio of high-quality and environmentally friendly real estate properties, with the Company receiving Green accreditation for two properties - Green Court "B" (LEED Gold) and Gara Herastrau (BREEAM Excellent), raising the number of Green-certified properties in our portfolio to seven. We remain committed to investing in environmentally friendly schemes and aim to further increase our number of such properties in the short to medium term, with five other properties currently at various stages of Green accreditation, the first of which was Globalworth Tower that has received LEED Platinum accreditation in 2017.

In addition, as part of our efforts to maintain and improve the marketability of our portfolio, we initiated a renovation and repair programme involving four of our portfolio properties.

The first project involved the common areas (indoor and outdoor) of the cluster of properties formed by BOB (office), BOC (office) and Upground Towers (residential), with works including landscaping, general repair works, the upgrade of light features and the repainting of selected areas. The second project involved the re-introduction to the market of the property now branded as Globalworth Plaza (formerly Nusco Tower) and the renovation/modernisation of the lobby, conversion of the first floor terrace to a roof garden and upgrade of the building's façade.

We are currently reviewing alternative solutions for other properties in our portfolio as we are committed to providing our tenants and their employees with the best possible product.

Optimising Capital Efficiency

Efficiently managing our combination of equity and debt financing is key in order to achieve a balance that allows for the rapid growth of the Company, enhances shareholder returns in the medium-term, and controls the inherent risk associated with third-party debt.

During the year we completed a number of debt and equity transactions that have allowed us to de-risk our balance sheet and provide us with funds that will facilitate further investment in our development projects and new pipeline opportunities, and thus the growth of the Company.

In 2016 we successfully raised c.€224 million from debt financing providers at an average cost of 6.5% and €200 million from equity investors at an average share price of €8.0 per share.

Debt Transactions

During the year, three new facilities were completed involving either the refinancing of existing facilities at improved terms or the raising of new debt against unencumbered properties.

The most notable transaction was the €180 million senior secured real estate bond, which was directly negotiated and subscribed to by the CPPIB and Cairn Capital and completed in May 2016. Part of the proceeds were used to repay a €100 million short-term corporate level facility expiring in 2016. Other transactions completed during the period included the re-financing of the TAP investment by BCR and the financing of the Gara Herastrau office building by Garanti Bank.

The new facilities agreed in 2016 resulted in the reduction of Globalworth's weighted average cost of debt from approximately 6.2% as at 31 December 2015 to approximately 5.3% at 31 December 2016. In addition, the consolidated LTV ratio has remained at the moderate level of approximately 43.4% as at 31 December 2016 (approximately 43.9% at 31 December 2015), well below the 60% level which Globalworth is committed to maintaining at all times.

Equity Transactions

In December 2016 we successfully completed a €200 million new equity capital raise at €8.0 per share. The transaction, which is transformational for the Company, was subscribed to by Growthpoint Properties Limited (GRT) and certain funds and/or accounts managed by Oak Hill Advisors (Europe), LLP and its affiliates (Oak Hill).

As a result of this transaction, GRT became the principal shareholder of Globalworth with a 26.9% stake and the Company further strengthened its shareholder base with the addition of one of South Africa's leading REITS as one of its anchor investors.

Portfolio High Occupancy Rate supported by High-Quality Long-Term Leases

Our ability to achieve high occupancy rates in our properties remains one of the key strengths of our Company. 2016 was our best year so far, having successfully negotiated the take-up or extension of 98k sqm of commercial GLA, increasing our overall total since 2014 to c.238.1k sqm and confirming the Company's position as one of the most successful investors and developers in the Romanian real estate market and the wider CEE/SEE region.

New commercial leases signed in 2016 more than doubled on the previous year and accounted for c.71% of the overall total space signed. These agreements included some of Romania's best-known national and multinational corporates and were signed at a WALL of c.7.0 years, in line with the Company's strategy of agreeing long-term lease contracts.

We are pleased to see demand for office and light-industrial space increasing as the performance of tenants continues to improve. Demand in our properties has originated from:

·      existing tenants expanding their occupancy as a result of growth in their respective business activities (e.g., Valeo, Huawei and Deutsche Bank);

·      existing tenants seeking to maintain stability and run their operations without interruption and, as such, renegotiating their leases by removing break options and/or extending the term of the contracts (Hewlett Packard Enterprises, Honeywell and Cegeca); and

·      new tenants wishing to take up space in high-quality properties owned and managed by Globalworth (e.g. Litens Automotive, Patria Bank, WIPRO, Anritsu, Bunge and Ferrero).

At the end of December 2016, the average occupancy rate of the standing commercial portfolio was c.83.1%, while the WALL of our commercial leases was c.6.5 years. The portfolio is occupied by a diversified, high-quality tenant mix, comprising some 90 national and multinational corporates from more than 19 different countries.

High-Quality Team of Professionals Based in Bucharest & Improved Infrastructure

In 2016, we continued to invest in our team of skilled professionals through selected hires in our core and support teams and to upgrade our infrastructure through the implementation of our new ERP system. This investment was considered necessary as Globalworth now has more than 420.0k sqm of GLA under management in its real estate portfolio and this is expected to increase in the future.

Our talent pool now totals 66 professionals, the majority located in Bucharest. Our local presence in our core Romanian market has allowed us to develop a broad network of relationships over the years among owners, occupiers, property specialists and community representatives, as well as domestic and international investors and capital providers.

These relationships and our local market knowledge have given us an advantage in identifying and investing in opportunities as and when they become available, either publicly or off-market.

Furthermore, investment in skilled professionals and high-quality and customised technology has allowed us to service our business partners and service providers more effectively, as well as improving our economies of scale and the overall efficiency of our operations.

Pipeline of Investment to Facilitate Further Growth

Management continued to work intensively to source new opportunities and facilitate further growth in the Company. Opportunities under consideration are located both in our core Romanian market as well as in the broader CEE/SEE regions, where Globalworth will be seeking to invest in the future.

We are pleased to have been able to announce our first transaction for 2017 in February, involving the acquisition of a modern warehouse leased solely to Automobile Dacia, Romania's largest corporate, on a long-term basis. The facility, which offers total GLA of c.68.4k, was acquired for a total of €42.5 million reflecting an attractive NOI yield of c.9.6%.

We look forward to announcing more exciting transactions in 2017.

Dimitris Raptis

Deputy Chief Executive Officer, Chief Investment Officer

3 April 2017

CASE STUDY

€200 MILLION EQUITY CAPITAL RAISE

In December 2016 Globalworth successfully completed a €200 million new equity capital raise at €8.0 per share. The transaction was subscribed to by Growthpoint Properties Limited (GRT) and certain funds and/or accounts managed by Oak Hill Advisors (Europe), LLP and its affiliates (Oak Hill).

The issue price represented a:

·      58.4% premium to the closing share price on the date prior to the announcement of the transaction; and

·      12.6% discount to the 30 September 2016 period-end EPRA NAV of €9.15 (unaudited).

GRT subscribed to 23.3 million shares (c.93%) and Oak Hill the remaining 1.7 million shares. In addition, and as part of the overall transaction, Globalworth issued an initial tranche of 1.1 million Fee Shares to GRT and Oak Hill, with a further tranche of an additional 1.1 million Fee Shares to be issued to GRT and Oak Hill by no later than 31 December 2017.

This milestone transaction was completed on 20 December and, as of that date, the number of Globalworth's total shares in issue increased to 90.4 million. All shares in issue have been admitted for trading on AIM.

The proceeds raised from the offering will be used:

·      to develop the Globalworth Campus project;

·      to pursue attractive, pre-identified investment opportunities in line with the Company's investing policy; and

·      for other general corporate purposes.

INVESTMENT REVIEW

DELIVERING BEST-IN-CLASS OFFICE PROPERTIES

In 2016 we invested €42.7 million in our portfolio, raising our total investment in real estate since the Company was established to c.€860 million. We delivered two Class "A" office properties in Bucharest, further progressed with the development of four other high-quality buildings in Romania, and initiated a renovation and repair programme for selected assets.

Globalworth's development programme was our principal focus in 2016, with the Company developing six new buildings during the course of year which, upon completion, will offer GBA of c.200.0k sqm and GLA of c.145k sqm.

Overall, we invested €42.7 million in 14 properties within our portfolio, the majority of which are in four developments - Globalworth Tower, Gara Herastrau, Globalworth Campus Phase A and TAP - accounting for 90% of the total.

New Deliveries

·      Globalworth Tower: In February 2016 we delivered Globalworth Tower to market, a landmark Class "A" office property which extends over 26 floors above ground and three levels underground offering total GBA of 78.2k sqm. The project was finalised 23 months after the commencement of construction works.

·      Gara Herastrau: In June 2016 we delivered our second project under development, the Gara Herastrau office property, a Class "A" office which extends over 12 floors above ground and with three underground levels, offering total GBA of 16.9k sqm. The property is adjacent to our Green Court "A" and Green Court "B" office buildings and was constructed in 17 months.

Under Development

In addition to the projects delivered, in 2016 we progressed with the development/construction of four other buildings, two Class "A" offices in Bucharest and two high-quality, light-industrial facilities in Timisoara. In total, as of year-end 2016 we had four buildings with c.78.4k sqm of GLA under construction, due for completion in 2017 and 2018.

Renovation and Repair Programme of Standing Properties

As part of our ongoing strategy to offer best-in-class real estate space to our business partners, the Company selected four properties for further improvement works.

As part of this renovation and repair programme we invested a total of €2.2 million in 2016, principally on the cluster of properties formed by BOB (office), BOC (office) and Upground Towers (residential), all situated in the same block, with works involving primarily the upgrade of common areas (indoor and outdoor) and the creation of more uniform surroundings.

Furthermore, in 2016 we completed the necessary design/ preparatory activities for Globalworth Plaza (formerly Nusco Tower), which involved the renovation and modernisation of the lobby, conversion of the first floor terrace to a roof garden, and upgrade of the building's façade. All works are expected to be completed in 2017.

2017 Investments

In 2017 Globalworth announced the €42.5 million acquisition of a modern warehouse facility, leased on a long-term basis to Automobile Dacia, Romania's largest corporate.

The facility benefits from being situated in a prime location, c.100km west of Bucharest near the Bucharest-Pitesti motorway, one of Romania's principal warehouse and industrial corridors and 28km from Dacia's main plant in Mioveni, Arges County.

The property offers c.68.4k sqm of GLA, and is one of the Renault Group's largest spare parts and accessories distribution centres worldwide.

Amounts invested in 2016:
Developments -	Developments -	Portfolio -
Delivered	Under Construction	Improvements
Globalworth Tower	GW Campus Phase A (two towers)	Other
Gara Herastrau	TAP - Valeo
	TAP - Litens Automotive
c.€24.8m	c.€13.8m	c.€4.1m

LEASING REVIEW

A RECORD YEAR IN LEASING

Over the past three years, Globalworth has successfully negotiated the take-up or extension of c.238k sqm of commercial GLA within its property portfolio, confirming the Company's position as one of the most successful investors and developers in the Romanian real estate market.

In leasing terms, 2016 was a record year for Globalworth with a total of c.98k sqm of commercial GLA takenup or extended. New leases signed (c.69.2k sqm GLA) during the year were more than double (c.145%) those of 2015, and were agreed at a WALL of c.7.0 years. In line with our strategy, these new leases were typically agreed with multinational corporate groups and financial institutions on long-term, euro-denominated, inflation-linked, triple net leases.

Our Green Court Building "B" is now 100.0% leased (c.82.1% at year-end 2015), and significant progress in lettings was made in the Globalworth Tower and Gara Herastrau office properties (both completed in 2016), which respectively had year-end occupancy of c.83.2% (c.51.0% at year-end 2015) and c.68.9% (vacant at year-end 2015).

In addition, at our TAP light-industrial complex we signed new leases with Valeo Lighting and Litens Automotive for a total of c.21.5k sqm, which will result in two facilities being developed in 2017, with the one for Valeo already delivered in Q1-17.

Furthermore, the Company has continued to improve the risk profile of its portfolio through the extension and/or expansion of leases with some of its prime tenants. New contracts in 2016 included signings with well-known national and multinational corporates such as Valeo (TAP c.13.5k sqm), Litens (TAP c.8.0k sqm), Huawei (Globalworth Tower c.6.8k sqm), Deutsche Bank (BOB c.6.2k sqm), ADP (Gara Herastrau c.6.1k sqm), Honeywell (BOC c.3.8k sqm), Patria Bank (Globalworth Plaza c.3.0k sqm), Hewlett Packard Enterprises (BOC c.2.5k sqm), Vodafone (Globalworth Tower c.2.0k sqm), Wipro (Globalworth Tower c.1.98k sqm), Ericsson (Green Court B c.1.9k sqm), Bunge (Globalworth Tower c.1.8k sqm), Tripsta and Saipem (Gara Herastrau c.2.2k sqm), Ferrero and Anritsu (Globalworth Tower c.1.8k sqm).

In TCI, the Company signed expansion contracts with existing tenants Cegeka, Hidroelectrica and EY for a total of c.3.1k sqm. In addition, Globalworth successfully renegotiated its leases with Honeywell (BOC), HP (BOC) and Cegeca (TCI) for a total of c.28.9k sqm.

The average occupancy rate of the Company's standing commercial portfolio at 31 December 2016 was 83.1%, with tenancies signed with 90 national and multinational corporates from 19 countries, including some of the most recognisable corporates from their respective industries. The WALL remaining on the commercial lease space in the Company's portfolio is approximately 6.3 years.

Selected Tenants of our Portfolio

Tenant Origin:	% of Contracted Rent	Selected Tenants of Commercial Portfolio
Multinational	86.0%	Abbott Laboratories, Adecco, ADP, Anritsu Solutions, Bayer, Billa, BRD, Bunge, Carrefour, Cegeka, Clearanswer, Colgate-Palmolive, Continental, Credit Agricole Bank, Delhaize Group, Deutsche Telekom, EADS, Elster Rometrics, Ericsson, EY, Ferrero, GfK, Honeywell, Hewlett Packard Enterprise, Huawei, Intel, Litens Automotive, Mood Media, NBG Group, Nestle, Orange, Piraeus Bank, ProCredit Bank, Saipem, Sanofi, Schneider Electric, Skanska, Starbucks, Stefanini, Subway, Telekom, Tripsta, UniCredit, Valeo, Vodafone, Wipro, Worldclass
National	8.2%	CITR, Creative Media, GlobalVision, NNDKP, NX Data, Patria Bank, RINF
State Owned Entities	5.8%	Hidroelectrica, Ministry of European Funds

CORPORATE SOCIAL RESPONSIBILITY

RESPECTING OUR SOCIAL AND ENVIRONMENTAL OBJECTIVES

At Globalworth we believe that it is our duty to be aware of, and manage responsibly, the social, environmental and economic impacts of the way in which we conduct our business and to make a positive contribution to the community in which we live and work.

Globalworth's key objective is to create value for its shareholders by acting consistently in an ethical and socially responsible manner. We aim to do so, by building a sustainable business and managing our financial goals and shareholder returns while respecting our social and environmental objectives.

We are very pleased that in 2016 we have been able to continue to promote and foster a sustainable and ecologically-responsible approach as well as supporting a number of social and charitable initiatives.

Overview

Selected Charities / Donations

·      Education/Social Assistance and Child Care ·      Health-related (Hospitals, Hospices etc) ·      Health-related operations for various individual cases

·      Foundation Hospice "Casa Sperantei" Bucharest ·      "Make a Wish" Foundation ·      Foundation for the Hearing Impairement (Asociatia Procultura Surzilor) ·      Foundation Together We are Overcoming Autism ·      Association for child and family protection "Ana and the Children" ·      Association for equal opportunities ("Un strop de fericire") ·      Special School No9 for children (Scoala Gimnaziala Speciala nr. 9) ·      "Sf Dimitrie" Foundation ·      Metropolis Foundation for children

SOCIAL FOCUS

Positively impacting and improving the future prospects of our local community, by the way we approach our business is a key driver for Globalworth.

The Globalworth family, and its Founder in particular, have, directly or indirectly, supported numerous local communities, charities and hospitals in Romania over the past 10 years. We have predominantly focused on those in need, with particular attention given to young children, orphanages, underprivileged families, single mothers and those in need of palliative care at the initiative of Hospices of Hope.

Our intention is for every year to be able to give more to those in need and 2016 was no exception. We are very proud that our Founder, the companies under his control and Globalworth (since its inception) have donated more than €1.5m in charitable contributions since 2011. In addition, many of our people have been contributing to several charities in Romania by diverting part of their State income tax deductions to charitable service.

Our involvement in causes goes over and beyond financial contributions, as we actively invest our personal time and effort to support those who need it the most. Being able to be actively involved and showing that they are not alone in their battles is equally important for us as the financial contribution we are committed of making. With this in mind we organised a number of events and visited selected charities throughout the year.

In 2016, these included distributing thousands of gifts to children between the ages of 1 and 18 over the Christmas period, the organisation of our annual 2016 Children's events and the Globalworth Camp Day at Adunatii Copaceni (Hospice of Hope). In addition we gave school scholarships for children, provided space in one of our properties to host a charity shop and hosted a number of local and international university gatherings at our development sites as well as our standing properties.

ENVIRONMENTAL FOCUS

Creating an environment in which people want to work and be associated with is a key objective for Globalworth, and for us there is no better way to achieve this than by building a "greener" and more environmentally-friendly portfolio.

Investment in energy efficient properties allows us to give back to local communities, our investors, our tenants, our partners and the people who work in or live nearby our buildings:

·      local communities benefit from reduced carbon emissions generated from the use of the property;

·      our tenants benefit from lower energy costs, positively impacting the profitability of their operations;

·      those working in our buildings benefit from improved conditions thanks to temperature control and better flow and quality of air (which can also lead to improved productivity);

·      our partners benefit by assisting us to develop, maintain and operate a green portfolio according to the respective specifications of each property; and

·      our investors benefit through the creation of long term sustainable value in the portfolio.

In 2016, our efforts were dedicated to designing and building new developments with the aim of achieving LEED Gold, BREEAM Very Good, or higher accreditations and to ongoing investment in our properties to ensure further improvement in our sustainability performance.

We are pleased to report that over the course of the year we received green accreditation for two new properties. Green Court "B", which was acquired by the Company in 2015, received LEED Gold accreditation in February 2016, while the Gara Herastrau office property, developed by Globalworth and completed in June 2016, received BREEAM Excellent accreditation in November.

In addition, our flagship Globalworth Tower, which was developed by the Company and completed in February 2016, was awarded a LEED Platinum rating in 2017. It is the first building in Romania and the broader SEE region to have received the highest available green accreditation, an achievement of which we are particularly proud.

The majority of the standing office properties in our portfolio are now green accredited, with eight currently holding green accreditation of BREEAM Excellent/LEED Gold or higher. We are exploring the potential for similar accreditation for other properties in our portfolio, both standing and development projects.

Existing Properties	Developments / New Investments
·      Our portfolio includes 8 Class A office properties with LEED Gold or BREEAM Very Good (or higher) certifications ·      We are in the process of certifying additional properties owned by Globalworth ·      Green Court B was awarded LEED Gold in 2016 ·      Gara Herastrau was awarded BREEAM Excellent in 2016 ·      Globalworth Tower was awarded LEED Platinum in 2017	·      Globalworth is designing its development projects to be energy efficient and sustainable, aiming to achieve LEED Gold or BREEAM Very Good or higher accreditations ·      When considering new investments, Globalworth is looking, insofar as is possible, for green buildings or properties which have the potential to achieve a green classification

PORTFOLIO REVIEW

BEST-IN-CLASS REAL ESTATE PORTFOLIO

Over the past three-and-a-half years, Globalworth has been investing exclusively in Romanian real estate, its principal market, assembling a portfolio of best-in-class properties in prime locations within their respective sub-markets.

By the end of 2016 the Company had 15 investments with a total of 20 assets, all of which were located in two Romanian cities, the capital Bucharest and Timisoara, one of the largest logistics hubs in the country. Since the turn of the year we have continued to expand our footprint, having announced the acquisition of a standing warehouse leased to Automobile Dacia in Pitesti (Central Romania) and formed a partnership for the development of a new Class "A" office complex in the western part of Bucharest. These initiatives have increased our total number of investments and assets to 17 and 22 respectively.

Globalworth's main focus is to invest in standing or development office properties, which are subsequently actively managed by the Company. Such properties accounted for c.81.4% of our portfolio value as of year end 2016.

In addition, our exposure to the industrial sector has been increasing in the past couple of years, initially driven by demand from tenants interested in taking up space in what has become one of our most successful investments, the TAP light-industrial complex in Timisoara. This complex consisted initially of a facility leased to Valeo Lighting and was expanded in 2015 following the development of two facilities let to Continental and Elster. A new facility leased to Valeo Lightning was delivered in Q1-17 and a second facility pre-let to Litens Automotive is scheduled for delivery in Q3-17.

In February 2017, Globalworth announced the acquisition of a 68.4k sqm modern warehouse facility 100% leased to Dacia in Pitesti. Including the addition of the three new facilities under construction or being acquired, our total footprint in the light-industrial / warehouse sector will grow to 171.0k sqm of GLA (c.27.0k sqm year end 2014).

The highest concentration of our portfolio, however, remains in the New CBD of Bucharest where we have eight standing properties and one development project, accounting for 73.4% of the value of our portfolio and representing 214.8k sqm of standing commercial GLA and 423 residential units as of 31 December 2016.

The New CBD is in the northern part of Bucharest, clustered around the Dimitrie Pompeiu, Calea Floreasca and Barbu Vacarescu Boulevards, and has seen the highest level of office investment in recent years as a result of its excellent accessibility and infrastructure (metro, tram, bus, road), its proximity to the Henri Coanda International Airport, and the availability of sizeable land plots.

Key investments in the new CBD include the Class "A" flagship office Globalworth Tower, offering GLA of 54.7k sqm (delivered in 2016), two Class "A" offices which form part of the Green Court complex, the Class A BOC office property and, finally, our Globalworth Campus development which, upon completion, will offer 88.6k sqm of Class "A" office space supported by retail shops and other amenities.

The remainder of our Bucharest portfolio comprises Class "A" offices offering total GLA of 73.9k sqm and two land plots held for future development. These properties are spread across the capital (centre, north and south), with each property occupying a prime location within its respective sub-market.

We are very pleased that Globalworth, following the delivery of our Globalworth Tower in Q1-16, now owns the second, third and fifth-tallest office towers in Bucharest and the two single largest office buildings (held by an institutional investor) in Romania.

			Mark to	Value upon
	"As Is" Value	Capex	Market Uplift	"Completion"
Property	(€ m)	(€ m)	(€ m)	(€ m)
GW Tower	162.5	-	-	162.5
BOB	50.3	-	-	50.3
BOC	143.7	-	-	143.7
Green Court "A"	51.3	-	-	51.3
Green Court "B"	53.2	-	-	53.2
GW Plaza	56.5	-	-	56.5
Unicredit HQ	52.5	-	-	52.5
TCI	76.7	-	-	76.7
City Offices	62.0	-	-	62.0
Gara Herastrau	28.8	-	-	28.8
UPG	101.2	-	-	101.2
TAP	50.4	12.0	2.4	64.8
GWI Campus	70.4	84.5	16.0	170.9
Herastrau One	5.8	-	-	5.8
Luterana	12.3	-	-	12.3
Total	977.5m	96.5m	18.4m	1,092.4m

Green Certified Properties

 

Globalworth Tower:	LEED Platinum
BOB:	BREEAM In-use/Excellent and LEED Gold certifications (for part of the property)
BOC:	BREEAM In-use/Excellent certification
UniCredit HQ:	BREEAM Very Good certification
City Offices:	LEED Gold certification
Green Court "A":	LEED Gold certification
Green Court "B":	LEED Gold certification
Gara Herastrau:	BREEAM Excellent

Properties Under Green Certification Process
TCI:	BREEAM Very Good/Excellent
Globalworth Plaza:	BREEAM Very Good/Excellent
Globalworth Campus:	BREEAM Very Good/Excellent
Upground Towers:	BREEAM Very Good/Excellent (ongoing)

Standing Properties

Globalworth's portfolio of standing assets increased in 2016 with the addition of the flagship Globalworth Tower and the smaller Gara Herastrau office property, which were delivered in Q1 2016 and Q2 2016 respectively.

Our standing portfolio increased to 14 assets, comprising 10 Class A office properties and a residential complex located in Bucharest, while in Timisoara we own a light-industrial park comprising three facilities.

Globalworth's total standing GLA at the end of 2016 had increased by c.18.1% to 420k sqm, of which 370.0k sqm was commercial space, while the appraised value of our standing investment properties rose to c.€881.5 million (as at 31 December 2016), representing a c.26.8% increase on the previous year.

Globalworth Tower is a landmark office property located in the heart of the New CBD of Bucharest. At a height of approximately 120 metres it is the second-tallest office property in Romania and one of the biggest in terms of office space in the CEE/See region. Globalworth Tower offers approximately 54.7k sqm of Class "A" office space and is approximately 83.2% let to high-quality national and international tenants including Vodafone (telecoms), Nestor Nestor Diculescu Kingston Petersen (law), Huawei (telecoms), Delhaize/Mega Image (retail-FMCG), Wipro (IT), Bunge (services), Ferrero (confectionery), Anritsu Solutions (services) and Globalworth (real estate). Globalworth Tower recently received the award for the "Best Big Office Development of the Year" for 2016 in the prestigious CIJ Awards. Occupancy in the property increased in 2017 to 90.4% following the signing of new leases with new and existing tenants.

Gara Herastrau was the second of Globalworth's projects delivered in 2016. This Class "A" office property is also situated in the New CBD and is adjacent to the Green Court Building complex and approximately 200 metres from Globalworth Plaza and Globalworth Tower. It extends over 12 floors (with an additional technical floor) and offers approximately 12.0k sqm of GLA. The Gara Herastrau office building was delivered in June 2016 and has an occupancy of approximately 68.9%. The property is anchored by ADP, the leading global provider of human capital management solutions, with other tenants including Saipem (oil and gas) and Tripsta (services). Occupancy in the property has further increased in 2017, rising to 75.4% following a new lease signed with Baker Tilly (accounting, audit and tax advisory). All standing properties in the portfolio have been completed or refurbished since 2008, with Globalworth continuously investing in its properties in order to maintain them as both modern and in line with tenant demand.

The number of 'green' properties owned by the Company has also increased since the beginning of 2016, with Green Court B receiving LEED Gold in February and the Gara Herastrau office property receiving BREEAM Excellent accreditation in November. In addition, we are very proud that our landmark Globalworth Tower property was officially awarded Green certification of LEED Platinum (January 2017), becoming the first building in Romania and the broader SEE region to have received the highest available Green accreditation.

The portfolio currently comprises eight Green accredited properties, with four others currently under various stages of Green certification. The Company expects to complete the Green certification process in the next 12 months.

At 83.1% as of 31 December 2016, occupancy of our standing portfolio remains high, with 307.7k sqm leased to top-quality tenants. Nine of our commercial properties had an occupancy rate in excess of 90% and we are in active discussions with a number of tenants for the remaining vacant space in our portfolio.

Since the beginning of 2017, as a result of the ongoing efforts of our leasing team and the acquisition of the 100% let Dacia warehouse, the total commercial space leased in our standing portfolio has increased to 383.7k sqm and the average occupancy rate has reached 87.5%. In addition to its commercial portfolio, Globalworth owns 421 apartments in Upground Towers (Upground), a modern two-tower residential complex ideally situated in the new CBD, with a total of 571 apartments.

The property benefits from fine views of the nearby Tei lake and is located close to our commercial portfolio, thus allowing us to leverage its use and provide a complete package to our many international tenants looking for turnkey solutions when relocating their operations to the area.

In Upground Towers we own a range of different apartments, varying in size (80 to 440sqm) and number of bedrooms (1 to 5). These are available for rental or sale and are targeted at residents interested in living in a complex offering top-end space combined with other amenities (gym, supermarket, restaurants and coffee shops etc.), while also being easily accessible by both public and private transport.

In 2016 we continued to market units for sale, and as a result we sold 14 apartments. In addition, at the end of the year 205 apartments were leased, generating c.€1.6 million of annual rental income.

Commercial Properties	Q4-15	Q4-16
Number of Investments	9	11
Number of Assets	11	13
GLA (sqm)	303,155	370,033
"As Is" Valuation:	595.6	788.6
Occupancy	85.1%	83.1%
Contracted Rent	36.3	47.0
WALL	6.0	6.4

Total Standing Properties	Q4-15	Q4-16
Number of Investments	10	12
Number of Assets	12	14
GLA (sqm)	355,513	419,986
"As Is" Valuation:	695.1	881.5
Contracted Rent		48.6

Developments

We continued with our active development programme in 2016, delivering to market two Class "A" office properties with 66.7k sqm of GLA. As at the end of the year we had four other properties under construction which, upon completion, will further increase our footprint of high-quality office and light-industrial standing GLA by 78.4k sqm.

Developments in Bucharest

The Globalworth Campus project is a large-scale development situated in the new CBD of Bucharest, which upon completion will offer three Class "A" office towers, retail spaces and other supporting amenities (including a conference centre). Phase A, currently under construction, will comprise two side towers facing Dimitrie Pompeiu Street (main street) with total GLA of approximately 56.9k sqm on completion, while Phase B will comprise one middle tower, which on completion will contribute additional GLA of approximately 31.7k sqm.

The development of Phase A is progressing in line with the estimated timeline. In Tower I the structural concrete works have been completed and the façade is currently being fitted out with a glazed surface, which is approximately 95% complete. For Tower II, the necessary preparatory activities have been completed, including excavations, and construction of the structure has now commenced. We expect to deliver Tower I in Q2-17, followed by Tower II in Q1-18.

Globalworth is currently in negotiations with a number of tenants for the take-up of space in both towers.

The Company has adopted a number of environmentally friendly principles for both office buildings under development and, as such, anticipates being able to achieve Green certifications of BREEAM Very Good or Excellent.

Developments in Timisoara

The TAP project has proven to be a location much sought-after by high-quality multinational tenants and a very successful investment for Globalworth. Since its acquisition in July 2014 the park has been continuously expanded, initially with new facilities developed for Continental and Elster Rometrics (part of the Honeywell Group), who moved into TAP in 2015. In 2016 the Company signed new leases for the development of two facilities leased to Valeo Lightnings (expansion) which was delivered in Q1-17 and Litens Automotive (new tenant) which is currently under construction and scheduled for delivery in Q3-17.

In February 2016, Valeo exercised its option to take more space in the TAP complex, with the development of a new light-industrial facility of 13.5k sqm. The delivery of the new facility in Q2-17 marked the second time that Valeo has expanded in the park since its arrival in 2011.

In November 2016 the Company signed a 10-year unbreakable lease with Litens Automotive for the development of a 8.0k sqm new light-industrial facility in the park. The new facility is to be developed on available land in TAP and is expected to be delivered in Q3-17. The German Litens Automotive Group is a leading global designer and manufacturer of engineered power transmission systems and components, with more than 35 years of experience in the market.

TAP offered a total of 81.3k sqm of GLA and was c.97.3% occupied at the end of 2016. GLA in the complex is expected to increase to 102.9k sqm by Q3 2017, and has the potential for further development reaching a total GLA of 131.4k sqm as a result of the extension options currently available to the existing tenants of the park.

The "As Is" value of the Development Projects as of 31 December 2016 was approximately €77.9 million. On completion, the projects are expected to deliver approximately 138.7k sqm of new office and light-industrial space, with an appraised value of c.€192.8 million.

Development Projects - Breakdown by Status Q4-16	Under Construction(1)	Future Development(2)	Total Development
Number of Investments	2	2	2 investments developed in stages
Number of Assets to be Developed	4	2	6
GLA (sqm)	78,444	60,229	138,673
"As is" Valuation	€58.7m	€19.3m	€77.9m
"Completion" Valuation	€118.7m	€74.1m	€192.8m

Notes:

(1)      "Under Construction" comprises Globalworth Campus Phase I, TAP Valeo (expansion) and TAP Litens (new facility).

(2)      "Future Development" comprises Globalworth Campus Phase II and other expansion options available at TAP.

Land for Future Development

Globalworth owns land plots in two prime locations in Bucharest (Herastrau Lake and the historical CBD) for future development. These plots represent further opportunities for office or mixed-use developments, which the Company intends to take advantage of in the future in order to further grow its real estate portfolio.

The total land size for future development in these two locations is approximately 9.8k sqm, with an appraised value of approximately €18.1 million.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2016

		2016	2015
	Note	€'000	€'000
Revenue	7	68,231	44,776
Operating expenses	8	(24,678)	(16,406)
Net operating income		43,553	28,370
Administrative expenses	9	(7,707)	(10,201)
Acquisition costs		(105)	(811)
Fair value movement	3	6,710	49,422
Bargain purchase gain on acquisition of subsidiaries		-	17,227
Gain on sale of subsidiary	25	272	-
Share-based payment expense	22	(14)	(125)
Depreciation on other long-term assets		(183)	(174)
Other operating expenses		(1,857)	-
Other operating income	7	3,111	-
Foreign exchange loss		(119)	(249)
		108	55,089
Profit before net financing cost		43,661	83,459
Net financing cost
- Finance cost	10	(32,222)	(21,472)
- Finance income		749	526
		(31,473)	(20,946)
Profit before tax		12,188	62,513
Income tax expense	11	(873)	(11,092)
Profit for the year		11,315	51,421
Other comprehensive income		-	-
Attributable to equity holders of the Company		11,315	51,421

		Cents	Cents
Earnings per share
- Basic	12	17.57	92.01
- Diluted	12	17.56	92.01
EPRA earnings per share
- Basic	12	13.34	(9.41)
- Diluted	12	13.33	(9.41)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2016

		2016	2015
	Note	€'000	€'000
ASSETS
Non-current assets
Investment property	3	980,892	937,119
Goodwill	24	12,349	12,349
Advances for investment property	5	2,454	3,993
Other long-term assets		722	661
Other receivables	17	1,183	2,193
Prepayments		1,022	1,020
		998,622	957,335
Current assets
Trade and other receivables	17	10,807	13,114
Guarantees retained by tenants		277	79
Income tax receivable		411	583
Prepayments		348	1,638
Cash and cash equivalents	18	221,337	37,036
Investment property held for sale	25	-	10,353
		233,180	62,803
Total assets		1,231,802	1,020,138
EQUITY AND LIABILITIES
Total equity
Issued share capital	20	538,114	341,784
Unissued share capital	21	8,584	-
Share-based payment reserve	22	2,139	2,655
Retained earnings		166,557	155,242
Equity attributable to equity holders of the Company		715,394	499,681
Non-current liabilities
Interest-bearing loans and borrowings	15	375,570	261,287
Deferred tax liability	11	70,575	70,413
Guarantees retained from contractors		33	957
Finance lease liabilities		-	5
Deposits from tenants		2,261	1,485
Trade and other payables	16	2,188	3,278
		450,627	337,425
Current liabilities
Interest-bearing loans and borrowings	15	38,665	143,024
Guarantees retained from contractors		2,394	3,277
Trade and other payables	16	20,726	32,275
Other current financial liabilities	19	3,574	3,935
Finance lease liabilities		4	18
Deposits from tenants		374	428
Income tax payable		44	75
		65,781	183,032
Total equity and liabilities		1,231,802	1,020,138
		Cents	Cents
NAV per share	13	791	798
Diluted NAV per share	13	782	798
EPRA NAV per share	13	857	908

The financial statements were approved by the Board of Directors on 3 April 2017 and were signed on its behalf by:

John Whittle

Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2016

		Equity attributable to equity holders of the Company
				Share-
		Issued	Unissued	based			Non-
		share	share	payment	Retained		controlling	Total
		capital	capital	reserve	earnings	Total	interests	equity
	Note	€'000	€'000	€'000	€'000	€'000	€'000	€'000
As at 1 January 2015		288,740	-	180	103,815	392,735	6	392,741
Shares issued for cash		53,830	-	-	-	53,830	-	53,830
Transaction costs on issue of shares		(786)	-	-	-	(786)	-	(786)
Fair value of option warrants issued for executive share scheme		-	-	125	-	125	-	125
Reclassification from liabilities to equity		-	-	2,350	-	2,350	-	2,350
Acquisition of minority interest		-	-	-	6	6	(6)	-
Profit for the year		-	-	-	51,421	51,421	-	51,421
As at 31 December 2015		341,784	-	2,655	155,242	499,681	-	499,681
Shares issued for cash	20	200,000	-	-	-	200,000	-	200,000
Transaction costs on issue of shares	20.2	(22,191)	-	-	-	(22,191)	-	(22,191)
Transaction costs on issue of shares settled in shares	20	8,584	-	-	-	8,584	-	8,584
Transaction costs on issue of shares to be settled in shares	21	-	8,584	-	-	8,584	-	8,584
Fair value of option warrants issued for executive share scheme	22	-	-	14	-	14	-	14
Shares granted to Executive Directors and other senior
management employees	22.2	-	-	3,407	-	3,407	-	3,407
Shares issued to the Executive Directors and other senior
management employees	20	3,937	-	(3,937)	-	-	-	-
Shares issued for settlement of interest-bearing liability	20	6,000	-	-	-	6,000	-	6,000
Profit for the year		-	-	-	11,315	11,315	-	11,315
As at 31 December 2016		538,114	8,584	2,139	166,557	715,394	-	715,394

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2016

		2016	2015
	Note	€'000	€'000
Profit before tax		12,188	62,513
Adjustments to reconcile profit before tax to net cash flows
Fair value movement	3	(6,710)	(49,422)
Bargain purchase gain on acquisition of subsidiaries		-	(17,227)
Loss on sale of investment property		1,421	-
Gain on sale of subsidiaries	25	(272)	-
Share-based payment expense	22	14	125
Depreciation on other long-term assets		183	174
Net movement in provision for doubtful debts		(98)	-
Foreign exchange loss		119	249
Net financing costs		31,473	20,881
Operating profit before changes in working capital		38,318	17,293
Decrease in trade and other receivables		4,174	4,148
(Increase)/decrease in trade and other payables		1,364	(2,896)
Interest paid		(23,171)	(15,158)
Interest received		22	78
Income tax paid		(795)	(447)
Cash flows from operating activities		19,912	3,018
Investing activities
Expenditure on investment property under development		(51,688)	(69,729)
Payment for acquisition of subsidiaries less cash acquired	16	(1,894)	(114,406)
Proceeds from sale of subsidiary less cash disposed	25	11,000	-
Proceeds from sale of investment property		3,327	-
Acquisition of other long-term assets		(244)	(162)
Cash flows used in investing activities		(39,499)	(184,297)
Financing activities
Proceeds from share issuance	20	200,000	53,830
Payment of transaction costs on issue of shares		(1,099)	(389)
Proceeds from interest-bearing loans and borrowings1		222,703	155,634
Repayment of interest-bearing loans and borrowings		(203,017)	(15,095)
Payment of loan arrangement fees		(5,543)	(3,622)
Payment of other financing costs		(6,127)	-
Cash flows from financing activities		206,917	190,358
Net increase in cash and cash equivalents		187,330	9,079
Cash and cash equivalents at the beginning of the year	18	31,036	21,957
Cash and cash equivalents at the end of the year1	18	218,366	31,036

1     Net of the €2.9 million (2015: €6 million) cash reserve, see note 18.

 

END

 

 

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