Posting of Annual Report and Notice of AGM
The information communicated within this announcement is deemed to constitute inside information for the purposes of Article 7 of Regulation (EU) No 596/201 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"). Upon the publication of this announcement, this information is considered to be in the public domain.
26 March 2021
Globalworth Real Estate Investments Limited
("Globalworth" or the "Company")
Audited Results for the year ended 31 December 2020,
Posting of Annual Report and
Notice of AGM
Globalworth, the leading office investor in Central and Eastern Europe, announces that further to the publication on 5 March 2021 of its Condensed Unaudited Financial Results, it is pleased to release its Annual Report and Audited Consolidated Financial Results for the year ended 31 December 2020 ("2020 Annual Report").
Operational Highlights
· Total combined portfolio value remained effectively unchanged at €3.0 billion.
‒ €2.3 billion in environmentally certified properties.
· Performed an extensive review of our cost base, passing on service charges savings to our tenants and reducing our administrative expenses by c.7.0% compared to FY2019.
· Focused developments only on projects with significant pre-lets or advanced level of construction, delivering two Class "A" offices and two high-quality industrial facilities in Romania and Poland with 95.8k sqm of GLA.
· Overall standing portfolio footprint increased by 4.7% to 1,271.3k sqm of GLA.
· Leasing transactions for a total of 303.5k sqm of commercial space at an average WALL of 3.9 years.
‒ 74.3% related to lease renegotiations / extensions with our existing tenants.
· Standing commercial occupancy remained high at 90.9% (91.7% including tenant options) as at year-end, impacted however by the delivery of properties under development still in lease-up stage and a 3.3% decrease in like-for-like occupancy due to the very challenging market conditions.
· Annualised contracted rent of €183.4 million, of which 91.3% from office and industrial properties.
· Rate of collections for rents invoiced and due remained high at 99.0% [1] for the year.
· Majority of portfolio now internally managed, by our team of over 220 professionals in Poland and Romania.
· c.€2.0 million contributed to our communities towards 27 initiatives in Romania and Poland, with the majority targeted towards the fight against COVID-19.
· CPI Property Group became the largest shareholder in Globalworth in February 2020.
Financial Highlights
· Net Operating Income increased by 6.5% to €157.3 million, despite the negative effect (-2.3%) of the Covid-19 pandemic.
· Adjusted normalised EBITDA increased by 9.8% to €141.6 million due to the increase in NOI of 6.5% and reduction in recurring administrative expenses by 19.0% compared to FY2019.
· IFRS Earnings per share -21 cents in FY2020 (2019: +93 cents) as a result of the negative impact of revaluations.
· EPRA earnings of €82.3 million for FY2020, representing an annual increase of 1.7%, while EPRA earnings per share decreased by 16% to 37 cents per share as a result of the higher weighted average number of shares in issue following the two successful equity capital raises during FY2019.
· Dividends declared and paid for FY2020 of 34 cents per share, representing an amount of at least 90% of the EPRA Earnings for the first and second six months of the year, as stipulated by our articles of incorporation.
· Maintained our investment grade by all three major rating agencies.
· Issued our inaugural green bond, raising €400 million with a 6-year term, which was more than 2x oversubscribed and at the same time further improved our debt maturity profile, through the repurchase of c.41% of the notes maturing in 2022 at a 2.0% premium to their par value.
· Liquidity position remained high with €527.8 million of cash available as of 31 December 2020 and an additional undrawn €215 million Revolving Credit Facility available to the Group.
· Loan to Value of 37.8% at 31 December 2020, consistent with the Group's strategy to manage its long-term LTV target at below 40% while still pursuing strong growth.
· EPRA Net Asset Value per share decreased by 6.7% to €8.68 per share at 31 December 2020 (31 December 2019: €9.30), mainly due to the impact of negative revaluations due to the increased uncertainty in the market caused by the Covid-19 pandemic.
· Total Accounting Return of -1.4% compared to +9.2% for FY2019.
Availability of 2020 Annual Report and Notice of AGM
The 2020 Annual Report is available on Globalworth's website, www.globalworth.com under the Financial Reports and Presentation section.
The Annual General Meeting of the Company ("AGM") will be held on 21 June 2021 at 10.00am British Summer Time. It is currently intended that the AGM will be held at Anson Court, La Route des Camps, St Martin, Guernsey GY4 6AD. However, in light of the constraints faced due to the COVID-19 pandemic, and given the constantly evolving nature of the situation, Globalworth may need to adapt arrangements to enable participation by shareholders in accordance with any safety constraints and any government guidelines which may be in place at the time. Details of any such arrangements, and any contingency plans, will be included in the notice of this year's AGM ("Notice of AGM") which will itself be out in a separate circular to shareholders, and issued to shareholders and notified via RNS at least 10 clear days before the meeting. The Notice of AGM will also in due course be available on the Company's website in accordance with AIM Rule 20.
For further information visit www.globalworth.com or contact:
Enquiries
|
Stamatis Sapkas Deputy Chief Investment Officer
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Tel: +40 732 800 000 |
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Jefferies (Joint Broker) Stuart Klein
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Tel: +44 20 7029 8000 |
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Panmure Gordon (Nominated Adviser and Joint Broker) Alina Vaskina / Joanna Langley
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Tel: +44 20 7886 2500 |
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 220 professionals across Cyprus, Guernsey, Poland and Romania, a combined value of its portfolio is €3.0 billion, as at 31 December 2020. Approximately 92.5% of the portfolio is in income-producing assets, predominately in the office sector, and leased to a diversified array of over 650 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 and Pitesti.
For more information, please visit www.globalworth.com and follow us on Facebook, Instagram and LinkedIn.
IMPORTANT NOTICE: This announcement has been prepared for the purposes of complying with the applicable laws and regulations of the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom. This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "targets", "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward looking statements include all matters that are not historical facts and involve predictions. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business, results of operations, financial position, liquidity, prospects, growth or strategies and the industry in which it operates. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance. Save as required by law or regulation, the Company disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements in this announcement that may occur due to any change in its expectations or to reflect events or circumstances after the date of this announcement.
Chief Executive's Review
Despite the significant disruption in the economic and social activity during most of 2020, I am pleased to report that our core strengths and competitive advantages have resulted in a very resilient operating performance and financial results. At the same time, we kept close to and supported our clients and the broader community within which we live and operate, reinforcing our position as THE landlord of choice in our home markets.
Whilst 2021 will continue to present a number of challenges, I firmly believe that the worst is behind us and I am confident and excited about the opportunities that lie ahead of us.
We are well-prepared for the upcoming challenges and will continue focusing on delivering sustainable value to our investors, whilst at the same time we are ready and have the resources to take advantage of future attractive investment opportunities.
The COVID-19 pandemic has created an unprecedented situation for our business and people, as we had to quickly adapt to this fast-paced and evolving environment. Since the very early days of the pandemic, we have adopted a very hands-on and proactive approach, aiming at ensuring not only the maximum possible health and safety protection for all parties concerned, but also business continuity and long-term viability.
I am very pleased with the results of our actions over the year, which are primarily due to the positive attitude, resilience, commitment, and efficiency of our team, which has responded remarkably since the beginning of the pandemic, working under challenging circumstances. I would like to the thank all of them personally and on behalf of the Board.
Our Market
Since March 2020, the authorities in Poland and Romania, in line with many other countries, have adopted several measures to address the pandemic, including restrictions on peoples' movement, travelling, opening hours of commercial spaces, as well as measures to protect affected business.
The measures implemented, to a certain extent, have followed the pace of the pandemic, becoming more restrictive or easing throughout the period, however at no point did they result in any forced closure of office, industrial premises, or essential retail businesses (supermarkets, pharmacies, convenience stores etc) which are the main areas of focus of our operations with over 95% of our contracted rent generated from such spaces.
The negative impact of COVID-19 on the overall negative economic environment, however, was only partially manifested in the office sector, whereas the industrial market has witnessed accelerated growth.
In offices, we saw several companies being forced to reassess their occupational requirements and the duration of the leases signed, as occupiers have been working on plans to lower costs and re-enter their workplaces. In addition, the signing of new leases, typically for large multinational and national corporates, is taking longer in the current environment, thus impacting the overall take-up and occupancy rates in the market which both decreased in this period. We have adopted a very cooperative approach with all our tenants, understanding their needs and offering flexible and smart solutions. This is evidenced by the fact that across our roster of c.365 office tenants, we completed some 76 agreements (renegotiations, extensions, rent discounts/ deferrals etc) spanning c.132.2k sqm representing approximately 15.7% of our leased office portfolio. This evidences the very strong tenant relationships we have cultivated and the strength of our in-house leasing and asset management teams.
The logistics / light-industrial sector, where we have been increasing our presence in recent years, was a clear winner in 2020, backed by significant demand mainly from e-commerce, pharmaceuticals and food retailers. We are very pleased that we have managed to make further successful investments in this sector during the year.
Our Pro-Active Approach During the Pandemic
The COVID-19 pandemic has led us to rethink our overall strategy, while looking to our long-term activities and investments.
During the period, in order to ensure the health and safety of the people who work at or visit our properties, and to maintain business continuity for our tenants and ourselves, we implemented several preventative health and safety measures in our properties and construction sites, maintained a continuous open communication with our tenants and suppliers on matters related to COVID-19 and established a detailed action plan in place should a COVID-19 case be detected in one of our premises.
In addition, we reviewed all our suppliers and supplier contracts, aiming at improving efficiency and achieving significant savings which will benefit mainly our tenants, as we aim at lowering their occupational cost in our properties.
In terms of investments, we have utilised a risk-adjusted approach aiming at preserving as much cash in the business without jeopardising the future growth of the Group. We continued focusing our investment capex on development projects with either significant pre-lets or for which construction was substantially completed or was very advanced at the time the pandemic started, while we suspended all other developments or new acquisitions.
Our Community
In addition to the support offered to our clients, we have remained as ever committed in supporting our communities of which we are an integral part off, supporting 27 initiatives with c.€2.0 million, with most of the funds contributed to the fight against COVID-19. Giving back to our community is an integral part of Globalworth's DNA, and is not affected by the current challenging economic environment.
Our Portfolio
Our efforts have been, almost, exclusively focused in actively managing our portfolio of standing properties and development projects.
Our overall portfolio value stood at €3.0 billion at year-end, remaining effectively unchanged compared to 2019, as the delivery of four new high-quality buildings in Romania and Poland, and further progress in the construction of the fifth building, offset the revaluation decrease mainly attributed to the COVID-19 pandemic.
Furthermore, I am very pleased with our efforts in leasing, with 303.5k sqm of commercial spaces taken-up or extended/ renegotiated (more than 90% post pandemic), representing c.25% of our total standing commercial GLA, at an average WALL of 3.9 years. This represents the highest volume of leasing activity which we have ever achieved, mostly attributed to the successful negotiations with our existing tenants who appreciated our collaborative and flexible approach.
The average occupancy of our combined standing commercial portfolio as at 31 December 2020 was 90.9% (91.7% including tenant options), representing a 4.0% decrease compared to year-end 2019, due to the addition of properties with an average occupancy (79.6%) lower than the Group average, and a 3.3% decrease in like-for-like properties, considered modest given the very challenging market conditions. From the net space returned to us in this period, c.70% did not relocate to other office properties, hence their decision to reduce space was purely driven by the pandemic.
The benefits of our longstanding strategy to establish long-term partnerships with high-quality national and multinational tenants, thus ensuring sustainable cash-flow generation, could not be more evident than during a period of pandemic, where we have been able to maintain a high rate of collection with over 99.0% of the rents invoiced being received in line with their customary cycle, while the level of claims received by tenants represented 6.1% of our annualised contracted rents. However the impact on yearly Net Operating Income was limited to 2.3%.
Our Results and Corporate Activity
2020 marks the first entire year since our initial investment in Poland, where we have 100% consolidated results of our Polish activities, following the acquisition and delisting of our Globalworth Poland subsidiary at the end of September 2019. The Group during this period reported a solid uplift in earnings with an increase of 6.5% in our net operating income to €157.3 million, 9.8% in our adjusted normalised EBITDA to €141.6 million and 1.7% in our EPRA earnings to €82.3 million, as compared to the same period in 2019. Improvement in our performance is mainly attributed to our asset management initiatives and the impact of acquisitions and other property additions to our portfolio which were not fully reflected in 2019 and 2020.
During the year we paid the second interim dividend of €0.30 per share in respect to the 2019 financial year and €0.19 per share in respect to the first interim dividend of 2020. In addition, on 19 February 2021 we announced the second interim dividend for 2020 of €0.15 per share, resulting in a total dividend for the 2020 financial year of €0.34 per share. Both 2020 dividends represented an amount of at least 90% of the EPRA Earnings for the first and second six months of the year, as stipulated by our articles of incorporation.
Liquidity has always been a key area of focus, and especially since the COVID-19 pandemic outbreak, we have taken several steps to ensure that we have sufficient cash in this period, with our liquidity at year-end being c.€527.8 million (vs c.€291.7 million at 2019 year-end).
As part of our ongoing effort to effectively manage and further improve our debt maturity profile, at the end of July we successfully closed our inaugural green bond raising €400 million, with a 2.95% coupon, while at the same time repurchasing c.41% of our 2022 notes at a small premium over par, essentially extending the maturity of a significant part of the notes maturing in June 2022 to July 2026. Net LTV stood at 37.8% (vs 34.7% at 2019 year-end).
In addition, all three major rating agencies, following their 2020 review of Globalworth, maintained their investment grade status for the Group, with Moody's changing their outlook from "Stable" to "Negative", while S&P and Fitch outlooks remained "Stable".
The high level of confidence received from the debt capital markets and the rating agencies, followed that of the CPI Property Group, one of the largest property companies in the CEE, which in February 2020 became the largest equity shareholder in Globalworth holding 29.6% of the share capital.
Corporate Governance
Our Board of Directors was partially reshaped in 2020, because of corporate activity and the decision to maintain a leaner Board. As a result, Mr Papalekas, Mr Alroy, Mr Fechter, Mr Muchanya and Mr Buck stepped down from their positions, with Mr Bartyzal and Mr Maimon being appointed new members on the Board. I would like to personally thank parting members for their significant contributions to the Board and wish the new members a successful tenure and look forward to working closely with them and the rest of the Board in steering Globalworth in the future.
In December, the Founder and Co-CEO of Globalworth, Mr Papalekas, stepped down from his co-CEO role which I solely assumed. I have worked alongside Ioannis since Globalworth's creation in 2012. He has been the visionary leader and driving force behind Globalworth's outstanding success and transformation from a small Romania-focused office developer into the largest office investor and landlord in the wider CEE region. I would also like to add my personal thanks to him for his friendship, counsel and trust over the years and wish him all the very best for the future.
In addition, I would like to welcome Marian V. Popa to the Globalworth family, who joined us in March 2021 as Managing Director for Romania. Marian is one of the most recognised senior corporate operational leaders in the country with over 40 years of experience with outstanding results and success. I am looking forward to working closely with him and I am sure he will bring significant value and insight, not only to our Romanian operations but to the Group as a whole.
Outlook
During 2021 our primary focus will continue to be the active management of our portfolio of high-quality properties. At the same time, we are ready and have the financial resources to act quickly if new attractive opportunities become available.
Although the office of the future may need to be adjusted to potentially offer greater flexibility or alterative space planning arrangements, I strongly believe that its importance will not diminish. Corporates / occupiers believe that the office environment increases productivity, promotes creativity, innovation, consistency, and fosters relationships and corporate culture, which are essential for the long-term sustainability and growth of their businesses.
In addition, Poland and Romania should emerge as winners from this crisis as corporates continue to focus on containing costs, which will lead them to nearshoring additional operations in our two home markets.
We are very well-placed to continue to successfully address ongoing challenges and I firmly believe that we can achieve new levels of success in the future.
Stay safe and healthy!
Dimitris Raptis
Chief Executive Officer
25 March 2021
STANDING PORTFOLIO REVIEW
Our ongoing effort to further grow our portfolio of high-quality standing properties continued in 2020, with the addition of four newly constructed high-quality buildings in Romania and Poland.
As of year-end 2020, there were 37 standing investments in our portfolio, with a total of 64 standing properties.
Our standing portfolio comprised 29 Class "A" office investments (49 properties in total) and two mixed-use (with six properties in total) in central locations in Bucharest (Romania), Warsaw (Poland) and five of the largest office markets/cities of Poland (Krakow, Wroclaw, Katowice, Gdansk and Lodz).
In addition, over the past years we have gradually been increasing our presence in the industrial market through mainly the development of high-quality logistic and light-industrial facilities in Romania, where at year-end we solely owned two light-industrial parks with five facilities in Timisoara and a modern warehouse in Pitesti, and had a 50% ownership through a Joint Venture in two other industrial parks in Bucharest and Constanta. We also own part of a residential complex in Bucharest.
The total gross leasable area of our combined standing commercial portfolio increased by 58.8k sqm or 5.0% in 2020 to reach 1,238.9k sqm, with the overall combined standing portfolio GLA increasing 4.7% to 1,271.3k sqm. The net increase in the size of our portfolio was attributed to the addition of 95.8k sqm from four developments completed during the year, and the remeasurement of certain of our properties (3.9k sqm), partially offset by the reclassification of Renoma (40.9k sqm), our landmark mixed-use property in Wroclaw which is being refurbished / repositioned and the sale of certain residential and retail units in our Upground residential complex.
Globalworth Campus Tower 3 (Bucharest) and Podium Park II (Krakow), offering total GLA of 52.4k sqm were the two new office additions to our standing portfolio, and the first phases in the Chitila Industrial Park and the Constanta Business Park added two new high-quality industrial facilities with 43.4k sqm of GLA.
The appraised value of our combined standing portfolio as at 31 December 2020 was €2.8 billion. The inherent increase in total value from the addition of new properties was offset by the revaluations of properties held throughout the period (like-for-like), mainly because of the increased uncertainty from the COVID -19 pandemic. Value of like-for-like properties was 2.6% lower at the end of 2020 compared to the year before (additional information is in the "Asset Management Review").
Furthermore, and consistent with our commitment to energy-efficient properties, we certified 10 buildings and made further progress in the certification or re-certification of 17 others in 2020. Overall, at the end of the year, we owned 47 green certified standing properties in our portfolio valued at €2.2 billion, accounting for 81.8% of our standing commercial portfolio (additional information is in the "Sustainability Review" section).
We consider our standing commercial portfolio to be modern as 45 of our standing properties, accounting for 72.2% of our commercial GLA and 73.8% of our standing commercial combined portfolio value, have been delivered or significantly refurbished in or after 2014.
Globalworth Combined Portfolio: Key Metrics
|
Total Standing Properties |
31 Dec. 2018 |
31 Dec. 2019 |
31 Dec. 2020 |
|
Number of Investments |
31 |
37 |
37 |
|
Number of Assets |
52 |
61 |
64 |
|
GLA (k sqm) |
1,042.0 |
1,213.7 |
1,271.3 |
|
GAV (€ m) |
2,381.1 |
2,844.7 |
2,805.5 |
|
Contracted Rent (€ m) |
159.5 |
184.4 |
178.7 |
|
Of which Commercial Properties |
31 Dec. 2018 |
31 Dec. 2019 |
31 Dec. 2020 |
|
Number of Investments |
30 |
36 |
36 |
|
Number of Assets |
51 |
60 |
63 |
|
GLA (k sqm) |
1,004.8 |
1,180.1 |
1,238.9 |
|
GAV (€ m) |
2,312.2 |
2,783.1 |
2,745.9 |
|
Occupancy (%) |
95.1% |
94.7% (95.0%*) |
90.9% (91.7%*) |
|
Contracted Rent (€ m) |
157.9 |
183.3 |
177.7 |
|
Potential rent at 100% occupancy (€ m) |
167.5 |
195.9 |
199.4 |
|
WALL (years) |
5.0 |
4.5 |
4.5 |
(*) including tenant options.
Standing Properties Operation, Renovation and Upgrade Programme
Offering best-in-class real estate space to our business partners is a key component of our strategy at Globalworth.
As a long-term investor we are looking to maximise returns over the full life cycle of our properties. Continuous active management and investment in our portfolio enables us to preserve and enhance value, generate long-term income, as well as offer best-in-class real estate space to our business partners.
Providing a healthy and safe environment to work or visit became increasingly important in 2020 following the outbreak of the CO VID -19 pandemic, resulting in primarily focusing our efforts in ensuring that we provide such an environment in our properties.
The in-house experience and capabilities we have developed allowed us to quickly adjust our asset management strategy during the year and customise it to address the evolving pandemic, while attending to the medium to longer-term requirements of our portfolio.
Depending on the stage in the life cycle of each of our properties, improvements in technology, and their prevailing conditions and trends, we may conduct works which extend from small-scale upgrades to large-scale refurbishments. Typically, larger-scale refurbishments allow us to fully upgrade an asset, secure new leases and reset the life clock of the property.
We continued to implement this strategy in 2020, focusing on a more hands-on approach to the management and operation of our properties. Internalising the property management of our portfolio is a prime area of focus for the Group, and we are pleased to have been able to increase the number of properties we manage in-house in 2020, with Podium Park, Warsaw Trade Tower, CB Lubicz and five other properties in Warsaw and Krakow being the latest additions. Overall, we internally manage almost all our office and mixed-use properties in Poland and Romania, accounting for 89.2% of the total standing commercial portfolio by value (94.2% of office and mixed-use standing properties) as at 31 December 2020, aiming at internalising the management of the remainder of our offices in the future.
During this period we performed a detailed review of how we conduct our business, resulting in the termination and/or suspension or negotiation of our supplier contracts, achieving significant savings, the majority of which will benefit our tenants in the future.
With the largest part of leases being triple net (i.e. the tenant is responsible for all the expenses of the property including real estate taxes, building insurance, and ordinary maintenance), the majority of the savings achieved will be passed on to the tenants, with the typical approach used of 'capping' the service charge costs paid by the tenants in 2020, with the final reconciliation to take place in 2021, thereby assisting our tenants during this very difficult period.
Overall in 2020, €13.0 million were invested in our standing portfolio, with additional works of over €12.0 million planned for this year have been deferred to the future. Tenant fitout works were not affected during this period which continued as normal, but at renegotiated prices with suppliers and/or contractors.
One refurbishment / repositioning project that was being planned prior to the outbreak of the COVID-19 pandemic, and for which we have taken the decision to commence, was in our Renoma property. Works involving this landmark mixed-use property in Wroclaw will involve the conversion of certain retail / commercial spaces to office, as well as the reallocation of certain commercial uses, which are expected to be completed by the end of H1-2022.
DEVELOPMENTS REVIEW
Developments
Our ability to develop high-quality properties remains a key feature of our Group strategy, as it allows us to meet current and future tenant needs, and achieve higher risk- adjusted returns on our capital deployed.
We started 2020 with a very active pipeline of seven properties under development and several others selected for development in phases in the future, however amid the COVID-19 pandemic, we significantly scaled back on our construction and development programme during the year.
In March and looking ahead to the uncertainty in the market, we further reviewed our development pipeline and decided to focus only on those which had significant pre-lets in place or construction was well underway or substantially completed. As a result, we principally focused on the development of five selected properties in Romania and Poland, thus reducing our original expected construction and development expenditure for 2020 by more than €36.0 million to €53.9 million.
In 2020 we delivered a Class "A" office and two high-quality industrial facilities in Romania and our first Class "A" office development in Poland. In addition, we further progressed with the construction of another Class "A" office in Bucharest which is at an advanced stage of completion, and expected to be delivered in H1-2021. We are very pleased that despite the challenging environment due to the COVID-19 pandemic, we managed to create a safe environment in our construction sites, allowing us to progress with our developments in accordance with our envisaged respective timetables.
Overall during the year, we invested c.€54 million in our development projects and have €17.5 million remaining to be invested for the completion of the properties which were under construction in 2020.
Review of Projects Delivered:
Class "A" Offices
We delivered two class "A" offices in Bucharest and Krakow, further increasing our footprint by 52.4k sqm.
Globalworth Campus Tower 3
In January 2020, we delivered Tower 3 (centre tower) of the Globalworth Campus development in the New CBD of Bucharest. The third tower, which represents the second and final phase of the project, is green certified with BREEAM Excellent accreditation, and offers 32.2k sqm of Class "A" office space (c.96% of total GLA ) as well as other amenities such as a 750-seat conference centre (1.9k sqm).
The main office building extends over 14 floors above ground and two underground levels, and had its first tenants arriving at the beginning of 2020, with the property being 70.7% (90.8% including tenant options) let as at 31 December. Fitouts for the interconnected conference centre remain in progress (delayed due to COVID-19) and are expected to be completed in 2021.
Podium Park II
Podium Park II is the first Class "A" office we developed in Poland, and is part of the office complex known as Podium Park which is developed in phases. This second office of the complex was delivered in September 2020, and has received the highest BREEAM green accreditation with BREEAM Outstanding.
Podium Park II is multi-let office and extends over 11 floors above ground and two underground levels, offering 18.8k sqm of high-quality GLA , and was 82.6% let as at 31 December 2020 to tenants including Ailleron and FMC Technologies.
Industrial Facilities
We delivered two new industrial facilities in Romania offering a total of 43.4k sqm of high-quality GLA through our Joint Venture partnership where we have a 50% interest.
Constanta Business Park
The Constanta Business Park ("CBP") represents our first development project in the Eastern part of Romania. The park will be developed in phases and on completion is expected to offer 561k sqm of high-quality logistics/light-industrial (c.80%), office and other commercial space.
In July 2020, phase "A" was delivered, involving the development of a logistics/ light-industrial facility with 20.6k sqm of high-quality GLA. The project has already attracted significant tenant interest, as CBP aims at becoming a new industrial and commercial hub in the Eastern part of the country, and was 69.2% let at the end of 2020 to Quadrant Amroq Beverages (PepsiCo), and four other corporates.
Chitila Logistics Hub
The Chitila Logistics Hub ("CLH") is a high-quality logistics park to be developed in phases in the greater Bucharest area. This is our first industrial project we are developing in the capital and on completion of all its phases will offer a GLA of 75.8k sqm.
Phase "A" of this "last-mile" park was delivered in September 2020, offering 22.7k sqm of logistics space, with the facility fully leased as at 31 December 2020 to tenants including Mega Image, part of the Delhaize Group and Green Net (retailer).
Review of Projects Under Construction
At the end of 2020 we had one office project under construction in Bucharest. Globalworth Square, is a Class "A" office development in the New CBD of Bucharest. The property under construction, is located between our own Globalworth Plaza and Green Court B offices, and on completion, estimated in H1-2021 will offer 29.1k sqm of high-quality GLA and c.450 parking spaces over 15 floors above ground and three underground levels. As at the end of December 2020, construction is in progress with the building structure completed and the façade (almost fully completed) and other installations in progress. Globalworth Square is expected to receive a BREEAM Outstanding accreditation following its delivery, our first property in Romania to receive the highest BREEAM level accreditation awarded to buildings.
Review of Future Developments
As part of the review of our development projects amid the COVID-19 pandemic, the two offices in Bucharest (Globalworth West) and Krakow (Podium Park III) which were at an early stage of development at the time of the outbreak were postponed and reclassified as Projects for Future Development. These two Class "A" office developments, upon completion are expected to add in total 51.1k sqm to our portfolio and had an appraised value of €17.4 million at 31 December 2020 (€16.4 million as at 31 December 2019).
In addition, we own, directly or through JV partnerships, land plots in prime locations in Bucharest and other regional cities in Romania, covering a total land surface of 1.4 million sqm (comprising 2.1% 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 in total a further 821.3k sqm (mainly office and logistics / light-industrial) of high-quality GLA to our standing portfolio footprint.
We are currently progressing with select preparatory activities, including performing planning and/or permitting for this land bank, prioritising the subsequent phases of Chitila Logistics Hub and Constanta Business Park projects as a result of the success of their respective first phases and the increasing interest for space for these projects.
Projects classified for "Future Development", are periodically reviewed by the Group, with the pace at which these projects are being developed being subject to tenant demand and general market conditions.
Right of First Offer
Globalworth has invested in the two-phase My Place (formerly Beethovena) project in Warsaw, in which it owns a 25% economic stake, with the right to acquire the remaining interests once certain conditions have been satisfied.
My Place I & II (formerly: Beethovena I & II) are Class "A" office projects in the South of Warsaw comprising two, four-floor offices, which on completion will offer a total GLA of 36.1k sqm. The two offices are of similar size (19.0k sqm and 17.1k sqm). The first phase, completed in Q2-2019, is currently c.92% leased to tenants such as Havas and MasterCard, whereas Phase II was delivered in Q4-2020, and is partially leased, with first premises being handed over to the tenants at the beginning of 2021.
Our total equity investment as at year-end 2020 in these two buildings was €6.4 million.
DEVELOPMENTS DELIVERED IN 2020 | |||||||
Property Overview |
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| GLOBALWORTH CAMPUS TOWER 3 |
| PODIUM PARK II |
| CONSTANTA BUSINESS PARK |
| CHITILA LOGISTICS HUB |
Location: | Bucharest New CBD |
| Eastern part of Krakow |
| Constanta |
| Greater Bucharest area |
Type: | Class "A" office |
| Class "A" office |
| Logistics |
| Logistics |
GLA: | 33.6 k sqm |
| 18.8 k sqm |
| 20.6 k sqm |
| 22.7 sqm |
Parking Units: | 506 |
| 464 |
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Layout: | 2UG+GF+13F+TF |
| 2 UG, GF & 10 |
| GF |
| GF |
Typical Floor Plate: | 2.3k |
| 1.7k sqm |
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Access: | Metro, tram and bus |
| Private transport |
| Private transport |
| Private transport, bus |
Green Accreditation: | BREEAM Excellent |
| BREEAM Outstanding |
| Under review |
| Under review |
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Key Investment Highlights |
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Ownership | 100% |
| 100% |
| 50% |
| 50% |
Occupancy: | 70.7% (90.8% incl. option) |
| 82.6% |
| 69.2% |
| 100% |
Passing Rent: | €3.9m |
| €2.9m |
| €0.6m |
| €0.9m |
Potential Rent at 100% Occupancy | €5.9m |
| €3.4m |
| €0.9m |
| €1.1m |
Est. Yield on Development Cost | 10.6% |
| 7.9% |
| 8.9% |
| 10.2%* |
(*)For calculation of Yield on cost we have applied ER V in short-term leases | |||||||
DEVELOPMENTS - UNDER CONSTRUCTION / DEVELOPMENT PRIORITISE | |||||
| GLOBALWORTH SQUARE |
| CONSTANTA BUSINESS PARK (PHASE B)* |
| CHI ILA LOGISTICS HUB (PHASE B)* |
Location | New CBD |
| Constanta |
| Bucharest |
Status | Under construction |
| Development prioritised |
| Development prioritised |
Expected Delivery | H1-21 |
| H2-21 |
| H2-21 |
GLA (k sqm) | 29.1 |
| 21.5 |
| 15.6 |
CAPEX to 31 Dec 20 (€ m) | 39.8 |
| 0.5 |
| 1.0 |
GAV (€ m) | 42.4 |
| 0.8 |
| 1.2 |
Estimated CAPEX to Go (€ m) | 17.5 |
| 10.3 |
| 6.4 |
ERV (€ m) | 5.6 |
| 1.0 |
| 0.7 |
Estimated Yield on Development Cost | 9.8% |
| 8.9% |
| 9.3% |
FUTURE DEVELOPMENTS | |||||||||||||
| PODIUM PARK III |
| GLOBALWORTH WEST |
| CHITILA LOGISTICS HUB (PHASE C)* |
| CONSTANTA BUSINESS PARK (PHASED)* |
| TIMISOARA INDUSTRIAL PARK I & II (PHASED) |
| LUTERANA |
| GREEN COURT D |
Location | Krakow |
| West Bucharest |
| Bucharest |
| Constanta |
| Timisoara |
| CBD |
| New CBD |
Status | Construction postponed |
| Construction postponed |
| Planned |
| Planned |
| Planned |
| Planned |
| Planned |
Expected Delivery | 17.7 |
| 33.4 |
| 37.5 |
| 519.1 |
| 185.1 |
| 26.4 |
| 16.2 |
GLA (k sqm) | 8.5 |
| 5.2 |
| 2.3 |
| 11.5 |
| 7.6 |
| 7.4 |
| 2.5 |
CAPEX to 31 Dec 20 (€ m) | 9.6 |
| 7.8 |
| 2.8 |
| 20.6 |
| 11.3 |
| 14.0 |
| 5.9 |
GAV (€ m) | 29.7 |
| 38.7 |
| 15.3 |
| 248.9 |
| 71.1 |
| 40.2 |
| 24.4 |
Estimated CAPEX to Go (€ m) | 3.1 |
| 5.1 |
| 1.6 |
| 27.3 |
| 7.6 |
| 5.8 |
| 3.0 |
ERV (€ m) | 8.1% |
| 11.5% |
| 9.3% |
| 10.5% |
| 9.6% |
| 12.2% |
| 11.2% |
(*) 50:50 Joint Venture; figures shown on 100% basis.) | |||||||||||||
ASSET MANAGEMENT REVIEW
Leasing Review
2020 was a year of two very different tales in our markets of focus in Poland and Romania, with the first few months benefiting from the strong leasing momentum of the previous years, followed by the COVID -19 global pandemic outbreak where several companies were forced to reassess their occupational plans (extensions, expansions, relocations, release of spaces etc), as well as the duration of the leases signed.
Notwithstanding these unprecedented times, the entire Globalworth team, led by our dedicated leasing departments, successfully negotiated the take-up (including expansions) or extension of leases covering c.25% of our total standing commercial GLA, an impressive performance considering the prevailing conditions in the market and is mostly attributed to the successful negotiations with our existing tenants who appreciated our collaborative and flexible approach.
New Leases
In 2020, the Group successfully negotiated the take-up (including expansions) or extension of 303.5k sqm of commercial spaces in Poland (39.3% of transacted GLA) and Romania (60.7% of transacted GLA), with an average WALL of 3.9 years (179.5k sqm at an average WALL of 5.5 years signed in 2019).
Our principal focus for the year, and especially following the CO VID -19 pandemic outbreak, was the prolongation of leases with existing tenants in our portfolio, as the current market environment was not perceived favourable by several corporates to relocate or expand their operations, while in several cases were forced to downsize or even close-down their operations.
Leases were renewed with 159 of our tenants, for a total of 225.5k sqm of GLA, at a WALL of 3.4 years, with the most notable extensions involving Dacia (Groupe Renault), Nokia, Unicredit, DXC Technology (formerly HP) and Nestlé, while c.89.6% of the renewals by GLA signed were for leases that were expiring in 2021 or onwards.
The greater uncertainty in the market was reflected by the shorter duration of the leases prolonged, with 85% of the tenants who renewed their leases following the pandemic outbreak doing so at an average of 2.6 years, and only c.20 large multinationals and national corporates extended their occupation for periods of 5 years or longer. In addition, offering rent concessions in exchange for extensions in lease duration was one of the tools we used in settling claims with tenants, which also resulted in a lower overall WALL for leases prolonged during the year.
New leases for 63.8k sqm of GLA were signed at a WALL of 5.8 years, accounting for 81.8% of total new take-up, and included tenants such as BRD (part of Société Générale Group), PepsiCo and Allegro as well as 51 other corporates. The remaining 14.2k sqm of space signed in the period related to expansions by 31 tenants, with an average WALL of 4.9 years.
Signing of new leases, typically for large multinational and national corporates, is taking longer in the current environment as potential tenants are reassessing their future occupational plans.
Summary Leasing Activity for Combined Portfolio in 2020
| GLA (k sqm) | No. of Tenants* | WALL (yrs) |
New Leases (New Contracts & Expansions) | 78.0 | 85 | 5.5 |
Renewals / Extensions** | 225.5 | 159 | 3.4 |
Total | 303.5 | 229 | 3.9 |
* Number of individual tenants.
** Short-term renewals of leases extended and expired in 2020 are excluded from the analysis.
Occupancy
The average occupancy of our combined standing commercial portfolio as at 31 December 2020 was 90.9% (91.7% including tenant options), representing a 4.0% decrease over the past 12 months (94.7% as at 31 December 2020 / 95.0% including tenant options).
Standing occupancy has been affected by the addition of four properties with an average occupancy (79.6%) lower than the Group average, and the negative net uptake of space despite the signing of new contracts, resulting in a lower average standing commercial occupancy rate of our portfolio.
On a like-for-like basis, occupancy was lower by 3.3% to 91.8% at the end of 2020. This is a decrease considered modest given the very challenging market conditions. It is also important to note that from the net space returned to us during this period, c.70% was directly or indirectly impacted by COVID -19, thus not relocating to other office properties. We remain confident that we will be able to lease the available spaces in our portfolio in the future as business conditions return to a more normalised state.
In addition, occupancy in our Renoma mixed-use asset in Wroclaw has also decreased, however this is due to the property undergoing a partial refurbishment / repositioning, and we have not included it in our occupancy metrics.
Across the portfolio, as at 31 December 2020, we had 1,125.6k sqm of commercial GLA leased to approximately 600 tenants in our standing properties (98.3% in standing commercial properties), at an average WALL of 4.5 years, the majority of which is let to national and multinational corporates that are well known within their respective markets.
In addition, we had 25.2k sqm leased in Renoma which is currently under refurbishment and not included in our standing portfolio.
Occupancy Evolution 2020 (GLA 'k sqm) - Commercial Portfolio
| Poland | Occupancy Rate (%) | Romania | Occupancy Rate (%) | Group | Occupancy Rate (%) |
Standing Available GLA - 31 Dec. 19 | 586.3 | 94.1% | 593.8 | 95.3% | 1,180.1 | 94.7% |
Acquired GLA | - |
| - |
| - |
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Delivered GLA | 18.8 |
| 77.0 |
| 95.8 |
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Net Remeasurements/Reclassifications* | (38.9) |
| 1.9 |
| (37.0) |
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Standing Available GLA - 31 Dec. 20 | 566.2 | 89.4% | 672.7 | 92.0% | 1,238.9 | 90.9% |
Vacant Standing GLA - 31 Dec. 19 | 34.7 | 5.9% | 28.0 | 4.7% | 62.7 | 5.3% |
Delivered Vacant GLA | 3.3 |
| 16.2 |
| 19.5 |
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Expiries & Breaks | 39.1 |
| 37.8 |
| 76.9 |
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Renewals | 87.6 |
| 120.9 |
| 208.5 |
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New Take-up | (13.3) |
| (30.9) |
| (44.2) |
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Other Adj** | (3.9) |
| 2.4 |
| (1.6) |
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Vacant Standing GLA - 31 Dec. 20 | 59.8 | 10.6% | 53.5 | 8.0% | 113.3 | 9.1% |
* Includes the reclassification of Renoma mixed-use property in Poland from standing to refurbished / repositioned (40.9k sqm of GLA).
** Includes the reclassification of vacant GLA in Renoma as of 31 Dec 2019 from standing to under refurbishment (5.1k sqm of vacant GLA). Other lease expirations, renewals or new take-up in relation to Renoma are excluded from the table as the property was reclassified in Q3-2020.
Rental Levels
Market rental levels, although they can vary significantly between type of spaces, buildings and submarkets, remained relatively stable in our portfolio in both Poland and Romania during the year.
Our overall commercial GLA take-up in 2020 was agreed at an average rent of €10.9/sqm/m, lower compared to the previous year (€12.8/sqm/m for 2019), due to the relative high ratio of industrial spaces leased during the year which accounted for c.32.3% of the total leasing activity.
Office leases were negotiated at an average rent of €14.5/sqm/month (€14.2/sqm/month for FY2019), with our overall office average being €14.2/sqm/month as at 31 December 2020, mainly due to signing renewals with tenants occupying spaces with higher rent (e.g. technology and financial institutions). Industrial and retail spaces leased at €3.9 and €13.6/sqm/m respectively.
Contracted Rents (on Annualised Basis)
Total annualised contracted rents in our standing commercial portfolio were €177.7 million at 31 December 2020, lower by 3.1% compared to 31 December 2019, increasing to €182.4 million when including rent from assets being refurbished / repositioned. In addition, €1.0 million of annualised rental income is generated by renting 157 residential units and other auxiliary spaces in Upground, the residential complex in Bucharest which we partially own.
Like-for-like annualised contracted rents in our standing commercial portfolio decreased by 4.2% to €169.4 million at 31 December 2020 compared to year-end 2019, as the increase in rents (1.0% on average) due to indexation was outweighed primarily by the lower occupancy.
The Group's rent roll across its combined portfolio is well diversified, with the largest tenant accounting for 5.0% of contracted rents, while the top three tenants account for 10.6% and the top 10 account for 26.7%. We expect this diversity to grow further as the portfolio continues to expand.
Annualised Contracted Rent Evolution 2020 (€ m)
| Poland | Romania | Group |
Rent from Standing Commercial Properties ("SCP") 31 Dec. 19 | 105.0 | 78.3 | 183.3 |
Less: Properties Reclassified (*) | (6.5) | - | (6.5) |
Rent from SCP Adjusted for Properties Reclassified 31 Dec. 19 | 98.5 | 78.3 | 176.8 |
Less: Space Returned | (7.9) | (7.1) | (14.9) |
Plus: Rent Indexation | 0.9 | 0.8 | 1.7 |
Less: Lease Renewals (Net Impact) & Other | (0.4) | (1.8) | (2.2) |
Plus: New Take-up | 3.1 | 4.9 | 8.0 |
Total L-f-L Rent from Standing Commercial Properties 31 Dec. 20 | 94.1 | 75.2 | 169.4 |
Plus: Developments Completed During the Period | 2.9 | 5.5 | 8.4 |
Total Rent from Standing Commercial Properties | 97.0 | 80.7 | 177.7 |
Plus: Residential Rent | - | 1.0 | 1.0 |
Total Rent from Standing Properties | 97.0 | 81.7 | 178.7 |
Plus: Leased Space on Developments Projects | 4.7 | - | 4.7 |
Total Contracted Rent at 31 Dec. 2020 | 101.7 | 81.7 | 183.4 |
Combined Annualised Commercial Portfolio Contracted Rent Profile as at 31 December 2020
| Poland | Romania | Group |
Contracted Rent (€ m) | 101.7 | 80.7 | 182.4 |
Multinational | 66.6% | 90.9% | 77.3% |
National | 31.2% | 7.8% | 20.8% |
State Owned | 2.3% | 1.3% | 1.9% |
Note: Contracted Rent excludes c.€1.0 million from residential space as at 31 December 2020.
Annualised Commercial Contracted Rent by Period of Commencement Date as at 31 December 2020 (€ m)
| Active Leases |
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| 2020 | H1-2021 | H2-2021 | H1-2022 | H2-2022 | >2022 | Total |
Standing Properties | 173.9 | 3.2 | - | 0.3 | 0.0 | 0.3 | 178.7 |
Developments | 4.7 | 0.0 | - | - | - | - | 4.7 |
Total | 178.6 | 3.2 | - | 0.3 | 0.0 | 0.3 | 182.4 |
Annualised Commercial Portfolio Lease Expiration Profile as at 31 December 2020 (€ m)
Year | 2021 | 2022 | 2023 | 2024 | 2025 | ≥2026 |
Total | 22.6 | 22.1 | 21.9 | 33.4 | 17.2 | 65.0 |
% of Total | 12.4% | 12.1% | 12.0% | 18.3% | 9.4% | 35.8% |
Cost of Renting Spaces
Renting spaces typically involves certain costs which are incurred by the landlord. The base rent is the figure generally used as a reference point in the real estate market, but in assessing the profitability of a rental agreement, the effective rent can be a more useful indicator. The difference between the base rent and the effective rent is determined by the level of incentives awarded to tenants as part of the lease agreement, including rent-free periods, fitout costs for the space leased, and brokerage fees. These incentives can vary significantly between leases, and range depending on type of lease (new take-up or lease extension), space leased (office, commercial, etc), duration of the contract and other factors considered.
For leases typically signed by Globalworth the difference between base and effective rents ranges from 7% to 30%, however due to the high level of renewals with a shorter-term duration than what we normally sign, the average for the year was c.21% (25% in 2019).
Weighted Average Effective Rent (€ / sqm / m) - 2020
| Poland | Romania | Group |
Headline Commercial Rent | 14.9 | 8.3 | 10.9 |
Less: Rent Free Concessions | (2.1) | (0.7) | (1.2) |
Less: Tenant Fitouts | (1.8) | (0.5) | (0.9) |
Less: Broker Fees | (0.2) | (0.1) | (0.1) |
Effective Commercial Rent | 10.9 | 7.0 | 8.7 |
WALL (in years) | 3.4 | 4.6 | 3.9 |
Note: The average headline commercial rent was impacted by the signing of 97.9k sqm of industrial spaces in 2020 (53.1% from the total GLA signed in Romania, 32.3% from the total GLA signed in 2020 at Group level), most of it being signed in the second half of the year.
Headline commercial rent on office spaces for leases signed in 2020 stood at €14.5/sqm/m with average incentives of c.24%.
Tenant Demands/Claims Review1
The impact of the global COVID-19 pandemic, since it first broke out in mid-March, has forced Poland and Romania, similar to most countries in Europe, to adopt very restrictive measures in terms of movement of people and travelling, as well as enforcing the closure of all but essential retail premises. These measures were somewhat relaxed during the summer period, however the increasing number of COVID-19 cases since resulted in several measures and restrictions to be reintroduced.
In 2020, no government measures in either country of our focus implemented forced closure of office premises, industrial properties or essential retail businesses (supermarkets, pharmacies, convenience stores etc), however the direct and/or indirect impact of the restrictive and protective measures imposed, and the impact the crisis has had on certain businesses and industries, resulted in us receiving a growing number of tenant demands and claims.
Since the beginning of the pandemic, we have had a very proactive approach in managing this constantly evolving situation by being in continuous communication with all our tenants and by adopting an open and collaborative approach, by providing assistance to tenants in this period of higher uncertainty, while ensuring the sustainability and longevity of our business.
Of our €183.4 million of total contracted rent on the last day of the year, office rent accounted for 87.3% (including parking rent), with retail / commercial, industrial and other spaces accounting for 5.7%, 5.3% and 1.7% respectively.
Overall, since the beginning of the pandemic and until the year-end, we have estimated the value of the claims received at c.€11.1 million2, reflecting c.6.1% of our contracted annual rent.
The majority of the claims received were from occupiers operating in industries which saw immediate impact in their businesses from the COVID-19 pandemic (e.g. tourism related or co-working) and occupiers who were directly or indirectly impacted by measures taken by the authorities (e.g. restaurants/canteens etc), however we also received claims from a number of tenants seeking to reduce costs.
In dealing with these claims we have considered each case separately, rather than applying a horizontal or vertical approach, trying to identify the best solution for our tenant and Globalworth. Some of the solutions implemented have been bringing forward to this year rent free months that were applicable in later years, awarding rent free months / reductions this year in exchange for lease extensions, or delayed payment dates on rent invoices.
Approximately 54.0% of the claims by value were settled without a cash impact on the rental income and from the claims settled approximately half resulted to a lease maturity extension.
More importantly the impact on our Net Operating Income was limited to 2.3%, with c.75% related to retail/commercial tenants as a result from direct or indirect restrictions imposed on the operation of non-essential retail/commercial tenants by the authorities.
In addition, we expect that the economic impact of these claims will be substantially mitigated by the cost-cutting initiatives already implemented across the Group and through the extension of leases negotiated as part of the COVID-related agreements reached with our tenants.
1 Data as of 31 December 2020.
2 The estimate results from the fact that a number of tenant claims received had no value attached to them or are still under negotiation. The estimated claims value also excludes certain ones related to lease agreements which were already under extension negotiations before the start of the crisis.
Collections Review3
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 2020 has remained high at 99.0% (99.3% for 2019), as a result of the long-term partnerships the Group has established with high-quality national and multinational tenants, which have helped us minimise the impact on rent collections due to the COVID-19 pandemic in our portfolio, and ensure sustainable cash flow generation.
More specifically, considering the current market environment, rent to be collected in 2020 was classified as:
- Rent eligible for invoicing: Includes rents to be invoiced to tenants in accordance with the terms of their lease agreements. Such rents were either collected or subject to collection; and
- Rent impacted by measures imposed by the authorities: Such rent was to be collected based on the contractual agreements in place, however due to measures taken by the authorities in Poland and Romania, tenants were excluded from paying, and as such no invoices were issued by the Group.
Under normal conditions, the Group during the year would have had €106.3 million of rent be invoiced and due, however €2.9 million was not invoiced due to measures taken by the authorities.
3 Data as of 12 March 2021.
Portfolio Valuation
Our entire portfolio in Poland and Romania was revalued, by independent appraisers, as at 31 December 2020. Valuations were performed in accordance with our policy of revaluing our properties twice a year, at the end of June and December respectively. CBRE and Knight Frank valued our properties in Poland, with Colliers and Cushman and Wakefield valuing our properties in Romania (more information is available under note 4 of the audited consolidated financial statements as of the period ended 31 December 2020).
Our portfolio over the past periods has been growing in value, both on a like-for-like and absolute value basis, as a result of our asset management initiatives, and the performance of the real estate markets in Poland and Romania, resulting in healthy investor interest, tenant demand meeting or exceeding supply for quality real estate spaces, which led to contracting yields, stable or growing rental levels and lowering tenant incentives.
The COVID-19 pandemic, however, has created uncertainty in the market which has also been reflected in the independent appraised valuation of our portfolio.
The total combined value of our real estate portfolio in Poland and Romania as at 31 December 2020 remained effectively unchanged at €3.0 billion, compared to 31 December 2019, as the net positive impact from our developments (delivered, in progress or under refurbishment) was partially offset from the negative revaluation from our standing portfolio. Like-for-like appraised value of our standing commercial properties was €2.6 billion at year-end, 2.6% lower compared to 31 December 2019.
Appraisers have taken a more cautious approach when valuing our properties, typically applying wider yields and higher discount rates (when applicable) for our office and mixed-used properties. The level at which yields and discount rates have been considered vary, taking into account factors such as the commercial profile of the property, its location and the country in which it is situated. For the majority of our office and mixed-use properties, yields and/or discount rates considered, were 10 - 50bps wider compared to December 2019. It is to be noted yields and/or discount rates used by appraisers were stabilised between 30 June and 31 December, and in certain cases contracted. Our industrial properties, as well as the overall sector in Romania, continue to perform well, with valuations improving compared to year-end 2019.
Combined Portfolio Value Evolution 2020 (€ m)
| Poland | Romania | Group |
Total Portfolio Value at 31 Dec. 2019 | 1,647.4 | 1,397.7 | 3,045.1 |
Plus: Transactions / (Disposals) | - | (2.1) | (2.1) |
Plus: Capital Expenditure | 26.4 | 36.7 | 63.1 |
Plus: Net other changes | (63.7) | (9.4) | (73.1) |
Total Portfolio Value at 31 Dec. 2020 | 1,610.1 | 1,422.8 | 3,032.9 |
o/w Properties in Joint Venture* | - | 51.2 | 51.2 |
(*) Properties held through joint ventures are shown at 100%. Globalworth owns a 50% stake in the respective joint ventures.
Combined Portfolio Value Overview 2020 (€ m)
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| YoY | LfL |
| Poland | Romania | Group | % Change | % Change |
Office | 1,337.3 | 1,164.0 | 2,501.3 | (0.3%) | (3.0%) |
o/w Standing Properties | 1,327.8 | 1,093.9 | 2,421.7 | 2.8% | (2.3%) |
o/w Developments in Progress | - | 42.4 | 42.4 | (63.2%) | 68.9% |
o/w Future Developments | 9.6 | 27.7 | 37.3 | 1.6% | 1.6% |
Mixed-Used | 272.8 | - | 272.8 | (9.0%) | (9.0%) |
o/w Standing Properties | 169.7 | - | 169.7 | (43.4%) | (8.4%) |
o/w Properties under Refurbishment | 103.1 | - | 103.1 | 100.0% | (9.8%) |
Industrial | - | 181.5 | 181.5 | 15.2% | 3.0% |
o/w Standing Properties | - | 144.8 | 144.8 | 23.6% | 1.6% |
o/w Future Developments | - | 36.7 | 36.7 | (9.2%) | 7.9% |
Other | - | 77.3 | 77.3 | (2.9%) | (2.9%) |
o/w Standing Properties | - | 69.4 | 69.4 | (3.1%) | (3.1%) |
o/w Lands | - | 7.9 | 7.9 | (1.3%) | (1.3%) |
Total Portfolio at 31 Dec. 2020 | 1,610.1 | 1,422.8 | 3,032.9 | (0.4%) | (3.3%) |
(*) Properties held through joint ventures are shown at 100%. Globalworth owns a 50% stake in the respective joint ventures.
Note: Developments include projects under construction and projects postponed to be developed in the future.
FINANCIAL REVIEW
Improvement in NOI, EPRA Earnings and Adjusted normalised EBITDA in 2020 over 2019. However, the impact of the negative effects of COVID-19 on global properties values has also affected negatively IFRS Earnings per share, Total Accounting Return, and EPRA NAV per share.
Overview |
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| |
| 2020 | 2019 | |
NOI | €157.3m | €147.7m | |
IFRS Earnings per share2 | -21 cents | +93 cents | |
EPRA Earnings1 | €82.3m | €80.9m | |
Dividend per share | 34 cents | 60 cents | |
LTV1,5 | 37.8% | 34.7% | |
OMV1 | €3.03 bn | €3.04 bn | |
EPRA NAV per share1,3 | €8.68 | €9.30 | |
EPRA earnings per share1,2 | 37 cents | 44 cents | |
Adjusted normalised EBITDA1,4 | €141.6m | €129.0m | |
Total Accounting Return1 | -1.4% | +9.2% | |
1. See Glossary (pages 178-180) for definitions in Annual Report 2020. 2. See note 12 of the consolidated financial statements for calculation in Annual Report 2020. 3. See note 23 of the consolidated financial statements for calculation in Annual Report 2020. 4. See page 48 for further details in Annual Report 2020. 5. See note 25 of the consolidated financial statements for calculation in Annual Report 2020. 6. The 2019 comparative has been adjusted downwards by €5.8 million, related to the apportionment of part of the NOIG/RGA settlement in Annual Report 2020. | |||
NOI growth continued in 2020 with a 6.5% increase compared to 2019, reaching €157.3 million (2019: €147.7 million).
Adjusted normalised EBITDA increase by 9.8%, resulting from the increase in NOI of 6.5% and reduction in recurring administrative expenses of 19%.
Dividends declared and paid in respect to 2020 were €0.34 per share, as compared to €0.60 for 2019, a 43.3% decrease, resulting from Management's policy to preserve a high level of liquidity from the outset of the COVID-19 pandemic.
EPRA NAV per share as at 31 December 2020 decreased by 6.7% from 31 December 2019 to €8.68 per share (31 December 2019: €9.30). Combined with dividends paid in 2020, this resulted in a negative Total Accounting Return of -1.4% (2019 TAR: +9.2%).
The Open Market Value of the portfolio decreased slightly by €12.2 million, a decrease of 0.4% to €3.03 billion (31 December 2019: €3.04 billion), being the net impact of the increase due to value accretive development CAPEX and decrease due to fair value losses.
LTV at 31 December 2020 amounted to 37.8%, increasing marginally from 34.7% at 31 December 2019, but still under the long-term 40% threshold set by Management.
EPRA NAV / Total Accounting Return1 | ||||
| 2017 | 2018 | 2019 | 2020 |
EPRANAV/Share € | 8.84 | 9.04 | 9.30 | 8.68 |
TotalAccountingReturn | 5.7% | 7.8% | 9.2% | (1.4)% |
1. Total accounting return is the growth in EPRA NAV per share plus dividends paid, expressed as a percentage of EPRA NAV per share at the beginning of the year. | ||||
Revenues and Profitability
Consolidated revenues of €223.3 million in 2020 up by 0.5% on 2019 (€222.2 million), primarily as a result of a 5.9% increase in rental income to €160.5 million (2019: €151.5 million), while other revenues, such as property development services income, recorded a decrease. The main drivers for the increase in rental income were:
● additional rental income of €8.2 million recognised in 2020 versus 2019 following the acquisition of standing properties in Poland after 1 January 2019, representing a 5.4% increase in rental income;
● a 3.8% increase in rental income (€5.7 million) contributed from RBC (50% JV partner's share acquired in Dec. 19), and 1.6% increase in rental income (€2.4 million) contributed from Globalworth Campus Tower 3 and TIP2-B2; and
● an offsetting impact resulting from a 4.0% reduction (€6.0 million) in underlying rental income derived from standing properties in Poland (the majority of which or €3.5 million from three mixed-use properties with a retail component) and 0.9% in Romania (€1.3 million) owned throughout both years.
Revenue Share by Country 2020 |
|
|
| Poland | Romania |
Revenue (€m) | 56% | 44% |
NOI (€m) | 57% | 43% |
Group revenues were split 56% Poland / 44% Romania, the same as in 2019.
Net Operating Income was €157.3 million in 2020, a 6.5% increase over 2019 (€147.7 million), influenced mainly by the increase in rental income by 5.9% and also by a decrease in operating expenses, of 11.4% against 2019. The growth in NOI reflected an increase of €1.5 million in Poland and €8.1 million in Romania.
NOI was split 57% Poland / 43% Romania, compared to 60% Poland / 40% Romania in 2019.
Adjusted normalised EBITDA1 amounted to €141.6 million, an increase of 9.8% over 2019 (€129.0 million2, which includes the share of minority interests), which correlates to the net effect of the increase in NOI of 6.5% and a reduction in recurring administrative expenses of 19%.
1. Earnings attributable to equity holders of the Company before: finance cost, tax, depreciation, amortisation of other non-current assets, gain on acquisition of subsidiary (2020: €0.0 million; 2019: €2.9 million), fair value gains or losses on investment property and financial instruments (2020: loss of €116.2 million; 2019: gain of €119.6 million), non-recurring income (2020: €0.5 million; 2019: €0.9 million), acquisition costs (2020: €2.7 million; 2019: €0.2 million), non-recurring administration and other expense items (2020: €6.3 million; 2019: €9.2 million). The adjustments listed include the share of minority interests for year 2019 only as there were no minority interests in 2020.
2. The 2019 comparative has been adjusted downwards by €5.8 million, related to the apportionment of part of the NOIG / RGA settlement amount, recorded in full in 2018 in line with related IFRS provisions.
IFRS EPS to EPRA EPS (€ cents per share) | |||||
IFRS EPS | FV loss on properties | FV gain on financial instruments | Deferred tax | JVs & Others | EPRA EPS |
(21) | 52 | (0) | 6 | 0 | 37 |
Finance costs increased by 13.5% in 2020 resulting mainly from the increase in the outstanding balance on the Bonds issued by the Company, following the issuance of the €400 million new Bond in July 2020, as well as the interest associated with the drawdown of the €200 million RCF in March 2020 until its repayment in August 2020.
IFRS earnings were negative at €46.8 million (2019: +€170.2 million), resulting mainly from the €116.2 million fair value loss on investment property. Excluding the impact of investment property valuations, the Company would have generated a profit after tax, but before valuation changes of €69.4 million, 18.6% higher than in 2019 (€58.5 million).
IFRS earnings per share was negative at 21 cents (2019: positive 93 cents), mainly as a result of the impact of the fair value loss on investment property.
IFRS Earnings to EPRA Earnings (€ million) | |||||
IFRS Earnings | FV loss on properties | FV gain on financial instruments | Deferred tax | JVs & Others | EPRA Earnings |
(46.8) | 116.2 | (0.5) | 12.5 | 0.9 | 82.3 |
EPRA earnings improved over 2019 and reached €82.3 million, an increase of 1.7% compared to 2019 (€80.9 million). However, as a result of the two equity raises carried out in April 2019 and October 2019, the weighted average number of shares in 2020 increased to 221.1 million shares versus 182.1 million shares in 2019 and consequently EPRA earnings per share decreased in 2020 to 37 cents per share from 44 cents per share in 2019.
Balance Sheet
The Open Market Value of the portfolio decreased by a modest €12.2 million, a decrease of 0.4%, to €3.03 billion (31 December 2019: €3.04 billion). This comprises €2.98 billion of investment property - freehold and a further €0.05 billion representing the 100% value of our JV investment properties.
Evolution in Portfolio Value (€ million by location) | |||
| Romania | Poland | Total |
Investment Property - Dec 19 | 1,369.5 | 1,647.4 | 3,016.9 |
JV and others - Dec 19 | 28.2 | - | 28.2 |
OMV Dec 19 | 1,397.7 | 1,647.4 | 3,045.1 |
CAPEX | 33.1 | 49.5 | 82.6 |
Fair value loss | (28.6) | (86.8) | (115.4) |
Disposals | (2.4) | - | (2.4) |
JV's CAPEX & Uplift | 23.0 | - | 23.0 |
OMV Dec 20 | 1,422.8 | 1,610.1 | 3,032.9 |
JV and others | (51.2) | - | (51.2) |
Investment Property - Dec 20 | 1,371.6 | 1,610.1 | 2,981.7 |
Total assets at 31 December 2020 reached €3.63 billion, increased by 4.3% from 31 December 2019 (€3.48 billion). EPRA NAV (same as the new EPRA NRV metric) decreased to €1.92 billion at 31 December 2020, a decrease of 7.2% on 31 December 2019 (€2.07 billion), while EPRA NAV per share decreased by 6.7% to €8.68 per share (31 December 2019: €9.30 per share). Reflecting the dividend distributions made during 2020 of €0.49 per share, the adjusted EPRA NAV per share at 31 December 2020 would be €9.17 per share, representing a negative total accounting return of NAV for 2020 of 1.4% (2019: a positive return of 9.2%). In addition and in accordance with the October 2019 EPRA Best Practices Recommendations Guidelines, we present on page 176 of the 2020 Annual Report the three new NAV metrics (EPRA NRV, EPRA NTA, and EPRA NDA).
EPRA NAV per share bridge from 31 December 2019 to 31 December 2020 (€)
EPRANAVDec-19 | 9.30 |
EPRAEarnings | 0.37 |
Non-EPRAEarnings | (0.00) |
FVlossonProperty portfolio | (0.52) |
Dividends | (0.49) |
Others | 0.02 |
EPRANAVDec-20 | 8.68 |
Evolution of NAV/share and OMV by semester
| EPRA NAV per share (€) | EPRA NAV (€m) | OMV (€m) |
Dec-18 | 9.04 | 1,200 | 2,462 |
Jun-19 | 9.05 | 1,754 | 2,745 |
Dec-19 | 9.30 | 2,069 | 3,045 |
Jun-20 | 8.80 | 1,957 | 3,013 |
Dec-20 | 8.68 | 1,923 | 3,033 |
Cash Flows
Cash flows from operating activities were €105.2 million, compared to €80.3 million in 2019, representing a 31.0% increase, reflecting the growth of the Group's operating activities following the acquisition of three additional standing office buildings in Poland, the completion of two properties under development in Romania, and the acquisition of the remaining 50% share in the RBC property in Romania in December 2019.
Proceeds of €147 million from the drawdown of three secured bank loan facilities and €163.9 million proceeds from the issuance of the new Bond in July 2020 (net of the €226.9 million used to repurchase part of the 2022 Bond and effectively extend its maturity until July 2026).
Proceeds from the successful disposal of a ROFO property in Poland (Browary) of €16.5 million as well as apartments and land in Romania of €2.9 million.
Cash used on capital expenditure on advancing development projects (three in Romania, two of which are developed by joint ventures, and one in Poland) of €64.3 million and on standing assets of €29.3 million.
Dividends paid in 2020 of €108.3 million in respect of the six-month periods ended 31 December 2019 and 30 June 2020 of €66.4 million and €41.9 million, respectively.
Cash and cash equivalents at 31 December 2020 increased to €527.8 million, €236.1 million higher than at 31 December 2019 (€291.7 million), as influenced by the cash flows from operations, and the net proceeds of the new Bond issued in July 2020 and other bank loans drawn down during the year.
FINANCING AND LIQUIDITY REVIEW
Financing Activity in 2020
In the context of the COVID-19 pandemic, the Group's main focus during 2020 was to preserve the cash liquidity, to effectively extend the maturity of part of its Bond maturing in June 2022, and to protect its revenues and cash flows in order to mitigate the economic impact over its businesses.
The Group had in 2020 an active year in the capital markets, conducting various debt financing activities, that helped preserve the cash position and minimise the negative impact of the COVID-19 pandemic over its operations.
In March 2020, the Group fully drew down the €200 million unsecured Revolving Credit Facility ("RCF") in order to increase its short term liquidity. Further to this, in July 2020 exercised its option to increase the commitment and obtained from the syndicate of Banks an increase in the facility to €215 million.
In July 2020 the Group successfully completed under its €1.5 billion Euro Medium Term Notes Programme the issuance of the €400 million new Notes due in 2026 at a competitive coupon rate. Out of this amount, approximately €226.9 million was used in the tender for the repurchase of part of the €550 million Notes due in June 2022 and the Group collected net proceeds of €158.7 million.
Following the successful new Bond issuance, the €200 million outstanding balance on the RCF was repaid in full and the €215 million facility remains available for utilisation until the end of March 2024, with maturity at the end of April 2024.
The most significant events during 2020 as regards to the secured bank loans financing are outlined below:
In Romania:
· In June 2020, the €15 million outstanding balance on the bank loan secured on the UniCredit HQ property was extended until May 2025;
· In April 2020, the contracted amount of the 10 year bank loan secured on Globalworth Tower was increased to €85 million under the same terms and conditions; the increase of €20 million was drawn down in June 2020; and
· In December 2020, a 50% owned subsidiary of the Group signed an €8 million secured financing agreement for the refinancing of the Chitila Logistics Hub Project, out of which the amount of €7 million was drawn down before 31 December 2020 and the remainder of €1 million will be drawn down during 2021.
In Poland:
· In January 2020, the €65 million 10-year bank loan secured on Warsaw Trade Tower was drawn down; and
· In February 2020, the €62 million 7-year bank loan secured on Retro House and Silesia Star properties was drawn down.
Dividends
In February 2020 the Company paid an interim dividend of €0.30 per share (c.€66.57 million) in respect of the six-month period ended 31 December 2019, while in October 2020 paid an interim dividend of €0.19 per share (c.€41.95 million) in respect of the six-month period ended 30 June 2020. Further to this another interim dividend of €0.15 per share (c.€33.1 million) was paid in March 2021 in respect of the six-month period ended 31 December 2020.
Debt Summary
The total debt portfolio of the Group at 31 December 2020 of €1.63 billion (31 December 2019: €1.32 billion) comprises medium to long-term debt, denominated entirely in Euro.
The Group has extended in 2020 its strategy over the last few years of reducing the applicable weighted average interest rate. The weighted average interest rate decreased from 2.83% at 31 December 2019 to 2.73% at 31 December 2020, while the average period to maturity of 4.5 years increased from 4.3 years at 31 December 2019, as presented in the table below:
Weighted average interest rate versus debt duration to maturity
| Jun.18 | Dec.18 | Jun.19 | Dec.19 | Jun.20 | Dec.20 |
Weighted average interest rate versus debt duration to maturity | 2.91% | 2.91% | 2.85% | 2.83% | 2.52% | 2.73% |
Weighted average durationto maturity(years) | 5.6 | 5.1 | 4.9 | 4.3 | 4.2 | 4.5 |
The evolution of the weighted average interest rate during the year is due to the drawing down and subsequent repayment of the RCF facility, which bears a lower than the weighted average interest rate.
Servicing of Debt During 2020
During 2020, we refinanced €226.9 million (part of the Notes due in June 2022) and repaid c.€203.3 million of debt capital (including the €200 million outstanding balance of the RCF). In addition c.€41.0 million was used to pay accrued interest on the Group's drawn debt facilities, including c.€33.0 million in relation to the coupon for the Eurobonds of the Company.
Liquidity & Loan to Value Ratio
Although as a result of the COVID-19 pandemic the Group temporarily suspended significant new investments, its aim is to maintain at all times sufficient liquidity in order to have the flexibility to react quickly at the moment when attractive new investment opportunities may arise.
As at 31 December 2020, the Group had cash and cash equivalents of €527.8 million (31 December 2019: €291.7 million) out of which an amount of c.€9.8 million was restricted due to various conditions imposed by the financing Banks. On top of this, the Group had available liquidity from committed undrawn loan facilities amounting to €215 million.
The Group's loan to value ratio at 31 December 2020 was 37.8%, compared to 34.7% at 31 December 2019. This is consistent with the Group's strategy to manage its long-term target LTV of below 40%, whilst pursuing its strong growth profile.
Debt Structure as at 31 December 2020
Debt Structure - Secured vs. Unsecured Debt
The majority of the Group's debt at 31 December 2020 is unsecured: 77.7% (31 December 2019: 83.3%), with the remainder secured with real estate mortgages, pledges on shares, receivables and loan subordination agreements in favour of the financing parties.
The slight decrease in the percentage of the unsecured debt compared to 31 December 2019 is connected with the secured bank loans entered by the Group in Romania and Poland due to the advantageous cost conditions obtained, hence the decrease in the weighted average interest rate.
Loans and Borrowings Maturity and Short-Term / Long-Term Debt Structure Mix
The Group has at 31 December 2020 credit facilities and Eurobonds with different maturities, all on medium and long-term, same as at 31 December 2019, as presented in the table below.
Maturity by Year of the Principal Balance Outstanding at 31 December 2020 (€ Million)
2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 |
- | 323.13 | - | 37.48 | 664.65 | 400.00 | 62.26 | - | 150.00 |
Debt Denomination Currency and Interest Rate Risk
Our loan facilities are entirely Euro denominated and bear interest based either on one month's or three months' Euribor plus a margin (8.7% of the outstanding balance compared to 9.5% at 31 December 2019), or at a fixed interest rate (91.3% of the outstanding balance compared to 90.5% at 31 December 2019).
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 reporting currency for the fair market value of our investment property.
Debt Covenants
The Group's financial indebtedness is arranged with standard terms and financial covenants, the most notable as at 31 December 2020 being the following:
Unsecured Eurobonds and Revolving Credit Facility
the Consolidated Coverage Ratio, with minimum value of 200%;
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%.
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%.
There have been no breaches of the aforementioned covenants occurring during the period ended 31 December 2020.
Further details on the Group's debt financing facilities are provided in note 14 of the audited consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
|
| 31 December | 31 December |
|
| 2020 | 2019 |
| Note | €'000 | €'000 |
Revenue | 7 | 223,309 | 222,246 |
Operating expenses | 8 | (66,031) | (74,534) |
Net operating income |
| 157,278 | 147,712 |
Administrative expenses | 9 | (17,986) | (19,302) |
Acquisition costs |
| (2,689) | (240) |
Fair value (loss)/gain on investment property | 3 | (116,153) | 117,718 |
Share-based payment expense | 24 | (1,071) | (496) |
Depreciation on other long-term assets |
| (466) | (406) |
Other expenses |
| (2,565) | (7,192) |
Other income |
| 494 | 932 |
Gain resulting from acquisition of joint venture as subsidiary |
| - | 2,864 |
Foreign exchange loss |
| (395) | (888) |
(Loss)/gain from fair value of financial instruments at fair value through profit or loss | 16 | (47) | 1,898 |
|
| (140,878) | 94,888 |
Profit before net financing cost |
| 16,400 | 242,600 |
Net financing cost |
|
|
|
Finance cost | 10 | (51,140) | (45,050) |
Finance income |
| 2,383 | 2,416 |
|
| (48,757) | (42,634) |
Share of profit of equity-accounted investments in joint ventures | 27 | 1,897 | 7,750 |
(Loss)/profit before tax |
| (30,460) | 207,716 |
Income tax expense | 11 | (16,335) | (31,535) |
(Loss)/profit for the year |
| (46,795) | 176,181 |
Other comprehensive income |
| - | - |
Total comprehensive income |
| (46,795) | 176,181 |
(Loss)/profit attributable to: |
| (46,795) | 176,181 |
- Equity holders of the Company |
| (46,795) | 170,177 |
- Non-controlling interests |
| - | 6,004 |
|
| Cents | Cents |
Earnings per share |
|
|
|
- Basic | 12 | (21) | 93 |
- Diluted | 12 | (21) | 93 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
|
| 2020 | 2019 |
| Note | €'000 | €'000 |
ASSETS |
|
|
|
Non-current assets |
|
|
|
Investment property | 3 | 3,013,014 | 3,048,955 |
Goodwill | 26 | 12,349 | 12,349 |
Advances for investment property | 5 | 4,215 | 32,440 |
Investments in joint ventures | 27 | 28,358 | 17,857 |
Equity investments | 17 | 10,369 | 9,840 |
Other long-term assets |
| 2,148 | 1,493 |
Prepayments |
| 432 | 619 |
Financial assets at fair value through profit or loss | 16 | - | 3,098 |
Deferred tax asset | 11 | 786 | 2,869 |
|
| 3,071,671 | 3,129,520 |
Current assets |
|
|
|
Financial assets at fair value through profit or loss | 16 | 7,695 | 20,487 |
Trade and other receivables | 18 | 16,025 | 28,963 |
Contract assets |
| 2,819 | 5,257 |
Guarantees retained by tenants |
| 894 | 858 |
Income tax receivable |
| 931 | 255 |
Prepayments |
| 2,227 | 4,653 |
Cash and cash equivalents | 19 | 527,801 | 291,694 |
|
| 558,392 | 352,167 |
Total assets |
| 3,630,063 | 3,481,687 |
EQUITY AND LIABILITIES |
|
|
|
Issued share capital | 21 | 1,704,374 | 1,704,374 |
Treasury shares | 24.5 | (12,977) | (8,379) |
Share-based payment reserve | 24 | 6,184 | 5,571 |
Retained earnings |
| 57,783 | 213,101 |
Equity attributable to ordinary equity holders of the Company |
| 1,755,364 | 1,914,667 |
Non-current liabilities |
|
|
|
Interest-bearing loans and borrowings | 14 | 1,604,043 | 1,299,616 |
Deferred tax liability | 11 | 144,843 | 134,302 |
Lease liabilities | 3.2 | 27,324 | 30,190 |
Guarantees retained from contractors |
| 2,235 | 1,074 |
Deposits from tenants |
| 3,449 | 3,460 |
Trade and other payables |
| 692 | 1,316 |
|
| 1,782,586 | 1,469,958 |
Current liabilities |
|
|
|
Interest-bearing loans and borrowings | 14 | 26,051 | 24,304 |
Guarantees retained from contractors |
| 4,032 | 4,754 |
Trade and other payables | 15 | 40,209 | 44,633 |
Contract liability |
| 2,088 | 1,824 |
Other current financial liabilities | 20.3 | 875 | 1,498 |
Current portion of lease liabilities | 3.2 | 1,765 | 1,887 |
Deposits from tenants |
| 16,245 | 15,988 |
Provision for tenant lease incentives |
| 46 | 1,353 |
Income tax payable |
| 802 | 821 |
|
| 92,113 | 97,062 |
Total equity and liabilities |
| 3,630,063 | 3,481,687 |
The financial statements were approved by the Board of Directors on 25 March 2021 and were signed on its behalf by:
John Whittle
Director
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
|
| 2020 | 2019 |
| Note | €'000 | €'000 |
(Loss)/profit before tax |
| (30,460) | 207,716 |
Adjustments to reconcile profit before tax to net cash flows |
|
|
|
Fair value loss / (gain) on investment property | 3 | 116,153 | (117,718) |
Loss on sale of investment property |
| 387 | 1,576 |
Share-based payment expense | 24 | 1,071 | 496 |
Depreciation on other long-term assets |
| 466 | 406 |
Net movement in allowance for doubtful debts | 20.2 | 1,152 | (156) |
Foreign exchange loss |
| 395 | 888 |
Loss/(gain) from fair valuation of financial instrument | 16 | 47 | (1,898) |
Gain resulting from acquisition of joint venture as subsidiary | 27 | - | (2,864) |
Share of profit of equity-accounted joint ventures | 27 | (1,897) | (7,750) |
Net financing costs |
| 48,757 | 42,634 |
Operating profit before changes in working capital |
| 136,071 | 123,330 |
Decrease/(increase) in trade and other receivables |
| 16,696 | (714) |
(Decrease)/increase in trade and other payables |
| (3,149) | 3,966 |
Interest paid |
| (40,958) | (38,259) |
Interest received |
| 1,048 | 782 |
Income tax paid |
| (4,746) | (9,406) |
Interest received from joint ventures |
| 199 | 627 |
Cash flows from operating activities |
| 105,161 | 80,326 |
Investing activities |
|
|
|
Expenditure on investment property completed and under development or refurbishment |
| (77,028) | (92,784) |
Payment for land acquisitions |
| - | (925) |
Advances for investment property | 5 | - | (25,040) |
Refund of advances given for property acquisition |
| 24,000 | - |
Payments for acquisition of investment property |
| - | (233,952) |
Proceeds from sale of investment property |
| 2,870 | 5,773 |
Investment in financial assets at fair value through profit or loss | 16 | (671) | (5,980) |
Proceeds from sale of financial assets through profit and loss |
| 16,517 | - |
Payments for equity investments | 17 | (529) | (1,003) |
Investment in and loans given to joint ventures | 27 | (16,555) | (16,719) |
Proceeds from joint ventures for loans given | 27 | 8,485 | 4,389 |
Payment for the acquisition of remaining 50% stake in joint venture | 27 | (2,000) | (8,131) |
Payment for purchase of other long-term assets |
| (1,123) | (588) |
Cash flows used in investing activities |
| (46,034) | (374,960) |
Financing activities |
|
|
|
Proceeds from issuance of share capital | 21 | - | 611,921 |
Payment of transaction costs on issuance of shares | 21 | - | (12,828) |
Purchase of own shares | 24.5.1 | (8,345) | (7,295) |
Payments for the acquisition of shares from non-controlling interest |
| - | (33,491) |
Proceeds from interest-bearing loans and borrowings | 14 | 737,353 | 64,545 |
Payments of interest-bearing loans and borrowings | 14 | (430,200) | (129,094) |
Payment for performance incentive scheme termination | 24.4 | - | (25,813) |
Payment of interim dividend to equity holders of the Company | 22 | (108,324) | (93,799) |
Payment for lease liability obligations | 3.2 | (1,771) | (1,601) |
Payment of dividend to non-controlling interests in the subsidiary |
| - | (10,731) |
Payment of bank loan arrangement fees and other financing costs |
| (11,614) | (3,902) |
Change in long term restricted cash reserve | 19 | - | 1,250 |
Cash flows from financing activities |
| 177,099 | 359,162 |
Net increase in cash and cash equivalents |
| 236,226 | 64,528 |
Effect of exchange rate fluctuations on cash and bank deposits held |
| (119) | (1,111) |
Cash and cash equivalents at the beginning of the year | 19 | 290,694 | 227,277 |
Cash and cash equivalents at the end of the year1 | 19 | 526,801 | 290,694 |
1 Net of the €1.0 million restricted cash reserve (31 December 2019: €1.0 million), see note 19.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
|
| Equity attributable to equity holders of the Company |
|
| ||||
|
|
|
| Share-based |
|
| Non- |
|
|
| Issued share | Treasury | payment | Retained |
| controlling |
|
|
| capital | shares | reserve | earnings | Total | interests | Total Equity |
| Note | '000 | '000 | '000 | '000 | '000 | '000 | '000 |
As at 1 January 2019 |
| 897,314 | (842) | 2,117 | 186,326 | 1,084,915 | 212,407 | 1,297,322 |
Issuance of shares subscribed in cash |
| 611,921 | - | - | - | 611,921 | - | 611,921 |
Transaction costs on issuance of shares |
| (12,828) | - | - | - | (12,828) | - | (12,828) |
Shares issued to the Executive Directors and other senior management employees |
| 3,467 | (2,564) | (818) | - | 85 | - | 85 |
Interim dividends |
| - | - | 128 | (93,927) | (93,799) | - | (93,799) |
Share based payment expense under the subsidiaries' employees share award plan |
| - | - | 353 | - | 353 | - | 353 |
Shares vested under the subsidiaries' employees share award plan |
| - | 784 | (784) | - | - | - | - |
Shares purchased in cash by the Company |
| - | (7,295) | - | - | (7,295) | - | (7,295) |
Shares issued for share swap with non-controlling interest holders |
| 179,395 | - | - | 5,840 | 185,235 | (185,235) | - |
Shares acquired in cash from non-controlling interest holders in the subsidiary |
| - | - | - | (315) | (315) | (33,176) | (33,491) |
Performance incentive scheme termination |
| 25,105 | 1,538 | 2,544 | (55,000) | (25,813) | - | (25,813) |
Deferred annual bonus plan reserve for the year |
| - | - | 1,888 | - | 1,888 | - | 1,888 |
Long-term incentive plan reserve for the year |
| - | - | 143 | - | 143 | - | 143 |
Total comprehensive income for the year |
| - | - | - | 170,177 | 170,177 | 6,004 | 176,181 |
As at 31 December 2019 |
| 1,704,374 | (8,379) | 5,571 | 213,101 | 1,914,667 | - | 1,914,667 |
Shares issued to the Executive Directors and other senior management employees | 24.2 | - | 392 | (392) | - | - | - | - |
Interim dividends | 22 | - | 271 | (72) | (108,523) | (108,324) | - | (108,324) |
Share based payment expense under the subsidiaries' employees share award plan | 24.3 | - | - | 1,071 | - | 1,071 | - | 1,071 |
Shares vested under the subsidiaries' employees share award plan | 24.3 | - | 540 | (540) | - | - | - | - |
Shares purchased with cash by the Company | 24.5.1 | - | (8,345) | - | - | (8,345) | - | (8,345) |
Cash-based portion of deferred annual bonus plan converted to deferred shares settlement | 24.4.1.2 | - | - | 1,025 | - | 1,025 | - | 1,025 |
Deferred annual bonus plan reserve for the year | 24.4.1 | - | - | 2,065 | - | 2,065 | - | 2,065 |
Shares vested under the deferred annual bonus incentive plan | 24.4.2 | - | 2,544 | (2,544) | - | - | - | - |
Total comprehensive income for the year |
| - | - | - | (46,795) | (46,795) | - | (46,795) |
As at 31 December 2020 |
| 1,704,374 | (12,977) | 6,184 | 57,783 | 1,755,364 | - | 1,755,364 |
The aforementioned references to the Financial Statements above are in relation to the notes that are contained in the 2020 Annual Report, which will shortly be available at http://www.globalworth.com/investor-relations/financial-reports-and-presentation from page 114. In addition, the Annual Report provides further information about the activities of Globalworth and also a glossary of terms.
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