Trading and Market Update

RNS Number : 9742C

Globalworth Real Estate Inv Ltd

24 March 2014

 

24^th March, 2014

Globalworth Real Estate Investments Limited ("Globalworth" or the "Company")

Trading and Market Update

Summary Highlights

The Board of Globalworth is pleased to release a trading and market update for the Company since its IPO in July 2013.

Key highlights are as follows:

·     Completion of the acquisition of the Initial Portfolio and Founder Pipeline, as defined in the Company's Admission Document.  The Company now owns an attractive portfolio of eight high quality properties located in Bucharest (the "Current Portfolio") and an Asset Manager

·     Current Portfolio Open Market Value ("OMV") of €487.9¹ million

·     The commercial element of the Current Portfolio has occupancy of 77.7 per cent with 74.5 per cent of NOI derived from multinational tenants with a weighted averaged lease length ("WALL") of 6.5 years

·     LTV of 49.9 per cent as of March 21, 2014, with approximately half of the debt expiring in 2018 or later

·     Approximately 88.4 per cent of the Current Portfolio by value relates to standing properties with the remainder representing properties under development

·     Concluded c.€360 million worth of transactions and leased c.50,000 sqm

Geoff Miller, Chairman of Globalworth, commented:

"The Company has made an exceptional start to its development, covering a considerable distance in a short space of time. In line with its stated expectations in the IPO admission document, it has acquired a portfolio of landmark assets in Bucharest, most of which are let to high quality tenants on long, triple net leases, and has incorporated a c.40-strong, highly skilled and experienced asset management team. Since the IPO, the Company has achieved significant results in the letting, development and debt financing management of the portfolio. 

We look forward to a very busy and exciting 2014."

¹ OMV based on third party valuations as of December 31, 2013

Significant Post IPO Events

·     Closing of the acquisitions of the Initial Portfolio (City Offices, Herastrau One, Floreasca One Bucharest One, Tower Center International, Upground Towers), the Founder Pipeline (BOB and BOC office buildings) and the Asset Manager operations

·     Achievement of significant asset management milestones, including:

o  Extended existing and signed new leases totalling c.50,000 square metres, the most notable one being with Vodafone for c.16,000 square metres in Bucharest One, the largest letting transaction in 2014 and one of the largest in the Bucharest office market.  Other prime tenants which signed new leases or extended existing ones include, among others, Deutsche Bank, Honeywell, Intel Romanian Ministry of European Funds, Stefanini and Romtelecom (Dolce Sport)

o  Obtained the necessary permits to start the construction of Bucharest One

o  Agreed terms with a major European financial institution for the debt financing of the Bucharest One development

·     Concluded important debt financing arrangements, including:

o  Obtained change of control waivers and significant debt maturity extension for the BOB/BOC and Upground facilities totaling c.€162 million

o  Closed a short term €65 million debt facility with UBS for the closing of the BOB/BOC and TCI acquisitions

·     Appointed Andreas Papadopoulos, a seasoned EY professional, as Chief Financial Officer

Current Portfolio Key Highlights

·     Contracted annualised portfolio NOI of €24.6 million

·     Current Portfolio occupancy (commercial space) of 77.7 per cent

·     WALL (commercial space) of 6.5 years

·     Proportion of triple net leases: 100 per cent

·     Multinational tenants as a  per cent of commercial NOI: 74.5 per cent

·     Per cent of Current Portfolio OMV in office space: 72.9 per cent

·     Per cent of Current Portfolio OMV in assets under development: 11.6 per cent

-      Ends -

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

EastWest Partners (Financial Adviser)                                  

David Hill                                                                                            Tel: [phone]

Scott Evans                                                                                         Tel: [phone]     

Panmure Gordon (Nominated Adviser)                                Tel: [phone]

Nicola Marrin

Freddy Crossley

Cantor Fitzgerald Europe (Joint Broker)                                Tel: [phone]

Rick Thompson

David Foreman

Milbourne (Public Relations)                                                     Tel: [phone]

Tim Draper

About Globalworth:

Globalworth Real Estate Investments Ltd is a real estate investment company founded by real estate investor and developer Ioannis Papalekas to take advantage of investment opportunities in Romania and the broader SEE and CEE regions. The Company is Guernsey incorporated and has been declared by the Guernsey Financial Services Commission to be a registered closed-ended collective investment scheme. The Company's shares were admitted to trading on AIM in July 2013.

The Romanian market offers an attractive real estate investment proposition in the medium-to-long term. Globalworth believes that global investor capital flows will gradually move from markets considered as "safe havens" to more peripheral markets such as Romania and the broader SEE and CEE regions in search of higher yielding investments. As a result, Romania and the broader SEE and CEE regions should, in due course, become more attractive destinations for a wide investor audience. Globalworth anticipates holding an early mover advantage in these markets and benefitting from this gradual shift in investor sentiment.

IMPORTANT NOTICE

Certain figures in this document, including as to stabilised or expected NOI, are current expectations based on a number of assumptions that reflect a substantial degree of judgment.  These projections are subject to risks and uncertainties that could cause actual outcomes to differ materially from those expressed or implied by the relevant statements; they are not guarantees of future performance and there can be no assurance that these projections can or will be achieved

Chief Executive Officer's Statement

Before commenting on the progress of the Company since IPO, it is worth providing certain key highlights on the economy and real estate market of Romania, the Company's principal target market.

Romania has a number of strong macroeconomic fundamentals, as follows:

·     It is the second largest country in the CEE and seventh largest in the EU with c.21.4 million inhabitants;

·     Full membership of the EU since 2007;

·     Solid and improving infrastructure (one of the fastest internet connections in the world);

·     Low wage cost (second lowest in the EU) and a low and stable tax rate (16 per cent flat);

·     High standards of education;

·     The economy has seen one of the highest growth rates in Europe with GDP up by 3.5% in 2013 (+5.2% in Q4) and is expected to maintain momentum through to 2015;

·     Unemployment has remained remarkably low at 7.1% vs. an EU average of 10.9% and is expected to fall to 5% in 2014 making it one of the lowest rates in Europe;

·     The low current account deficit (1% in 2013) driven by increased exports has ensured a stable currency, despite the recent volatility in currency markets;

·     Strict control of government spending has led to the budget deficit falling to 2.5 per cent in 2013 from 3 per cent in 2012;

·     Inflation has fallen steadily from 6% in 2010 to 1.55% by the end of 2013 with a 2014 target of 2.5% (NBR); 

·     The country has one of the lowest Public Debt to GDP (c.39%) ratios in the EU

·     c.€40 billion of EU and Romanian State funding to be available between 2014 and 2020 according to the Romanian Ministry of European Funds:

o  The Romanian State has supported projects of c.€3 billion in value - half of the investments were directed to the automotive sector which now employs more than 100,000 people and generates an annual turnover of more than €12.5 billion;

o  Examples of multinationals which have recently invested and/or expanded in Romania (most of which benefiting from hundreds of millions of grants and subsidies) are Deutsche Bank, Daimler, Delphi, Bosch, OMV, Microsoft, Dell, Renault, Lufkin and Continental.

Given the above, there has been a marked increase in levels of foreign direct investment, particularly in the IT&T and automotive industries where Romania is emerging as one of the most attractive countries for the relocation of call centres and outsourced production and service facilities.  The Outsourcing Journal recently estimated that Romania will rank in first position for outsourcing in Europe.

The international capital markets have given a positive vote of confidence to the improvement and potential of the Romanian economy.  In January 2014, Romania borrowed $1 billion for 10 years at a coupon of 4.875 per cent and $1 billion for 30 years at a coupon of 6.125 per cent, with the offer being oversubscribed six times.  The issue was supported by US and UK investors who subscribed for more than 80 per cent of the offering.

On the real estate side, the Bucharest office sector (the Company's primary market accounting for 72.9 per cent of its portfolio by value) has witnessed very positive momentum during 2013, mainly in terms of new lettings.  Demand is mainly driven by expansion of IT companies, financial institutions and companies in the manufacturing, industrial and energy sectors, largely as a result of Romania's emergence as a major outsourcing location.  A recent report by Jones Lang LaSalle highlighted that most major outsourcing companies have opened at least one centre in Romania.

Since 2011, demand for office space has consistently surpassed new supply levels.  In 2013, demand was more than double compared to the level of new stock in the Bucharest office market, with over 276,500 square metres of space leased.  Demand is expected to continue to outstrip supply in the medium term.  Prime rental rates have stabilised over this period and now range from €16 to €19 per square metre per month. 

Office yields have also stabilised at 8.25-8.50 per cent, although transaction activity is still well below pre-crisis levels.  Accordingly, there is now a significant positive gap of 200-250bps between the Bucharest office market and the more active markets of Warsaw and Prague, which is a strong indicator that as yields bottom out in these markets, institutional investor interest for Romania will increase.

Since its listing on AIM in July 2013, the Company's activities have focused on the following objectives:

·     Completing the acquisition of the portfolio described in the Company's admission document

·     Achieving important milestones in the leasing of assets, obtaining permits and restructuring debt facilities

·     Sourcing new acquisitions

·     Strengthening the management team

I am pleased to report that excellent progress has been made on all fronts.

The Company now owns and controls the portfolio described in the Company's admission document consisting predominantly of office assets located in Bucharest, Romania, offering a balanced combination of income-producing buildings and development projects with significant upside potential. These assets are predominantly let to multinational companies and financial institutions on long-term, triple net leases, in line with the investment objectives of the Company set out at the time of its admission to trading.

It is important to emphasise the fact that the real estate portfolio has been acquired at a cost of €343.0 million, reflecting an entry yield on stabilised NOI of c.11.0 per cent. This compares very favourably to current yields in the market for similar properties of 8.25-8.50 per cent.  Comparing it to its Open Market Value (OMV) as of December 31, 2013 of €486.5 million², the portfolio was acquired at a c.30 per cent discount.  Considering the additional costs required to be spent on the development assets (Bucharest One and Herastrau One), the total cost to acquire and develop the portfolio is c.€430.7 million, compared with an OMV as of December 31, 2013 upon completion of €612.0 million, reflecting a discount of c.30 per cent.  As a result, we believe there exists significant unrealised upside potential, which we expect to further increase as market conditions ameliorate and institutional investor perception of, and interest in, the market further improves.

On the asset and portfolio management side, the Company and the asset management team residing within Globalworth Asset Managers ("GAM") have been very busy and have achieved a number of significant milestones.

On the letting side, we have concluded some of the most important leasing transactions in the Bucharest market.   The most notable one is the 10-year lease contract we recently concluded with Vodafone for c.16,000 square metres in Bucharest One, the largest letting transaction this year and one of the largest ever in the Bucharest office market.  Other lettings worth noting are in BOC; Honeywell's extension and further take-up of new space for 10 years with a total 11,000 square metres and Intel's lease extension for 10 years for 3,850 square metres. In BOB; Deutsche Bank's new lease for c.6,000 square metres for 10 years and Stefanini's relocation (from BOC) and further take-up for a total of 6,200 square metres for c.6 years. On TCI, Globalworth won the tender to house the Romanian Ministry of European Funds for a total take up of c.6,200 square metres (over various phases).

On the permitting side, the most important highlight was obtaining the necessary permits to start the construction of Bucharest One.  This was the result of over 12 months of intense efforts by the team to obtain a number of approvals, the most important being the approval of the local Metro authority.  Once completed (expected end of December 2015) Bucharest One will be the most iconic office tower in Bucharest and a significant contributor to the Company's NOI and expected capital appreciation, hence getting the relevant permits on time and in line with the Company's expectation was of paramount importance.

On the debt financing side, there have been a number of significant wins during the period since the IPO.  First and foremost, the Company concluded a €65 million facility with UBS which has enabled it to complete the acquisitions of BOB, BOC and TCI.    In addition, it would be remiss not to highlight the following important achievements:

·     We have obtained the change of control waivers from the lending banks on BOB/BOC and Upground for a total debt quantum of c. €162 million.  Although that would in itself constitute a major accomplishment, given current market conditions in the local and international lending markets, the waiver was also accompanied by an extension of the maturities of the related facilities to 2016 for Upground and 2018 for BOB/BOC.

·     We have agreed terms with a major international financial institution for the development financing of Bucharest One.  We expect to sign the related documentation within Q2 2014.

As indicated to investors at the time of the IPO, the Company intends to have moderate levels of gearing.  The current Loan to Value ratio is 49.9 per cent versus the Company's target level of 60 per cent at group level.

On the personnel side, we have made a number of additional hires mainly in the areas of finance/financial reporting.  It is worth highlighting the appointment of Andreas Papadopoulos as Chief Financial Officer, who joined the Company in March 2014.  Andreas is a very experienced corporate finance and accounting professional having spent most of his career with EY in various senior positions in Southeast and Central and Eastern Europe.  He has significant knowledge of the Romanian market having worked in the country for several years on a number of important assignments. 

We are looking for additional targeted hires in a number of functions within 2014 in line with the growth of the Company.

Ioannis Papalekas

Chief Executive Officer

² adjusted for the 60% ownership of the Floreasca 1 investment

Portfolio Review

Current key portfolio highlights are as follows:

·     Contracted annualised portfolio NOI of €24.6³ million

·     Portfolio occupancy (commercial space) of 77.7 per cent

·     WALL (commercial space) of 6.5 years

·     Proportion of triple net leases: 100 per cent

·     Multinational tenants of commercial space as a  per cent of total NOI: 74.5 per cent

·     Per cent of Portfolio OMV in office space: 72.9 per cent

·     Per cent of Portfolio OMV in assets under development: 11.6 per cent

The tables below summarise certain key portfolio statistics. 

Asset Name	Status	Valuation4	Acquisition	Dev/ment	Debt	LTV %	NOI5
		on Completion	Cost	Cost	on Completion		Current	Q1 '15E	Q1'16E
		(€m)	(€m)	(€m)	(€m)		(€m)	(€m)	(€m)
Asset Manager (RE)	Comp. / Dev.	104.1	51.0	22.7	33.0	31.7%	2.1	9.0	9.3
City Offices	Comp. /Re-dev.	62.4	37.0	6.5	16.0	25.6%	1.7	5.4	5.6
Herastrau 1	Development	28.8	6.0	14.0	13.0	45.1%	-	2.7	2.8
Floreasca 16	Development	5.2	2.0	2.2	2.0	38.5%	-	0.5	0.5
Upground Apt	Completed	7.7	6.0	-	2.0	25.9%	0.4	0.4	0.4
BOB7	Completed	50.5	42.0	-	35.0	69.3%	3.4	4.2	4.3
BOC	Completed	139.0	110.0	-	85.3	61.4%	9.6	10.1	10.4
Upground Towers	Completed	101.0	52.0	-	38.0	37.6%	2.4	5.0	5.2
TCI8	Completed	76.0	58.0	-	-	-	4.5	5.0	5.2
Bucharest One	Development	141.3	30.0	65.0	50.0	35.4%	-	-	12.5
Sub-Total		612.0	343.0	87.7	241.3	39.4%	21.9	33.3	46.8
Asset Manager	Operations	22.4	15.0	-	-	-	2.7	2.7	2.8
Grand Total		634.4	358.0	87.7	241.3	38.0%	24.6	36.0	49.6

³ Includes €2.7 million of Asset Manager NOI

⁴ Independent Valuation of real estate assets represents the value at completion (as of December 2013) and the valuation of the asset manager operations as of June 2013.

⁵ NOI represents the contracted or expected annualised NOI of the company at the specified point in time.

⁶ Figures associated with the Floreasca 1 are adjusted to reflect the 60% ownership of GWI in the investment

⁷ Total equity utilised in the investment of c.€5.0 million, with an additional €2.0 million paid by BOB (through its reserves) to reduce debt in place at the time of the transaction.

⁸ Current debt in TCI of c.€32 million to be converted to equity in Dec. 2014.

Current Portfolio by Asset Type               ("As Is Valuations9")		Current Portfolio by Status                           ("As Is Valuation)		Currernt Commercial 10 NOI                     Contribution by Type
Office	69.7%	Standing	84.5%	Multinational	65.6%
Residential	19.9%	Development	11.1%	National	12.1%
Retail	3.6%	Asset Manager	4.4%	State & Related Entities	10.3%
Parking	2.4%			Asset Manager	12.0%
Asset Manager	4.4%
Total	100.0%	Total	100.0%	Total	100.0%

Lease & Occupancy Details (Commercial spaces)
Weighted Average Lease Length (from Mar. 1st 2014)			6.5 years
Average Rent (completed):			€14.0/sqm/m
Office			€14.1/sqm/m
Retail			€13.9/sqm/m
Average Occupancy (Office / Retail)			77.7%
Proportion of Triple Net Leases11			100%

Lease Expiry based on Annualised Commercial NOI
2014	2015	2016	2017	2018	2019	2020	>2020
1.2%	11.1%	2.3%	8.3%	5.9%	5.0%	21.7%	44.6%

Commercial Tenant Mix by Sector (NOI)		Commercial Tenant Mix by Parent Company Domicile (NOI)
Technology	20.9%	Romania	25.3%
Financial	17.4%	USA	21.5%
Services	11.8%	Greece	11.8%
Conglomerate	9.0%	Germany	8.4%
Government	7.5%	UK	7.7%
Accounting	5.4%	South Africa	4.8%
Telecom	4.5%	Belgium	4.3%
Utilities	4.2%	Italy	3.0%
Oil and Gas	3.0%	France	2.8%
Other	16.4%	Other	10.5%
Total	100.0%		100.0%

⁹ Real Estate values as independently appraised as of December 2013 and and asset manager operations as valued as of June 2013..

¹⁰ Commercial NOI represents the NOI generated by BOB, BOC, TCI, City Offices (currently under redevelopment), Upground Towers (retail component only).

¹¹ c.19% of the leases service charges are capped at various levels.

We outline below a summary description and trading update of the major assets in the Company portfolio accounting for c. 97 per cent of its OMV. 

BOB - Office Building (Completed)
Description	·      "BOB" is a modern ("class A") office building located in the Northern part of Bucharest on Dimitrie Pompeiu Boulevard. The property is part of a wider building complex developed by Mr. Papalekas between 2006 and 2011 which includes BOC and Upground Towers
Location	·      North of Bucharest
Completion Year	·      2008
GBA / GLA (square metres)	·      25,040 / 22,391
Parking spaces indoor/outdoor	·      -/161
OMV as of December 31, 2013	·      €50.5 million
Acquisition Cost	·      €42 million
Development Cost	·      -
LTV	·      69.3  per cent
Occupancy	·      89.8 per cent
Annualised NOI Contracted/Stabilised12	·      €3.4 million/€4.2 million
Average rent per square metre per month (Commercial)	·      €12.9
WALL	·      7.3 years
Stabilised Yield	·      10 per cent
Strategy	·      Lease and hold the property
Key tenants	·      Deutsche Bank, Stefanini, Securitas, NX Data, Snamprogetti,  Banca Romaneasca

Since July 2013 we closed significant new lettings in BOB which replaced a number of tenants which had already left and leases which were about to expire.  The most significant lettings were with Deutsche Bank (6,000 square metres) for 10 years, Stefanini (6,200 square metres) for c.7 years and Romtelecom/Dolce Sport (2,000 square metres) for 10 years.

¹² Stabilised NOI; represents the Company’s expectation of the NOI of that asset when it is built (if applicable) and fully let (and after any rent-free period)

BOC - Office Building (Completed)
Description	·      "BOC" is a modern ("class A") office building located in the Northern part of Bucharest on Dimitrie Pompeiu Boulevard. The property is part of a wider building complex developed by Mr. Papalekas between 2006 and 2011 which includes BOC and Upground Towers.
Location	·      North of Bucharest
Completion Year	·      2009
GBA / GLA (square metres)	·      58,449 / 57,607
Parking spaces indoor/outdoor	·      842/53
OMV as of December 31, 2013	·      €139.0 million
Acquisition Cost	·      €110 million
Development Cost	·      -
LTV	·      61.4 per cent
Occupancy	·      94.8 per cent
Annualised NOI Contracted/Stabilised13	·      €9.6 million/€10.1 million
Average rent per square metre per month (Commercial)	·      €13.2
WALL	·      6.4 years
Stabilised Yield	·      9.2 per cent
Strategy	·      Lease and hold the property
Key tenants	·      Hewlett Packard/Global E-Business Center, Intel, Nestle, Honeywell, Banca Romanesca, EADS

The letting activity in BOC was mainly concentrated around extending current leases with some of our core tenants.  Highlights include Honeywell's extension and take-up of new space in BOC for 10 years for 11,000 square metres, Intel's lease extension in BOC for 10 years for 3,850 square metres.

¹³ Stabilised NOI; represents the Company’s expectation of the NOI of that asset when it is built (if applicable) and fully let (and after any rent-free period)

City Offices - Office, Retail & Parking (Completed)
Description	·      "City Offices" is a mixed-use property comprising two connected buildings, a Commercial Building ("CB") and a Multilevel Parking ("MP"). It is located at the southern part of Bucharest in the densely populated area of Eroii Revolutiei. City Offices, a former retail mall, was recently re-developed/re-positioned to its current use with construction works completed in December 2013, with additional fit-out works currently underway.
Location	·      South of Bucharest
Completion Year	·      2014
GBA "CB"&"MP" / GLA                           (total square metres)	·      32,210 & 28,883 / 32,024
Parking spaces indoor/outdoor	·      1,019 / -
OMV as of December 31, 2013: "As Is" / "On Completion"	·      €55.9 million /€62.4 million
Acquisition Cost	·      €37.0 million
Development Cost	·      €6.5 million
LTV: "As Is" / "On Completion"	·      25.7 per cent / 25.6 per cent
Occupancy	·      25.8 per cent (office and retail)
Annualised NOI Contracted/Stabilised14	·      €1.7 million/€5.4 million
Average rent per square metre per month (Commercial)	·      €16.3
WALL	·      6.8 years
Stabilised Yield	·      12.4 per cent
Strategy	·      Lease and hold the property
Key tenants	·      M. Image, Global Vision, Vodafone, Billa, MaxBet, Piraeus Bank

¹⁴ Stabilised NOI; represents the Company’s expectation of the NOI of that asset when it is built (if applicable) and fully let (and after any rent-free period)

Since the IPO, the main focus has been the completion of the redevelopment of the asset as part of its reconversion from a mall to a mixed-use office, retail and parking asset. The main redevelopment phase of the project was substantially completed at the end of 2013 and there are currently ongoing tenant fit-out works in the interior of the building.

On the letting side, we are currently in active negotiations with a number of multinationals for the leasing of the office space.  Although the building is not located in a developed office sub-market of Bucharest, it has a number of features which make it attractive to potential tenants, as follows:

·     It is situated next to Eroii Revolutiei Metro station, being two stops away from the city center (Unirii square).

·     It is located in a densely populated area, which should prove attractive both for the retail component of the project as well as for the office one as many workers/employees of large multinationals live in the vicinity.

·     The asset was acquired out of insolvency for c.€17 million, including the parking building, substantially below not only to its market value, but also its replacement cost.  As a result of the low cost basis, the service charge and parking cost charged to the tenants are considerably lower than properties of similar size and specification in the market, making City Offices economically very attractive for potential tenants.

Tower Center International (TCI) - Office (Completed)
Description	·      Tower Center International ("TCI") is a recently completed landmark office ("class A") building centrally located in Bucharest's CBD area at Victoriei Square. The property consists of two interconnected buildings and is currently the 2nd tallest building in Bucharest. It comprises 24,711sqm GBA extending over twenty six floors above ground.
Location	·      CBD of Bucharest
Completion Year	·      2012
GBA /GLA (square metres)	·      24,711 / 22,228
Parking spaces indoor/outdoor	·      130 / 38
OMV as of December 31, 2013	·      €76.0 million
Acquisition Cost	·      €58 million
Development Cost	·      -
LTV	·      42.2 per cent
Occupancy	·      90.3 per cent
Annualised NOI Contracted/Stabilised15	·      €4.5 million/€ 5.0 million
Average rent per  square metre per month (Commercial)	·      €17.8
WALL	·      5.4 years
Stabilised Yield	·      8.6 per cent
Strategy	·      Lease and hold the property
Key tenants	·      EY, Inside Software (Cegeka), Hidroelectrica, Huawei, DB, Ministry of European Funds

Following the lease agreements signed with EY, Hidroelectrica and Inside Software (Cegeka) before the IPO, the main highlight of the leasing activity of this asset post IPO was the lease agreement with Romania's Ministry of European Funds (MEF) which, among others, is responsible for coordinating the significant EU subsidy programme for the country.  MEF's agreement to lease c.6,300 square metres brought the occupancy of the asset to over 90 per cent, a significant achievement considering that almost a year ago the asset was completely vacant.  With a tenant roster of prime tenants, this asset can be now considered one of the most attractive investment properties in the Bucharest office market.

¹⁵ Stabilised NOI; represents the Company’s expectation of the NOI of that asset when it is built (if applicable) and fully let (and after any rent-free period)

Bucharest One - Office (Development)
Description	·      "Bucharest One" is a flagship office development project to be constructed in the northern part of Bucharest in the Floreasca/Barbu Vacarescu area. Upon completion, the building will be the second tallest tower in Bucharest, offering c.48,732  square metres of GBA over twenty three floors above ground. Development is under way with a number of permits already received. Construction is expected to be completed in 2015.
Location	·      North Bucharest
Completion Year	·      2015
GBA /GLA (square metres)	·      48,732 / 47,026
Parking spaces indoor/outdoor	·      537 / 122
OMV as of December 31, 2013 "As Is" / "On Completion"	·      €48.1 million / €141.3 million
Acquisition Cost	·      €30.0 million
Development Cost	·      €65 million
LTV "As Is" / "On Completion"	·      - / 35.4 per cent
Occupancy	·      37.5% pre-let
Annualised NOI Contracted/Stabilised16	·      €4.0 million /€12.5 million
Average rent per  square metre per month (Commercial)	·      €16.0 (pre-let)
WALL	·      9.4 years (pre-let)
Stabilised Yield	·      13.2 per cent
Strategy	·      Develop the project/Lease and hold the property
Key tenants	·      Vodafone and Huawei

¹⁶ Stabilised NOI; represents the Company’s expectation of the NOI of that asset when it is built (if applicable) and fully let (and after any rent-free period)

In December 2013 we achieved the significant milestone of obtaining all relevant permits to begin the construction of this landmark project.  This marks the culmination of more than 12 months of efforts by our development management team.  The development is expected to be finalised in Q4 2015.  Upon completion, Bucharest One will be the city's second tallest building and is expected to constitute one of the most desirable assets in the market due to its unique location in the city's new Central Business District (CBD). The development is situated on the corner of three main boulevards and benefits from exceptional architectural design, proposed LEED Platinum accreditation (the first building of its kind in Bucharest) and top of the range high efficiency M&E systems.

On the letting side, we have pre-let c.37.5% of the property after having signed a lease agreement with Vodafone for c.16,000 square metres for a 10 year period and Huawei for 2,500 square metres for a 5 year period.

On the debt financing side, we have agreed terms with a major European financial institution for €50 million development facility, which we expect to sign within Q2 2014.

Upground Towers - Residential & Retail (Completed)
Description	·      "Upground Towers" is a modern residential complex located in the Northern part of Bucharest on Fabrica de Glucoza Street. It was completed in 2009 and comprises two buildings with a total GBA of 101,354 sqm. In total, Upground Towers comprises of 571 residential units of which GWI currently owns 446. In addition, GWI owns 25 retail units and 618 parking spaces in the complex.
Location	·      North Bucharest
Completion Year	·      2011
GBA /GLA (square metres)	·      67,457 / 59,871 (of which c.6,555 is retail space)
Parking spaces indoor/outdoor	·      563 / 55
OMV as of December 31, 2013	·      €108.8 million
Acquisition Cost	·      €58.0 million
Development Cost	·      -
LTV "As Is" / "On Completion"	·      37.7 per cent
Occupancy	·      Retail: 97.3%, Residential: c.51.1%
Annualised NOI Contracted/Stabilised17	·      €2.8/€5.4 million
Average rent per  square metre per month	·      Retail: 10.3 €/sqm
Weighted Average Lease Expiry	·      Retail: 9.5 years / Residential: 1 year
Stabilised Yield	·      9.3 per cent
Strategy	·      Lease/sale residential component and hold retail component
Key tenants	·      M. Image, World Class, Geta Voinea, Huawei, Subway

¹⁷ Stabilised NOI; represents the Company’s expectation of the NOI of that asset when it is built (if applicable) and fully let (and after any rent-free period)

Debt Financing

The table below summarises the key features of the group's bank debt facilities

Asset /         Company Name	Lender	Base Rate	Margin (%)	Outstanding amount (21/03/2014) in €	Undrawn amount (21/03/2014) in €	Maturity Date
BOB	National Bank of Greece	3M Euribor	3.20	17,485,438	-	Dec. 2018
	Bank of Cyprus	3M Euribor	3.20	17,485,438	-	Dec. 2018
BOC	National Bank of Greece	3M Euribor	3.20	42,655,184	-	Dec. 2018
	Bank of Cyprus	3M Euribor	3.20	42,655,184	-	Dec. 2018
GAM	Marfin Bank	3M Euribor	6.00	2,963,000	-	May 2014
	Unicredit	3M Euribor	3.00	1,888,500	-	Nov. 2014
	Bancpost (Eurobank)	3M Euribor	6.25	14,094,360	2,405,640	Mar. 2019
	Bancpost (Eurobank)	3M Euribor	6.25	-	8,000,000	Mar. 2019
	Bancpost (Eurobank)	3M ROBOR	1.95	264,258	735,742	Nov. 2014
Upground	National Bank of Greece	3M Euribor	4.75	38,000,000	-	Dec. 2016
Floreasca One	Piraeus Bank	3M Euribor	7.00	138,666	2,861,334	Dec. 2015
	Piraeus Bank	3M ROBOR	6.00	32,840	367,160	June 2015
TCI	UBS	6M Euribor	4.00	32,072,493	-	Aug. 2014
Globalworth Cyprus Holdings	UBS	6M Euribor	14.85	32,927,507	-	Aug. 2014

As of March 21, 2014, Globalworth had €242.7 million of outstanding bank borrowings and €14.6 million of undrawn facilities. 

Loan to Value was 49.9 per cent as of March 21, 2014. 

The weighted average cost of Globalworth's debt is 5.66 per cent with a weighted average maturity of 3.1 years.  These statistics, however, are skewed by the high cost and short term nature of the recently concluded UBS facility, which made possible the acquisition of BOB, BOC and TCI.  It is anticipated that this facility will be repaid in a few months.

Dimitris Raptis

Deputy CEO and Chief Investment Officer

24 March 2014

 

END

 

 

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