THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
24 March 2023
Globalworth Real Estate Investments Limited
("Globalworth" or the "Company")
Audited Results for the year ended 31 December 2022,
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 3 March 2023 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 2022 ("2022 Annual Report").
Key Highlights for the year ended 31 December 2022
· Total combined portfolio value remained effectively unchanged at €3.2 billion (0.2% higher compared to 31 December 2021).
o Combined standing commercial properties at year-end were appraised at €2.9 billion. Like-for-like properties marginally lower at €2.8 billion (1.3% decrease compared to 31 December 2021), with new facilities acquired or completed in 2022 adding €75.5 million in standing commercial portfolio value.
· Focused development program in select high-quality projects.
o Romania; delivered 6 new logistics facilities offering 104.4k sqm of GLA, with 3 logistics facilities under development which are expected to have a total GLA of 30.0k sqm.
o Poland; two mixed-use properties under refurbishment/repositioning.
· Acquired the first small business units logistic facility in Romania (Bucharest), with a total area of 7.1k sqm.
· Overall standing portfolio footprint net increase of 103.3k sqm (+7.9% compared to 31 December 2021) to 1.4m sqm of GLA in 71 standing properties.
· Leasing transactions of 206.9k sqm of commercial space at an average WALL of 4.4 years, despite continued challenging market conditions.
· Average standing occupancy of 85.6% (85.9% including tenant options), 2.9% lower compared to 31 December 2021.
o Addition of 7 properties with an average occupancy of 54.2%, some of which are in the lease-up phase, negatively impacted the overall combined standing occupancy.
o Like-for-like standing occupancy adjusted for Warta Tower in Warsaw (property held for sale and now effectively vacant), of 90.5% (+0.2% compared to 31 December 2021).
· Total annualised contracted rent up by 3.0% to €189.2m
o Like-for-like annualised commercial contracted rents in our standing commercial portfolio increased by 1.7% to €177.5 million at the end of 2022, mainly as effect of rent indexation.
· Rate of collections invoiced and due remained high at 99.0% for 2022.
· Net Operating Income ("NOI") was lower by 3.2% compared to 2021 at €139.7 million.
· EPRA earnings increased by 21.2% to €71.6 million (2021: €59.1 million), as prior year EPRA earnings were impacted by the exceptional one-off costs associated with the cash offer for Globalworth's shares initiated in May 2021.
· Adjusted normalised EBITDA decreased by 3.2% to €126.0 million (2021: €130.2 million), due to lower NOI, partially offset by the positive impact of the lower recurring administrative and other non-operating expenses.
· Net loss of €16.1 million (2021: net profit of €47.5 million) due to revaluation losses of €89.5 million in 2022 compared to the €5.7 million revaluation losses in 2021.
· Cash dividend paid to shareholders of €0.27 per share in 2022.
· Preliminary EPRA Net Reinstatement Value (NRV) of €1.8 billion, or €8.29 per share, decreasing from €8.66 at 31 December 2021 mainly due to revaluation losses on the property portfolio.
· High liquidity of €163.8 million (vs €418.7 million at 2021 year-end) plus available liquidity from committed undrawn facilities of €300 million; LTV 42.7% at 31 December 2022 (vs 40.1% at 2021 year-end).
· Sustainability:
o €2.6 billion in 53 green certified properties.
o 45 properties were certified or recertified with BREEAM Very Good or higher certifications during the year.
o Committed to reduce our carbon footprint based on a science-based approach to align with a 1.5oC trajectory.
o Issued the third sustainable development report and our second Green Bond Report.
o Maintained low-risk rating by Sustainalytics and our MSCI rating to "A".
o Contributed to over 25 social initiatives in Romania and Poland.
Availability of 2022 Annual Report and Notice of AGM
The 2022 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 19 June 2023 at 10.00am British Summer Time at Anson Court, La Route des Camps, St Martin, Guernsey GY4 6AD. The notice of this year's AGM will be included in a separate circular to shareholders, will be issued to shareholders and notified via RNS at least 10 clear days before the meeting, and 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 Tel: +40 732 800 000
Chief Financial Officer
Panmure Gordon (Nominated Adviser and Broker) Tel: +44 20 7886 2500
Dominic Morley
About Globalworth / Note to Editors:
Globalworth is a listed real estate company active in Central and Eastern Europe, quoted on the AIM-segment of the London Stock Exchange. It has become the pre-eminent office investor in the CEE real estate market through its market-leading positions both in Poland and Romania. Globalworth acquires, develops and directly manages high-quality office and industrial real estate assets in prime locations, generating rental income from high quality tenants from around the globe. Managed by over 260 professionals across Cyprus, Guernsey, Poland and Romania, a combined value of its portfolio is €3.2 billion, as at 31 December 2022. Approximately 96.4% of the portfolio is in income-producing assets, predominately in the office sector, and leased to a diversified array of over 690 national and multinational corporates. In Poland Globalworth is present in Warsaw, Wroclaw, Lodz, Krakow, Gdansk and Katowice, while in Romania its assets span Bucharest, Timisoara, Constanta, Pitesti, Arad, Oradea and Targu Mures.
For more information, please visit www.globalworth.com and follow us on Facebook, Instagram and LinkedIn.
CEO Statement
Adapting our strategy to tumultuous macro and property markets
"At Globalworth we focus on providing our business partners with high- quality spaces in Poland and Romania that are sustainable, technologically advanced, and tailored to their unique needs. Our premium spaces and services are geared towards ensuring the success of our tenants' and our business.
Dennis Selinas
Chief Executive Officer
Dear Stakeholders,
As we move forward, we remain committed to improving our services and providing a platform for growth that is sustainable and at the forefront of building technology. At Globalworth, we strive to offer our business partners and their employees the best possible experience, and we are proud to be a trusted partner for their ongoing success.
Navigating Our Business Through Challenging Market Conditions
The year 2022 began with a sense of hope that, after two years of the COVID-19 pandemic, the world was ready to start returning to normality. However, fresh challenges soon surfaced, largely linked to macroeconomic/geopolitical risks and the war in Ukraine. These hurdles have given rise to supply chain disturbances, hikes in fossil fuel prices, increased costs for transportation and construction materials, and higher levels of inflation and interest rates, which have put a strain on consumer incomes and businesses. As a result, the outlook for everyone has become more uncertain.
As a result, the economic outlook in our regions has been revised, with slower growth predictions for 2022 and beyond than had been previously anticipated. However, a recession in the Eurozone is not currently expected. Another positive note is that inflation appears to be gradually returning to more normalised levels over the next 18-24 months.
Amidst these challenging circumstances, Globalworth's performance demonstrated remarkable resilience, as we adhered to our steadfast commitment to the "local landlord" approach to managing our business. This involved undertaking a series of carefully calibrated initiatives including:
· Strategic investments in existing and new high-quality properties
· Managing our portfolio to preserve and enhance operational performance
· Maintaining a flexible capital structure that can adapt to evolving market conditions
At the core of all our endeavours was an unwavering commitment to providing a safe and healthy environment that nurtured both work and leisure for our tenants and for our communities.
We are confident that the extensive work carried out by our team throughout 2022, while not fully reflected in this year's financial results, has served to consolidate our position as the pre-eminent landlord in our home markets of Poland and Romania and will set us to a trajectory towards even greater performance as the markets gradually return to a more normalised state in the future.
At this juncture, and despite my relatively short tenure at Globalworth, I would like to extend my sincere gratitude to all of our team members for their resolute and optimistic attitude, unwavering commitment and efficiency, as well as our shareholders, partners and communities for their steadfast support, all of which have enabled us to achieve results of which we can be rightfully proud.
Evolving Real Estate Portfolio
Our portfolio predominantly comprises Class "A" offices. Nonetheless, following the delivery of our Class "A" Globalworth Square office and in response to changing market dynamics, we have in the past 12 months shifted our development focus towards high-quality logistics facilities in Romania as well as the ambitious redevelopment of two mixed-use properties in Poland.
Throughout the course of 2022, we successfully completed the construction of six logistics facilities, which collectively encompassed 104.4k sqm of GLA. Five of these facilities represent subsequent phases of development within existing established projects which are owned directly by us, or through JV partnerships.
In addition, we also established a new strategic partnership with an experienced local developer with the aim of investing in the lucrative "small business units" segment of the logistics and warehouse facilities market in Romania. Under this partnership, in which we hold a controlling majority (75%) stake, we acquired our first small-business-units project (standing) in the north-western part of Bucharest, and we are in the process of developing a second project which is executed in phases and is located in the north-eastern part of the capital city.
As of 31 December 2022, Globalworth's high-quality combined standing portfolio reached a total of 1.4m sqm. The Company anticipates continued growth in 2023, with the finalisation of two mixed-use properties in Poland and two industrial facilities in Romania, adding another 104.9k sqm of GLA.
Globalworth's investment programme has also included investment in existing properties aimed at preserving and enhancing their value, generating long-term income and offering best-in-class real estate space to our business partners. As a result, the Company continues to (re)invest in all of its properties, improving the quality of our buildings and services across the board.
Overall, the addition of new properties to Globalworth's standing portfolio has resulted in a combined portfolio value of €3.2 billion as at 31 December 2022, representing a +0.2% increase compared to the end of 2021.
Our Leasing and Occupancy
The ability to lease spaces within our portfolio is a critical factor in both our short- and long-term success. In 2022, despite the persistently challenging market conditions, we were able to successfully negotiate the take-up or extension of 206.9k sqm of commercial space, within an average WALL of 4.4 years. It is worth noting that the majority (52.4% by GLA) of our leasing activity involved new take-up of available spaces.
As at 31 December 2022, the standing occupancy of our combined commercial portfolio was 85.6% (85.9% including tenant options), representing a 2.9% decrease from the previous 12 months. However, this decline can be primarily attributed to the addition of several new properties in our portfolio, most of which are in their lease-up phase, and Warta Tower in Warsaw which is now effectively vacant and is being sold.
· Like-for-like standing occupancy of our combined commercial portfolio adjusted for Warta Tower was 90.5% (+0.2% compared to 31 December 2021).
Despite the uncertainty in the market and the cautious approach of tenants, headline market rental levels across our portfolio remained relatively stable. We attribute this to the quality of our properties, our active asset management initiatives, and our commitment to sustainable development.
The total annualised contracted rent of our combined portfolio increased by 3.0% to €189.2 million, compared to year-end 2021, with like-for-like annualised commercial contracted rents in our combined standing commercial portfolio increasing by 1.7% to €177.5 million.
It is noteworthy that most of our tenants are large multinational or national corporations and their operations within our portfolio had no significant exposure to Ukraine or Russia. Therefore, our business has not been directly impacted by the war. Nevertheless, it is important to recognise that no business is entirely immune to the war's effects on the macro economy through its impact on inflation and interest rate transmission mechanisms.
In both Poland and Romania, the COVID-19 pandemic has resulted in increased construction costs and reduced office development activity thereby limiting new supply. We anticipate that this will result in fewer new, high-quality offices being available for lease in central locations over the next few years.
Furthermore, the disparity between A-grade properties with robust ESG credentials and B-grade properties has been growing from both an investment and a leasing perspective. This trend is expected to work in favour of our portfolio of high-quality properties in the future.
Given these factors, and the quality of our services and properties, we are confident that we will be able to lease the available spaces in our portfolio in due course.
However, it is important to note that competition between landlords for high-quality tenants remains intense, particularly in regional cities in Poland. This is likely to impact the level of effective rents achieved or attainable in the market and in our portfolio.
Our Financial Results
In a year fraught with numerous challenges, our unwavering operational focus and business expansion have been partly reflected in our annual results.
Despite market conditions, our rental income for the year remained virtually unchanged compared to the previous year. The positive effect of our operating initiatives and the addition of new standing properties were counterbalanced by relatively higher amortisation expenses in 2022, active leases and fluctuations in occupancy.
Moreover, our Net Operating Income and EBITDA decreased by 3.2% annually. This decline was due to an increase in the cost of non-recoverable service charges (including the impact of Warta Tower being effectively empty during the year) and property operating costs covered by the Group as part of our ESG commitment for spaces used in response to the Ukrainian refugee crisis.
Over the past 12 months, property values in our markets have come under pressure, due to the challenging macroeconomic and geopolitical environment. Furthermore, a combination of operating performance, expanding yields, higher discount rates and capex invested in our portfolio, which are fully reflected in valuations and operations, contributed to negative revaluations of €89.5 million in our consolidated portfolio as of 31 December 2022.
As a result, the Group recorded a net loss for the year of €16.1 million (2021: €47.5 million gain). It is worth noting, however, excluding the impact of revaluation and exceptional items, our net profit would be €72.9 million.
Dividend
Throughout the year, we disbursed two interim dividends, one in relation to the 2021 financial year and the first interim dividend of 2022, amounting to €0.13 per share and €0.14 per share respectively. In summary, dividends paid to our shareholders during 2022 totalled €0.27 per share or €59.8 million. Both dividends were at least 90% of the EPRA Earnings for their corresponding half-year periods, as stipulated by our Articles of Incorporation.
Balance Sheet
Ensuring ample liquidity has always been a key area of focus for us, and we are pleased to report that during the year, we were able to repay the remaining €323 million of Globalworth's inaugural €550 million bond, which had been due to mature in June 2022. As a result, Globalworth has no material debt maturing until March 2025.
Additionally, we secured new financings for a total of €266 million during the year, with the most noteworthy being:
· the six-year term loan agreement for €85 million with the International Finance Corporation , which is a member of the World Bank; and
· the €160 million for two new facilities (secured and unsecured) signed with the Erste Group (undrawn at the end of 2022)
In the context of negative revaluations and recently completed or ongoing projects, which have yet to fully realise their value uplift, our LTV increased from 40.1% to 42.7% at year-end. Furthermore, our EPRA Net Reinstatement Value (NRV) at the end of the period was €1.8 billion, or €8.29 per share, representing a 4.3% decline from €8.66 on 31 December 2021, mainly due to dividends paid that offset operating performance and negative revaluations.
Despite these developments, we maintained a flexible liquidity position at year-end, with €164 million in cash and cash equivalents, and a further €300 million in undrawn debt facilities. Moreover, we maintained an investment grade rating from all three rating agencies in the 2022 review. However, the outlook was updated to negative, reflecting a higher interest-rate environment, deteriorating real estate market conditions, future refinancing considerations and a more negative outlook of rating agencies towards the real estate sector. In March 2023 S&P updated their rating to BB+ (stable outlook).
Sustainable Development
Our strategy for sustainable development revolves around the fundamental tenets of "People, Places and Technology". We are committed to delivering environmentally sound, safe buildings that cater to our occupiers' requirements while ensuring that we continue to make positive contributions to the communities we serve.
To that end, in 2022, we have accepted the challenge of proactively managing the consumption and associated carbon emissions produced during the construction and operation of our properties. This effort is aimed at further reducing our carbon footprint throughout the value chain, from areas within our control to those under the purview of our tenants.
Our environmental target is to reduce GHG emissions intensity by +40% by 2030 compared to our 2019 baseline levels (for Scope 1 and 2) and to commit to measuring and reducing Scope 3 emissions.
We also certified or recertified 45 of our properties during the year, with our green portfolio comprising 53 environmentally friendly properties valued at €2.6 billion. I am delighted that 89.8% of our standing commercial portfolio has been awarded high-level green certifications. Moreover, all of the offices within our portfolio have received the WELL Health-Safety Rating, and several other properties have received additional certifications.
However, sustainable development is not merely restricted to green buildings. Our comprehensive approach to ESG was further acknowledged by Sustainalytics where our "Low Risk" rating improved to 13.9 (compared to 14.8 last year and 16.0 two years ago) and MSCI, where we maintained our "A" rating.
Additionally, we continued to support our communities, where we supported over 15 initiatives in Romania and Poland.
Management Changes
In 2022, there was a change in executive leadership, wherein Mr D. Raptis and Mr A. Papadopoulos relinquished their roles as CEO and CFO respectively. Subsequently, Mr S. Sapkas and myself assumed these positions. I would like to express my utmost appreciation to the departing individuals for their invaluable contributions to the trajectory of Globalworth. As previously communicated upon my appointment, I am eagerly anticipating the prospect of progressive expansion, pioneering asset management innovation and an unwavering commitment to improving our tenants' experiences, all while delivering optimal returns to our esteemed shareholders.
Outlook
In 2023, we anticipate that macroeconomic developments, specifically the trajectory of inflation and the response of central banks, will have the most significant impact on the performance of the real estate market. Despite the prevailing market uncertainty, our Company remains steadfast in its focus on liquidity initiatives, which provide us with the resources we need to seize emerging opportunities.
Our unwavering commitment to providing sustainable office space that is highly appealing to the employees of our tenants, and adheres to the strictest environmental standards, continues to be a top priority. We are confident that this commitment, combined with the flexibility we offer our clients, will enable us to maintain robust leasing activities in 2023, irrespective of any challenges posed by the market's fluctuating conditions.
In conclusion, I have complete faith in the resilience of Globalworth in the face of market turbulence, and I believe that our prospects are bright. Our focus on liquidity and sustainability, coupled with the flexibility we offer our clients, positions us well to navigate any challenges that may arise and to continue to thrive. We look forward to the opportunities that the future holds, and we are eager to achieve greater success in the coming years.
Dennis Selinas
23 March 2023
"At Globalworth, we strive to offer our business partners and their employees the best possible experience, and we are proud to be a trusted partner for their ongoing success."
Standing Portfolio Review
We operate best-in-class real estate spaces in Poland and Romania
Our high-quality standing portfolio grew by 103.3k sqm to 1.4m sqm, valued at €2.9 billion at year-end 2022.
We provide our business partners with high-quality spaces in some of the most important real estate markets in Poland and Romania, that are sustainable, technologically advanced, and custom fitted to their requirements, offering premium services to allow the businesses to succeed.
By effectively managing our real estate portfolio, we aim to offer our investors an efficient gateway to the two largest markets in Central and Eastern Europe.
Increased Our Footprint to 1.4m sqm
In 2022, our combined portfolio of standing properties grew by 103.3k sqm with the addition of seven logistics facilities in Romania. Four facilities are in Bucharest, including our first small business units facility acquired in April, and three in regional cities of Romania (Pitesti, Constanta and Timisoara).
Overall, our standing portfolio predominantly comprises 30 Class "A" offices (50 properties in total) and a mixed-use investment (with five properties in total) in central locations in Bucharest (Romania), Warsaw (Poland) and five of the largest office markets/cities in Poland (Krakow, Wroclaw, Katowice, Gdansk
and Lodz), which in total account for 89.4% of our standing portfolio by value.
· During the year, the size of our office and mixed-use portfolio remained unchanged; however, we expect it to grow in 2023 following the completion of the repositioning/redevelopment of two mixed-used properties in Poland.
In addition, in Romania, we fully own two logistics/light-industrial parks with six facilities in Timisoara, one industrial park in Pitesti (two facilities), two modern warehouses in Arad and Oradea, and, since earlier this year, we also own the majority stake (75% ownership) in a small business units facility and another warehouse (delivered in November), both in the Bucharest area. We have 50% ownership through a joint venture of two other logistics/business parks (with three standing facilities) in Bucharest and Constanta. We also own part of a residential complex in Bucharest.
During the year, our standing commercial portfolio's total GLA increased 8.7% to reach 1,383.2k sqm at the end of December 2022 whilst our overall standing portfolio (commercial and other) increased in GLA by 7.9% to 1,405.6k sqm due to the sale of residential units in our Upground residential project.
Standing Portfolio Value at €2.9 billion
The appraised value of our combined standing portfolio as of 31 December 2022 was €2.9 billion (+1.4% in commercial properties). This overall increase is mainly attributable to the addition of new properties through acquisition and completion, partly offset by relatively small revaluation losses of properties held throughout the period (like-for-like) and by the sale of certain units in our Upground residential complex.
The value of like-for-like standing commercial properties decreased by 1.3% as of 31 December 2022 compared to the prior year, as the reduction in value by 1.7% of our like-for-like standing office and mixed-use properties was offset by the increase in value of our industrial properties.
| Globalworth Combined Standing Portfolio: 2022 Evolution | |
| GAV - 31 December 2021 | €2,866.3m |
| Like for Like Change* | -€34.6m |
| Acquisitions of Properties | +€7.2m |
| Delivery of Properties | +€68.3m |
| Sales | -€13.7m |
| GAV - 31 December 2022 | €2,893.6m |
* Like-for-Like change represents the changes in GAV of standing properties owned by the Group at 31 December 2021 and 31 December 2022.
| Globalworth Combined Standing Portfolio: 2022 Evolution | |
| Total Standing YE 2021 | 1,302.3k sqm |
| of which Standing Commercial YE 2021 | 1,272.0k sqm |
| Pitesti Industrial Park (Phase II) / logistics facility developed in Pitesti (RO) | +6.7k sqm |
| Chitila Logistics Hub (Phase B & C) / logistics facilities developed in Bucharest (RO) | +54.4k sqm |
| Constanta Business Park (Phase B) / logistics facility developed in Constanta (RO) | +19.8k sqm |
| Timisoara Industrial Park II (Phase B) / logistics facility developed in Timisoara (RO) | +19.0k sqm |
| Business Park Stefanesti (Phase A) / logistics facility developed in Bucharest (RO) | +4.4k sqm |
| Business Park Chitila / logistics and warehouse facilities acquired in Bucharest (RO) | +7.1k sqm |
| Net Remeasurement Adjustments & Other (RO & PL) | -0.2k sqm |
| Standing Commercial YE 2022 | 1,383.2k sqm |
| Upground / residential complex in Bucharest (RO)* | 22.4k sqm |
| Total Standing YE 2022 | 1,405.6k sqm |
* In 2022, units with 7.9k GLA were sold in our Upground residential complex.
Like-for-Like Occupancy Marginally Changed in 2022
Our standing commercial portfolio's average occupancy as of 31 December 2022 was 85.6% (86.0% including tenant options), representing a 2.9% decrease over the previous 12 months (88.5% as of 31 December 2021 / 88.7% including tenant options).
This decrease is mainly attributable to the addition of seven industrial properties (six deliveries and one acquisition), the majority of which are in their lease-up phase and, consequently, at year-end had occupancy lower than the Group average, thus negatively impacting the overall average standing commercial occupancy rate across our portfolio. These facilities have a total GLA of 111.5k sqm and on 31 December 2022 were 54.2% occupied.
On a like-for-like basis, occupancy marginally decreased by 0.2% to 88.4% at the end of the year, mainly due to the expiration of certain ESG leases during the year (from our efforts to help in the Ukrainian refugee crisis) and Warta Tower in Warsaw now being effectively empty.
Like-for-like standing occupancy of our portfolio, adjusted for Warta Tower which was in the process of being sold at year-end, was 90.5% (+0.2% compared to 31 December 2021). We see this relative stagnation as a changing point under normalising market conditions. Therefore, we remain confident that we will be able to lease the available spaces in our portfolio in the future as business conditions return to a more balanced state.
Across our standing portfolio, at 31 December 2022, we had 1,184.6k sqm of commercial GLA leased to more than 600 tenants at an average WALL of 4.4 years, the majority of which is let to national and multinational corporates that are well-known within their respective markets.
Not included in our standing portfolio metrics are: 44.3k sqm leased in our two mixed-use properties which are currently under refurbishment/repositioning, and 4.8k sqm in our industrial properties which are under development in Romania (Bucharest and Targu Mures).
| Occupancy Evolution 2022 (GLA k sqm) - Commercial Portfolio | ||||||
|
| Poland | Occupancy Rate (%) | Romania | Occupancy Rate (%) | Group | Occupancy Rate (%) |
| Standing Available GLA - 31 Dec. 21 | 542.1 |
| 729.9 |
| 1,272.0 |
|
| Acquired GLA | - |
| 7.1 |
| 7.1 |
|
| New Built GLA | - |
| 104.4 |
| 104.4 |
|
| Remeasurements, reclassifications | 0.0 |
| (0.3) |
| (0.2) |
|
| Standing Available GLA - 31 Dec. 22 | 542.1 |
| 841.0 |
| 1,383.2 |
|
| Occupied Standing GLA - 31 Dec. 21 | 464.1 | 85.6% | 662.1 | 90.7% | 1,126.2 | 88.5% |
| Acquired/Developed Occupied GLA | - |
| 60.4 |
| 60.4 |
|
| Expiries & Breaks | (56.8) |
| (19.7) |
| (76.5) |
|
| Renewals* | 42.7 |
| 47.8 |
| 90.5 |
|
| New Take-up | 32.7 |
| 40.9 |
| 73.5 |
|
| Other Adj. (relocations, remeasurements, etc) | 0.6 |
| 0.0 |
| 0.6 |
|
| Occupied Standing GLA - 31 Dec. 22 | 440.6 | 81.3% | 743.7 | 88.4% | 1,184.3 | 85.6% |
Standing Portfolio Snapshot
As of 31 December 2022, our combined standing portfolio comprised 41 investments (39 on 31 December 2021) with 71 buildings (66 on 31 December 2021) in Poland and Romania. The appraised value of the portfolio was €2,893.6 million, of which 88.4% was environmentally certified.
| Globalworth Combined Portfolio: Key Metrics | |||
| Total Standing Properties | 30 Dec. 2020 | 31 Dec. 2021 | 31 Dec. 2022 |
| Number of Investments | 37 | 39 | 41 |
| Number of Assets | 64 | 66 | 711 |
| GLA (k sqm) | 1,271.3 | 1,302.3 | 1,405.6 |
| GAV (€ m) | 2,805.5 | 2,866.3 | 2,893.6 |
| Contracted Rent (€ m) | 178.7 | 175.4 | 182.1 |
| Of which Commercial Properties | 30 Dec. 2020 | 31 Dec. 2021 | 31 Dec. 2022 |
| Number of Investments | 36 | 38 | 40 |
| Number of Assets | 63 | 65 | 70 |
| GLA (k sqm) | 1,238.9 | 1,272.0 | 1,383.2 |
| GAV (€ m) | 2,745.9 | 2,810.3 | 2,850.3 |
| Occupancy (%) | 90.9% (91.7%2) | 88.5% (88.7%2) | 85.6% (86.0%2) |
| Contracted Rent (€ m) | 177.7 | 174.5 | 181.3 |
| Potential Rent at 100% occupancy (€ m) | 199.2 | 201.2 | 211.4 |
| WALL (years) | 4.5 | 4.7 | 4.4 |
1 Following the completion of the third phase of the Chitila Logistics Hub, we have consolidated the three phases in one facility.
2 Including tenant options.
Our awards:
Poland
Golden Award - Marketing Event of the Year - Hala Koszyki
Investment of the Year - Retail Space Market - Renoma
Golden Award - The Best Food Hall in Poland - Hala Koszyki
Golden Award - PR & Employer Branding
Best Interior Concept for Uniqa Polska in WTT
Romania
Best Technology Driven Office Building award at the "The Readers' Choice Realty Awards" gala - Globalworth Square
Office Developer of the Year award at the Real Estate Gala
Logistics Project of the Year at SEE Property Forum 2022 - Chitila Logistics Hub
Best Green Development of The Year at CIJ Awards gala - Globalworth Square
Forbes Best Office Buildings - The New Way of Working Gala - Globalworth Square.
Portfolio Development / Evolution
Investment activity principally focused on developing and repositioning of 178.6k high-quality GLA in Romania and Poland
"In 2022, we continued with our active investment programme focusing on high-quality logistics/light-industrial facilities in Romania and the refurbishment/repositioning of two mixed-use properties in Poland, investing over €52.2 million in their acquisition and development during the year.
Dimitris Pergamalis
Group Head Globalworth Workplaces
Investment in Industrial Properties
Tenant demand for industrial properties, specifically for warehouses, logistics and light-industrial buildings, has significantly accelerated in recent years, supported by strong demand for e-commerce and last-mile logistics.
In this market segment, we have been growing our footprint, especially since the COVID-19 pandemic outbreak, where we have added over 180k sqm of high-quality real estate spaces to our portfolio, most of which we developed ourselves and the remainder added through select acquisitions.
Review of New Acquisitions
In April 2022, we formed a new strategic partnership with CATTED focusing on the "small business units" segment in logistics and warehouse facilities in Romania. As part of this partnership in which we own a majority (75%) stake, we acquired our first small business units project in the north-western part of Bucharest, close to our Chitila Logistics Hub. The project, developed by CATTED, has been rebranded as "Business Park Chitila" and comprises 13 small units, offering 7.1k sqm of GLA and was 98.2% occupied on 31 December 2022.
We also acquired a 45k sqm land plot in the north-eastern part of Bucharest (Stefanesti) where, together with CATTED, we are currently constructing "Business Park Stefanesti", also focused on small business units.
In addition, and to facilitate further the success and development of future phases of the Constanta Business Park project, we acquired a 34.5k sqm plot to secure a future railroad connection for the entire park.
Review of Developments
In 2022, we continued developing high-quality logistics/light-industrial facilities in Romania. At the beginning of the year, we had five logistics facilities under construction (98.9k sqm). In addition, we commenced the construction of four other facilities with 34.4k sqm of GLA during the year.
The new facilities we commenced construction on in 2022 included:
· our first development of small business units facilities (three phases) in the north-eastern part of Bucharest, and
· the first phase of the Mures City Logistics in the central northern part of Romania.
Business Park Stefanesti, located in the north-eastern part of Bucharest, offers easy access to the Bucharest ring road and allows for a quick connection to the centre of Bucharest via the A2 motorway. The location is considered very advantageous for housing small business units. The project comprises three buildings to be delivered in phases with a total of 17.7k sqm GLA, offering up to 24 units for rent, ranging from 500 to 1,500 sqm. As of 31 December 2022, the first building was already delivered and fully let to Delivery Solutions SRL.
Mures City Logistics, located in the central northern part of Romania, involves the development of a new facility which, on completion, will offer 16.7k sqm of high-quality space. Targu Mures is the seventh Romanian region we have invested in, and we elected to expand in this sub-market due to its strategic location and connectivity. The project is being developed with a joint venture partner, and we own a 50% interest in the venture. As of 31 December 2022, the facility was partially pre-let to Friesland Campina, a multinational holding the leading position in dairy products in Romania, on a +10 years contract.
Projects Delivered
We delivered six new logistics facilities offering 104.4k sqm of GLA. All facilities represented subsequent phases of development in existing established projects which we directly own or through JV partnerships.
These new facilities are in Bucharest (58.8k) and three regional locations, in Timisoara (19.0k sqm), Pitesti (6.7k sqm), and Constanta (19.8k sqm).
In Bucharest, deliveries were dominated by the completion of the second and third (final) phase of the Chitila Logistics Hub, which now offers in total 77.8k sqm of high-quality last-mile logistics spaces close to the Bucharest ring road, providing easy access to the capital. The first phase was delivered in Q3-2020 and is 100.0% occupied, with the second and third phases delivered in Q1 and Q3-2022, respectively and 90.7% and 23.8% occupied.
At the end of December 2022, the six facilities, some of which are in their lease-up phase, were 51.2% contracted by multinational or large national tenants like HAVI Logistics, Caroli, Linde, Phylosophy Design and Delivery Solutions. They had a total annualised contracted rent of €3.2 million at an average WALL of 7.5 years. Total annualised rent could increase to €5.7 million at full occupancy.
Developments in Progress
We currently have two projects under construction expected to be completed in the first half of 2023, further expanding our industrial footprint by 30.0k sqm of high-quality GLA and at full occupancy are expected to generate €2.4 million of annualised rent.
| | Developments - Delivered | Developments - Under Construction | |||||
|
| Pitesti Industrial Park (Phase II) | Chitila Logistics Hub (Phases B and C)* | Constanta Business Park (Phase B)* | Timisoara Industrial Park II (Phase B) | Business Park Stefanesti (Phase A) | Business Park Stefanesti2 | Mures City Logistics1 |
| Location | Pitesti | Bucharest | Constanta | Timisoara | Bucharest | Bucharest | Tg. Mures |
| GLA (k sqm) | 6.7 | 54.4 | 19.8 | 19.0 | 4.4 | 13.2 | 16.7 |
| Occupancy (%) | 100.0% | 43.9% | 86.7% | 6.1% | 100.0% | 4.4% | 25.2% |
| Development Cost (€ m) / Estimated CAPEX to Go | 5.9 | 28.3 | 9.4 | 8.3 | 3.0 | 9.4 / 1.5 | 11.6 / 1.9 |
| GAV (€ m) | 7.7 | 32.4 | 13.3 | 10.9 | 4.0 | 8.5 | 8.4 |
| Contracted Rent (€ m) | 0.6 | 1.2 | 1.1 | 0.1 | 0.3 | 0.0 | 0.4 |
| 100% Rent (€ m) | 0.6 | 2.7 | 1.2 | 0.9 | 0.3 | 0.9 | 1.1 |
| Estimated Yield on Development Cost | 9.6% | 9.6% | 13.1% | 11.0% | 9.6% | 9.7% | 9.3% |
* Joint venture in which Globalworth owns 50%; figures shown on 100% basis.
1 50:50 joint venture; figures shown on 100% basis.
2 75% owned by Globalworth; figures shown on 100% basis.
Refurbishment/Repositioning of Mixed-Use Properties
Following the review back in 2020 of our portfolio and in response to market conditions, we commenced refurbishing/repositioning two of our three mixed-use properties in Poland. Aiming to increase their Class "A" office space and improve their retail/commercial offering, work started at our Renoma landmark property in Wroclaw in H2-2020 and our centrally located Supersam property in Katowice in H2-2021.
· At Renoma, the refurbishment will increase the offer of Class "A" office space on the higher floors. It will also reposition the property's retail offer towards a more attractive food court and a selected fashion mix on the ground floor and convenience facilities, including a supermarket, gym and drugstore located on the -1 level.
· At Supersam, we are redeveloping the entire level 1 into an office function. On level -1, we are repositioning selected retail modules into high-quality retail and commercial spaces with food and entertainment.
In 2022 we invested €12.6 million in the two properties, and we expect to deliver the properties within 2023.
Ongoing Investment & Upgrade Programme of Our Standing Properties
Offering best-in-class real estate space to our business partners is a key component of our strategy at Globalworth.
We believe that through a "hands-on" approach with continuous active management and investment in our portfolio, we can preserve and enhance the value of our properties, generate long-term income and offer best-in-class real estate space to our business partners.
To be able to provide spaces for our current and future business partners' requirements, we keep (re)investing in our properties, maintaining and, where required, improving the quality of our buildings and our services.
We manage all our properties in Poland internally, and in Romania, we manage all but one of our offices in-house. This translates to 968.2k sqm of high-quality office and mixed-use space with an appraised value of €2.5 billion internally managed by our team.
Our Upgrade Programme has resumed at a more normalised pace since last year, following its scaling back for part of 2020 due to COVID-19. In 2022, we invested €35.2 million in select improvement initiatives in our standing commercial portfolio. As a result of our ongoing in-house initiatives and property additions, we hold a modern portfolio with 53 of our standing commercial properties, accounting for 77.1% by GLA and 76.2% by commercial portfolio value, having been delivered or significantly refurbished in or after 2014.
Also, in Q3-2022, we chose Honeywell Forge to help us lower maintenance costs and reduce energy consumption in our portfolio.
| | Properties Under Refurbishment/Repositioning | |
| | Renoma | Supersam |
| Location | Wroclaw | Katowice |
| Status | Refurbishment/ Repositioning | Refurbishment/ Repositioning |
| Expected Delivery | Q2/Q3-2023 | H1-2023 |
| GLA - on Completion (k sqm) | 48.2 | 26.6 |
| CAPEX to 31 Dec 22 (€ m) | 14.6 | 3.4 |
| GAV (€ m) | 108.0 | 44.4 |
| Estimated Capex to Go (€ m)* | 12.1 | 2.7 |
| ERV (€ m) | 9.8 | 4.2 |
| Estimated Yield on Completion of Project** | 9.9% | 11.2% |
* Estimated Capex to Go partially excludes tenant contributions which are subject to tenant negotiation and may impact the final yield on completion of the project.
** Estimated Rental Value increase versus current Contracted rent + ERV on vacant spaces divided by total Development Capex.
| | Internally Managed Commercial Portfolio as at 31 Dec. 2022 | ||
| | Poland | Romania | Group |
| GLA (k sqm) | 542.1 | 426.1 | 968.2 |
| % of Commercial GLA | 100% | 51% | 70% |
| % of Office and Mixed-Use GLA | 100% | 92% | 96% |
| GAV (€ m) | 1,422.6 | 1,088.6 | 2,511.2 |
| % of Commercial GAV | 100% | 76% | 88% |
| % of Office and Mixed-Use GAV | 100% | 93% | 97% |
Future Developments
We own, directly or through JV partnerships, other land plots in prime locations in Bucharest, regional cities in Romania and Poland, covering a total land surface of 1.2 million sqm (comprising 2.8% of the Group's combined GAV), for future developments of office, industrial or mixed-use properties. When fully developed, these land plots have the potential to add a total of a further 785.7k sqm of high-quality GLA to our standing portfolio footprint.
These projects, which are classified as "Future Development", continue to be reviewed by the Group, albeit periodically, with the pace at which they will be developed subject to tenant demand and general market conditions.
| Future Developments | | |||||
| | Podium Park III | Green Court D | Globalworth West | Constanta Business Park (Phased)* | Timisoara Industrial Park I and II (Phased) | Luterana |
| Location | Krakow | Bucharest | Bucharest | Constanta | Timisoara | Bucharest |
| Status | Constr. Postponed | Constr. Postponed | Constr. Postponed | Planned | Planned | Planned |
| GLA (k sqm) | 17.7 | 17.2 | 33.4 | 525.8 | 165.2 | 26.4 |
| CAPEX to 31 Dec 22 (€ m) | 8.5 | 2.5 | 5.2 | 12.3 | 7.0 | 7.4 |
| GAV (€ m) | 9.6 | 8.6 | 7.4 | 37.2 | 11.0 | 13.6 |
| Estimated CAPEX to Go (€ m)** | 29.7 | 23.9 | 38.5 | 243.6 | 63.5 | 39.7 |
| ERV (€ m) | 3.1 | 3.3 | 5.1 | 27.7 | 6.7 | 5.8 |
| Estimated Yield on Development Cost | 8.1% | 12.6% | 11.5% | 10.8% | 9.6% | 12.3% |
* 50:50 joint venture; figures shown on 100% basis.
** Initial preliminary development budgets on future projects to be revised prior to the permitting.
Asset Management Review
Continuing to actively manage our real estate portfolio
Leasing Review
We are present in six of the seven largest office markets in Poland, and in the largest office market and some of the most attractive logistics/light-industrial hubs of Romania too.
Our office markets provide corporations with the necessary infrastructure for them to operate and offer people interesting opportunities for them to grow professionally and personally, while our logistics/light-industrial properties benefit from locations that are easily accessible, on or next to major road arteries, connecting our facilities to major hubs in Romania and abroad.
The COVID-19 pandemic triggered a change in the way we work, and how business is conducted, and, as our markets were recovering and absorbing these changes, there was a further negative impact on the economic and business environment from the Ukraine war, resulting in a more uncertain outlook. The changes in market conditions became more apparent in the second half of 2022, impacting our overall operating performance.
As such, signing new leases, typically for large multinational and national corporates, is taking longer in the current market environment as tenants continue to assess their future occupational plans and adapt to the new conditions.
In both Poland and Romania, increased construction costs and reduced development activity, mainly as a result of the COVID-19 pandemic, limited new supply in these markets. This means that the supply of high-quality offices in central locations in the coming years will be lower than the average levels recorded in the past, which may result in higher tenant demand for such properties.
In addition, we observed a widening gap between A-grade properties with strong ESG credentials and B-grade properties, both from an investment and a leasing perspective, which should benefit our portfolio in the future as we actively manage our high-quality properties with the aim of improving our operational metrics.
Headline rental levels have remained stable, and the combination of lower supply and higher inflation should be a strong mitigant against the negative effects of a potential slowdown in tenant demand as a result of the weakening economic conditions.
New Leases
Our principal focus continued to be the prolongation of leases with existing tenants in our portfolio and the take-up of available spaces in standing properties and developments.
In the 12 months of 2022, the Group successfully negotiated the take-up (including expansions) or extension of 206.9k sqm of commercial spaces in Poland (42.3% of transacted GLA) and Romania (57.7% of transacted GLA), with an average WALL of 4.4 years. Between 1 January and 31 December 2022, the majority of our leasing activity, involved new take-up of available spaces, with such leases accounting for 52.4% of our total leasing activity and were signed at a WALL of 5.4 years, while renewals accounted for 47.6% signed at a WALL of 3.8 years.
In total, we signed new leases for 108.5k sqm of GLA, with the majority involving spaces (+65.0%) leased to new tenants, and the remaining areas being taken up by existing tenants which were expanding their operations.
· New leases were signed with 82 new tenants for 75.2k sqm of GLA at a WALL of 5.5 years. The majority were for office spaces, accounting for 61.3%, with the remainder involving industrial (31.4%) and retail/other commercial spaces.
· In addition, 52 tenants signed new leases, expanding their operations by 33.2k sqm at an average WALL of 5.2 years.
Also, in response to the Ukrainian refugee crisis in this period, we offered 14.9k sqm (8.1k sqm already returned to us) of GLA in our properties in Poland and Romania to local authorities and organisations, which we include in our performance.
During 2022, 52 of our tenants expanded their operations, taking-up an additional 33.2k sqm at an average WALL of 5.2 years.
We also renewed leases for a total of 98.4k sqm of GLA with 97 of our tenants at a WALL of 3.8 years. It is important to note that c.68.1% (by GLA) of these renewals were for leases that were expiring in 2023 or later.
| Summary Leasing Activity for Combined Portfolio in 2022 | |||
| | GLA (k sqm) | No. of Tenants* | WALL (yrs) |
| New Leases (incl. expansions) | 108.5 | 125 | 5.4 |
| Renewals/Extensions | 98.4 | 97 | 3.8 |
| Total | 206.9 | 198 | 4.4 |
* Number of individual tenants.
| Selected New Leases Signed in 2022 | ||||
| | City | Property | Use | GLA |
| Phylosophy Design | Bucharest (RO) | Chitila Logistic Hub | Industrial | 10.8k |
| OVT Logisticzentrum | Timisoara (RO) | Timisoara Industrial Park II | Industrial | 5.8k |
| Delivery Solutions | Bucharest (RO) | Business Park Stefanesti | Industrial | 4.4k |
| Max Bet | Bucharest (RO) | City Offices | Office | 4.3k |
| Coherent Solutions | Wroclaw (PL) | Renoma, Retro Office House | Office | 3.8k |
| Selected Lease Extensions Signed in 2022 | ||||
| | City | Property | Use | GLA |
| Automatic Data Processing Romania | Bucharest (RO) | Gara Herastrau | Office | 8.3k |
| Litens Automotive | Timisoara (RO) | Timisoara Industrial Park I | Industrial | 8.1k |
| Carrefour | Bucharest (RO) | Green Court Complex | Office | 5.3k |
| Olympus Business Services | Wroclaw (PL) | Retro Office House | Office | 4.6k |
| Delivery Solutions | Bucharest (RO) | Globalworth Square | Office | 4.3k |
| Average Portfolio Headline Rents in Standing Portfolio (€/sqm/m) | |||
| | 31 Dec. 2022 | 31 Dec. 2021 | Change (%) |
| Office | 14.2 | 14.0 | 1.8% |
| Industrial | 4.0 | 3.8 | 4.6% |
| Retail/Commercial | 14.2 | 13.9 | 2.1% |
| Average Headline Rents of New Leases Signed (€/sqm/m) | |||
| | 31 Dec. 2022 | 31 Dec. 2021 | Change (%) |
| Office | 14.8 | 13.9 | 6.8% |
| Industrial | 3.7 | 3.9 | -4.9% |
| Retail/Commercial | 14.1 | 12.7 | 11.0% |
| Average: | 11.9 | 12.1 | -0.9% |
Rental Levels
Headline market rental levels have remained relatively stable in our portfolio, despite the uncertainty in the market and the cautious approach of tenants. This reflects the quality of our properties, our active asset management initiatives, and our approach to sustainable development.
Our leases typically adjust annually in the first quarter of the year, with eligible leases indexed at an average of 3.8% in 2022. However, this positive impact is not fully reflected in our averages, as the rates at which leases were renewed or new leases signed were at their respective ERV rates.
Rental levels can vary significantly between type of spaces, buildings and sub-markets. Leases signed in 2022 were at €11.9/sqm/m, 0.9% lower than their prevailing group averages.
Contracted Rents (on annualised basis)
Total annualised contracted rent across our portfolio in Poland and Romania increased by 3.0% to €189.2 million compared to year-end 2021, driven by active asset management, indexation, a new acquisition and lease-up in our development projects (completed or in-progress).
Total annualised contracted rents in our standing commercial portfolio were €181.3 million on 31 December 2022, up by 3.9% compared to 31 December 2021, increasing to €182.0 million when including rental income generated by renting 147 residential units and other auxiliary spaces in Upground, the residential complex in Bucharest which we partially own.
Like-for-like annualised commercial contracted rents in our standing commercial portfolio also increased by 1.7% to €177.5 million at the end of December 2022 compared to the same period in 2021, mainly as a result of rent indexation.
| Annualised Contracted Rent Evolution 2022 (€m) | |||
| | Poland | Romania | Group |
| Rent from Standing Commercial Properties ("SCP") 31 Dec. 2021 | 87.9 | 86.6 | 174.5 |
| Less: Space Returned | (9.7) | (2.0) | (11.7) |
| Plus: Rent Indexation | 2.5 | 2.6 | 5.2 |
| Plus/Less: Lease Renewals (net impact) & Other | 0.4 | (0.3) | 0.1 |
| Plus: New Take-up | 5.4 | 4.0 | 9.4 |
| Total L-f-L Rent from SCP 31 Dec. 2022 | 86.6 | 90.9 | 177.5 |
| Plus: Standing Commercial Properties Acquired During the Period | - | 0.6 | 0.6 |
| Plus: Developments Completed During the Period | - | 3.2 | 3.2 |
| Total Rent from Standing Commercial Properties | 86.6 | 94.7 | 181.3 |
| Plus: Residential Rent | - | 0.7 | 0.7 |
| Total Rent from Standing Properties | 86.6 | 95.4 | 182.0 |
| Plus: Active and Pre-lets of Space on Projects Under Development/ Refurbishment | 6.7 | 0.5 | 7.2 |
| Total Contracted Rent as at 31 Dec. 2022 | 93.3 | 95.9 | 189.2 |
| Combined Annualised Commercial Portfolio Contracted Rent Profile as at 31 Dec. 2022 | |||
| | Poland | Romania | Group |
| Contracted Rent (€ m) | 93.3 | 95.2 | 188.5 |
| Tenant origin - % | | | |
| Multinational | 68.2% | 86.4% | 77.4% |
| National | 30.6% | 12.4% | 21.4% |
| State Owned | 1.1% | 1.3% | 1.2% |
Note: Commercial Contracted Rent excludes c.€0.7 million from residential spaces as at 31 December 2022.
| Annualised Contracted Rent by Period of Commencement Date as at 31 Dec. 2022 (€m) | |||||||
| | Active Leases | H1-2023 | H2-2023 | H1-2024 | H2-2024 | >2024 | Total |
| Standing Properties | 177.4 | 4.2 | 0.5 | 0.0 | - | - | 182.0 |
| Developments | 6.2 | 0.6 | 0.3 | - | 0.1 | - | 7.2 |
| Total | 183.6 | 4.7 | 0.8 | 0.0 | 0.1 | - | 189.2 |
| Annualised Commercial Portfolio Lease Expiration Profile as at 30 June 2022 (€m) | ||||||||||
| Year | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | >2031 |
| Total | 20.2 | 28.8 | 19.0 | 19.6 | 25.7 | 19.0 | 13.8 | 27.9 | 4.1 | 10.4 |
| % of total | 10.7% | 15.3% | 10.1% | 10.4% | 13.6% | 10.1% | 7.3% | 14.8% | 2.2% | 5.5% |
The Group's rent roll across its combined portfolio is well diversified, with the largest tenant accounting for 5.2% of contracted rents, while the top three tenants account for 10.6% and the top 10 account for 24.8%.
Cost of Renting Spaces
Renting spaces typically involves certain costs, such as rent-free periods, fitouts for the space leased, and brokerage fees, which the landlord incurs. These incentives can vary significantly between leases and depend on market conditions, type of lease signed (new take-up or lease extension), space leased (office, industrial, other), contract duration and other factors.
Headline (base) rents present the reference point typically communicated in the real estate market when referring to the level at which lease contracts are expected to be signed or are signed. However, the effective rent is a more useful indicator of a rental agreement's profitability.
In calculating our effective rent, we account for the costs incurred over the lease's lifetime, which we deduct from the headline (base) rent, thus allowing us to assess the profitability of a rental agreement. To analyse the effective rent more accurately in this period, we excluded ESG leases offered as assistance to support Ukrainian refugee initiatives in Poland and Romania.
Overall, in 2022, we successfully negotiated the take-up (including expansions) or extension of 191.0k sqm of commercial spaces in our portfolio (excluding ESG leases). The weighted average effective rent for these new leases was €8.8/sqm/month with a WALL of 4.4 years.
· Industrial leases completed in the period accounted for 24.7% of the total leasing activity, resulting in the lower average headline and effective rent.
The difference between headline (base) and effective rents in 2022 was, on average, 26.1%, which is lower than for FY2021 (average of 29.2%) but reflects the fact that market conditions continued to be challenging.
In total, new leases signed during the year will generate future rental income of €128.9 million (including auxiliary spaces), with leases from office properties accounting for 73.1% of future rental income.
| Weighted Average Effective Rent (€ / sqm / m) - 2022 | |||
| | Poland | Romania | Group |
| Headline Commercial Rent | 15.9 | 9.0 | 11.9 |
| Less: Rent Free Concessions | (2.3) | (0.9) | (1.5) |
| Less: Tenant Fitouts | (2.2) | (0.8) | (1.3) |
| Less: Broker Fees | (0.5) | (0.1) | (0.3) |
| Effective Commercial Rent | 10.9 | 7.2 | 8.8 |
| WALL (in years) | 4.0 | 5.1 | 4.4 |
Collections Review
The ability to collect - cash in - contracted rents is a key determinant for the success of a real estate company.
Our rate of collections of rents invoiced and due in 2022 remained high, at 99.3% (over 99% for FY2021). This is due to the long-term partnerships we have established and maintained with high-quality national and multinational tenants since the inception of the Group, which have helped us minimise the impact on rent collections in this period of higher economic uncertainty and ensure sustainable cash flow generation.
Portfolio Valuation
In line with our practice of biannual valuations, we valued our entire portfolio in Poland and Romania as of 30 June and 31 December 2022.
The valuations were performed by CBRE and Knight Frank for our properties in Poland, with Colliers and Cushman and Wakefield valuing our properties in Romania (more information is available under note 4 of the audited annual consolidated financial statements as of and for the period ended 31 December 2022).
Assigning the appraisal of our portfolio to four independent and experienced service providers makes the process of determining the value of our properties transparent and impartial. Through our oversight, we ensure that a consistent methodology, reporting, and timeframe are respected.
The main drivers in the growth of our portfolio since the inception of the Group have been:
· Acquisition or development of high-quality properties in Poland and Romania,
· Active asset management of the properties, and
· The performance of the real estate markets in which we operate.
Overall, our total combined portfolio value was €3.0 billion at the end of 2019, and remained effectively unchanged in 2020 due to the impact of the COVID-19 pandemic, increasing to €3.2 billion at 31 December 2021 due to additions.
In valuing our properties, key market indicators used by the four independent appraisers, although they vary, consider factors such as the commercial profile of the property, its location and the country in which it is situated.
As at 31 December 2022, third-party appraisals were impacted by higher inflation and interest rates, increased market volatility and a more uncertain outlook. This has led to the application of assumed (in several cases) yield expansion and higher discount rates in determining the valuations. As such, the portfolio's overall third-party appraised value on 31 December 2022 was estimated at €3.2 billion, +0.2% higher compared to the end of 2021.
The completion of six high-quality industrial facilities in Romania, the acquisition of a "small business units" facility and the net positive impact from our developments (in progress or under refurbishment) added €75.5 million in portfolio value, which was offset by the like-for-like decrease (€35.6 million/1.3%) in the appraised value of our standing commercial properties compared to 31 December 2021.
| Combined Portfolio Value Evolution 31 Dec. 2022 (€m) | |||
| | Poland | Romania | Group |
| Total Combined Portfolio Value at 31 Dec. 2021 | 1,612.8 | 1,539.5 | 3,152.3 |
| Less: Properties Held in Joint Venture * | - | (86.7) | (86.7) |
| Total Investment Properties ** at 31 Dec. 2021 | 1,612.8 | 1,452.8 | 3,065.6 |
| Plus: Transactions | - | (6.5) | (6.5) |
| o/w New Acquisitions | - | 7.2 | 7.2 |
| o/w Disposals | - | (13.7) | (13.7) |
| Plus: Capital Expenditure | 39.0 | 29.3 | 68.3 |
| o/w Developments | 8.1 | 13.0 | 21.1 |
| o/w Standing Properties | 30.9 | 16.3 | 47.2 |
| o/w Future Developments | - | - | - |
| Plus: Net Revaluations Adjustments | (67.3) | (20.5) | (87.8) |
| o/w Developments | (11.7) | 4.8 | (6.9) |
| o/w Standing Properties | (55.6) | (27.3) | (82.9) |
| o/w Lands, Future Developments & Acquisitions | - | 2.0 | 2.0 |
| Total Investment Properties ** at 31 Dec. 2022 | 1,584.5 | 1,455.1 | 3,039.6 |
| Plus: Properties Held in Joint Venture * | - | 119.3 | 119.3 |
| o/w Capital Expenditure & Acquisitions | - | 24.7 | 24.7 |
| o/w Net Revaluation Adjustments | - | 7.9 | 7.9 |
| Total Portfolio Value at 31 Dec. 2022 | 1,584.5 | 1,574.4 | 3,158.9 |
* Properties held through joint ventures are shown at 100%; Globalworth owns 50% stake in the respective joint ventures.
** Excludes adjustments made to investment properties, for sale of real estate assets following the year end.
Note: Certain casting differences in subtotals/totals are due to figures presented to 1 decimal place.
Financial Review
Resilient performance despite global challenges
"Our strong operational focus and business expansion partly reflected in our annual results, as we navigate through challenging market conditions.
Stamatis Sapkas
Chief Financial Officer
1. Introduction and Highlights
Our 2022 performance was resilient despite the global challenges, as we continued implementing our "local landlord" approach in managing our business.
To help explain our performance, we use a number of measures typically observed in our sector. These include quoting several measures on a consolidated basis (including our joint ventures), as it best describes how we manage our portfolio and overall business, like-for-like measures and measures prescribed by EPRA.
The measures defined by EPRA are designed to enhance transparency and comparability across the European real estate sector.
2. Revenues and Profitability
Our main source of revenue is rent that we receive from leasing spaces available in our properties to our partners. We also receive other income including that from service charges to cover the costs of communal or shared spaces and services in our properties, however this income is netted off against our total service charge cost.
Revenues
€239.3m
9.1% on 2021
IFRS Earnings per Share2
(8) cents
21 cents in 2021
EPRA NRV1,3
€1,835.5m
(4.3)% on 31 Dec. 2021
Adjusted Normalised EBITDA1,4
€126.0m
(3.2)% on 2021
LTV1,5
42.7%
40.1% at 31 Dec. 2021
NOI1
€139.7m
(3.2)% on 2021
Combined Portfolio Value (OMV)1
€3.2bn
0.2% on 31 Dec. 2021
EPRA NRV per Share1,3
€8.29
(4.3)% on 31 Dec. 2021
EPRA Earnings per Share1,2
32 cents
18.5% on 2021
Dividends Paid in 2022 per Share
27 cents
(10.0)% on 2021
1. See Glossary (pages 152-154) for definitions.
2. See note 12 of the consolidated financial statements for calculation.
3. See note 23 of the consolidated financial statements for calculation.
4. See page 46 for further details.
5. See note 25 of the consolidated financial statements for calculation.
| Total Revenue & Net Operating Income | | |
| Year ended 31 Dec. | 2022 €'m | 2021 €'m |
| Contracted rent | 180.9 | 176.4 |
| Adjustment for lease incentives | (31.1) | (26.1) |
| Rental income | 149.8 | 150.3 |
| Service charge income | 86.9 | 63.2 |
| Other income | 2.6 | 5.9 |
| Total Revenue | 239.3 | 219.4 |
| Operating Expenses | (99.6) | (75.1) |
| Net Operating Income | 139.7 | 144.3 |
Globalworth generated total consolidated revenue of €239.3 million during 2022, up by 9.1% compared to €219.4 million generated during 2021.
Gross rental income which accounts for the majority of our revenue was €180.9 million, 2.6% higher compared to the year prior. Decreasing however to €149.8 million when accounting for costs associated of renting spaces in our portfolio, and which are amortised during the life of the leases. As such our year-on-year (net) rental income was marginally lower (0.3% lower) compared to 2021.
| Year ended 31 Dec. | 2022 €'m | 2021 €'m |
| Office | 126.9 | 128.7 |
| Mixed-Use | 10.4 | 10.6 |
| Industrial | 11.1 | 9.5 |
| Other | 1.4 | 1.4 |
| Rental Income by Segment | 149.8 | 150.3 |
Like-for-like rental income on standing properties decreased by 2.8%, or €4.0 million, to €138.8 million in 2022. However, rental income from standing properties owned in Romania by the Group throughout 2021 and 2022 was higher by 2.7% at €68.1 million. In Poland, like-for-like rental income was lower by 7.6% at €70.7 million; however, the majority of this decrease (€5.2 million or 6.8%) was associated with Warta Tower (one of the properties held for sale) where TUIR Warta, the principal tenant in the building, vacated its premises at the end of 2021 and the building remaining only partially occupied in 2022. Excluding Warta Tower, rental income on our remaining Polish properties was marginally lower by €0.5 million or 0.8%.
Rental income received during the year from properties acquired or delivered in 2021 and 2022 was €11.0 million. This income was received from Globalworth Square, Supersam and Renoma (both under refurbishment) and three industrial facilities which were added to our portfolio in 2021 and had only partially contributed to the year prior, and three other industrial facilities that were acquired or delivered in 2022.
In 2022, we recorded a service charge income of €86.8 million, 37.6% higher compared to €63.1 million in 2021, due to the inclusion of new properties in the portfolio and an increase in service charge rate per square metre of 19.5% across our standing portfolio. This income is mainly linked to ancillary expenses that are typically reimbursed by tenants as the vast majority of our leases are triple-net, and include utility costs (energy, heating, water, electricity, insurance, etc.) and charges for services provided to tenants (cleaning, security, etc.).
In addition, we received €2.6 million for other services provided to tenants and partners which included fit-out services, marketing fees and other.
Revenue Share per Country
Year ended 31 Dec. 2022 (€'m)
|
| Poland | Romania |
| 2021 | 51.0% | 49.0% |
Revenue Share per Country
Year ended 31 Dec. 2021 (€'m)
|
| Poland | Romania |
| 2021 | 52.6% | 47.4% |
Net Operating Income ("NOI"), for the 12 months of 2022 was €139.7 million, after taking into account property and fit-out costs, lower by 3.2% compared to 2021. Overall operating expenses in our portfolio increased by €24.5 million to €99.6 million of which 89.8% were re-invoiced to tenants. The portion of our operating expenses not re-invoiced by tenants typically involved spaces available to be leased.
Net Operating Income Build Up
Year ended 31 Dec. (€'m)
| NOI - 2021 | NOI Change - Poland | NOI Change - Romania | NOI - 2022 |
| 144.3 | (8.6) | 4.0 | 139.7 |
Net Operating Income Share per Country
Year ended 31 Dec. 2022 (€'m)
|
| Poland | Romania |
| 2021 | 50.3% | 49.7% |
Net Operating Income Share per Country
Year ended 31 Dec. 2021 (€'m)
|
| Poland | Romania |
| 2021 | 54.7% | 45.3% |
Adjusted Normalised EBITDA
We use Adjusted Normalised EBITDA as a key performance measure to evaluate our recurring operational results. As such, we exclude from the calculation non-operational and non-cash items including revaluation or capital gains, exceptional income or costs and other adjustments.
Our Adjusted Normalised EBITDA was €126.0 million (excluding share of minority interests EBITDA was €125.9 million), lower by 3.2% compared to 2021 (€130.2 million), as a result of lower NOI which was only partially offset by lower administrative and other expenses.
| Adjusted Normalised EBITDA | | |
| Year ended 31 Dec. | 2022 €'m | 2021 €'m |
| Profit before net financing cost | 35.4 | 110.9 |
| Plus: Fair value loss/(gain) on investment property | 89.5 | 5.7 |
| Plus: Depreciation on other long-term assets | 0.7 | 0.5 |
| Plus: Other expenses | 2.0 | 2.4 |
| Plus: Acquisition costs | 0.0 | - |
| Plus: Other income | (0.5) | (1.1) |
| Plus: Foreign exchange (gain)/loss | (0.9) | (0.2) |
| Plus: Loss/(Gain) from fair valuation of financial instrument | (0.2) | 0.4 |
| Plus: Non-recurring expenses | - | 11.5 |
| Adjusted Normalised EBITDA | 126.0 | 130.2 |
| Share of minority interest | (0.1) | - |
| Adjusted Normalised EBITDA (excluding minority share) | 125.9 | 130.2 |
Property Valuation
Over the past 12 months, property values in our markets have come under pressure, given the challenging macroeconomic and geopolitical environment. Also, operating performance, expanding yields, higher discount rates and capex invested in our portfolio, which is fully reflected in valuations and operations, further contributed to recording €89.5 million in negative revaluations in our consolidated property portfolio on 31 December 2022. Approximately 75.9% of the net fair value loss was in our office and mixed-use properties in Poland, while in Romania €24.1 million (or 26.9%) of net fair value loss in our standing portfolio was partially offset by 2.8% net fair gains in our industrial properties.
| Year ended 31 Dec. | 2022 €'m | 2021 €'m |
| Fair value (loss) on investment property | (89.5) | (5.7) |
Finance Costs and Income
Our finance costs mainly include net interest on bonds, bank loans and other financing sources such as a Revolving Credit Facility. In 2022 our total finance cost was €52.5 million, lower by €3.0 million compared to the prior year, a result of net lower indebtedness following the repaying of the remaining GW 17/22 bond in June, reducing the interest cost by €4.5 million, which was partially offset by the increase in EURIBOR base rates particularly in the second half of the year on existing and new financing facilities.
In addition, finance income was €2.7 million, higher by €1.0 million compared to 2021. Higher interest received from shareholder loans provided to finance our joint ventures and higher finance income (by 170% or €0.5 million) as a result of higher/positive interest rates collected on Euro, Romanian Leu (RON) and Polish Zloty deposits and current accounts balances were partially offset (€0.2 million) by changes in the fair value in financial instruments during the year.
Overall, net finance costs were €49.8 million for the twelve months of 2022, lower by 7.3% or €4.0 million compared to 2021.
| Finance Cost & Income | | |
| Year ended 31 Dec. | 2022 €'m | 2021 €'m |
| Finance Cost | 52.5 | 55.5 |
| Finance Income | 2.7 | 1.7 |
| Net Finance Cost | 49.8 | 53.8 |
Share in Joint Venture
We hold interests in three joint ventures in Romania which principally focus on developing and managing industrial parks. In 2022 the share of profit in our joint ventures was €3.2 million, compared to €5.0 million in 2021, mainly due to the negative impact of the properties' revaluation. We have to note, however, that operating performance improved by €1.2 million, with losses excluding revaluations recorded lower by €2.7 million, to €2.4 million for the year, as we continue to invest in the three joint ventures and lease the available spaces in the facilities which are in their lease-up phase.
IFRS and EPRA Earnings
To measure our profitability, we measure both IFRS and EPRA Earnings. The latter, we consider as a more appropriate measure for real estate companies as it excludes non-cash or non-recurring items such as revaluation, capital gains, fair value adjustments and related deferred tax impact of adjustments made to profit after tax.
We recorded negative IFRS Earnings of €16.1 million (-8 cents per share) for 2022, compared to positive earnings of €47.5 million (21 cents per share) in 2021. This decrease is mainly attributed to the €89.5 million of revaluation losses recorded for the period compared to revaluation losses of €5.7 million in 2021.
Adjusting for revaluation losses with related deferred tax and the €11.5 million exceptional and non-recurring costs associated with the offer for Globalworth shares initiated in May 2021, the adjusted IFRS profit after tax for 2022 was marginally lower by €2.2 million compared to 2021, at €72.9 million for the year.
EPRA Earnings for 2022 were €71.6 million (or 32 cents per share), up by 21.2% from the prior year due to improved operating results, as lower operating performance was offset from lower cost base, net finance costs and income tax expenses (excluding deferred tax expense on investment property) compared to the same period in 2021.
| IFRS Earnings Vs EPRA Earnings | ||
| | Total €'m | Per Share cents |
| IFRS Earnings | (17.0) | (8) |
| FV loss on properties | 89.5 | 40 |
| Losses on disposal of investment properties | 1.9 | |
| FV gain on financial instrument | (0.2) | 0 |
| Deferred Tax | (1.0) | 0 |
| JVs & Others | (1.6) | 0 |
| EPRA Earnings | 71.6 | 32 |
3. Assets
| Assets | Note to the financial statements | 31 Dec. 2022 €'m | 31 Dec. 2021 €'m |
| NCA - Investment property | 3 | 2,945.5 | 2,966.1 |
| CA - Investment property held for sale | | 126.0 | 130.5 |
| Total Investment Property |
| 3,071.5 | 3,096.6 |
| NCA - Investments in joint ventures | 27 | 68.0 | 48.9 |
| Cash and cash equivalents | 19 | 163.8 | 418.7 |
| Other Assets | | 65.7 | 63.2 |
| Total Assets |
| 3,368.9 | 3,627.5 |
The two largest assets in our balance sheet are real estate/investment property and cash and cash equivalents, which account for over 96% of our total assets.
The balance sheet value of our investment property (freehold and properties held for sale) was €3,071.5 million as of 31 December 2022, €25.1 million or 0.8% lower compared to year-end 2021. This decrease was mainly due to the negative revaluations of real estate properties (€89.5 million) and disposal of residential units (€14.1 million), which offset the positive impacts mainly from the acquisition of our first small business units project in the north-west of Bucharest (€5.5 million), the purchase of land for future development (€1.8 million), and investments made in properties under development and other value accretive investments on standing properties (€70.3 million).
| IP Movement Freehold €'m | | | |
| | Poland €'m | Romania €'m | Total €'m |
| OMV Dec 21 | 1,612.8 | 1,539.0 | 3,151.8 |
| JV properties | - | 86.7 | 86.7 |
| Investment property - Dec 21 | 1,612.8 | 1,452.3 | 3,065.1 |
| CAPEX | 38.97 | 29.29 | 68.256 |
| Fair value loss | (67.3) | (21.6) | (88.8) |
| Apartment Disposals | - | (14.1) | (14.1) |
| Asset acquisition | - | 7.4 | 7.4 |
| Investment Property - Dec 22 | 1,584.5 | 1,453.3 | 3,037.8 |
| JV properties - Dec 22 | - | 119.0 | 119.0 |
| OMV Dec 22 | 1,5845 | 1,572.3 | 3,156.8 |
Cash and cash equivalents at the end of the year were €163.8 million (€418.7 million on 31 December 21), mainly as a result of the repayment of the remaining €323.2 million of our inaugural €550 million bond at the end of June and the distribution of €59.8 million of dividend to shareholders during the year.
Our investment in joint ventures increased by €19.1 million, reaching €68.0 million on 31 December 2022, due to an €8.4 million investment in a new/third joint venture company mainly to finance the acquisition of new standing investment facility and facilitate further development, and a €6.7 million further investment in two other companies mainly to finance subsequent phases in the Constanta Business Park and Chitila Logistic Hub projects. In addition, for 2022 our share of profit in our joint ventures was €3.2 million and we received €0.8 million of net interest income.
Other assets mainly comprised trade and other receivables and equity investments (where we have a right of first offer) and accounted for 1.9% (€65.7 million) of our total assets as of 31 December 2022.
Total assets at the end of the period were €3,368.9 million, lower by 7.1% compared to 31 December 2021 (€3,627.5 million).
4. Liabilities
| Liabilities | Note to the financial statements | 31 Dec. 2022 €'m | 31 Dec. 2021 €'m |
| NCL - Interest-bearing loans and borrowings | 14 | 1,433.6 | 1,285.6 |
| CL - Interest-bearing loans and borrowings | 14 | 21.6 | 348.3 |
| Total Interest-bearing loans and borrowings |
| 1,455.2 | 1,633.9 |
| Deferred Tax Liabilities (including liabilities associated with the assets held for sale) | 11.1 | 159.9 | 156.3 |
| Other Current Liabilities | | 69.5 | 72.4 |
| Other Non-Current Liabilities | | 26.8 | 26.2 |
| Total Liabilities |
| 1,711.5 | 1,888.9 |
Total Liabilities for the Group were €1,711.5 million at year-end 2022, €177.4 million lower compared to 31 December 2021. This decrease is mainly due to Interest-bearing Loans and Borrowings of the Group, which accounted for 85.0% of Total Liabilities, and were lower by €178.7 million on 31 December 2022.
Deferred Tax Liabilities were €159.9 million on 31 December 2022, €3.6 million higher compared to the prior year, mainly due to improved fiscal profits and the transition of certain subsidiaries to a taxable profit position.
Other Current and Non-Current Liabilities accounted for 5.6% of the Total Liabilities and included items such as tenant deposits, lease liabilities, and other trade and other payables. During the year, such amounts overall decreased by €2.3 million.
5. Interest-bearing Loans and Borrowings
Overview and Select Initiatives
The total consolidated debt for the Group at 31 December 2022 was €1,455.2 million (31 December 2021: €1,633.9 million) comprising mainly of medium to long-term debt, denominated entirely in Euro.
Our largest debt-related activity in 2022, involved the repayment from our own cash resources of the remaining €323.2 million of our inaugural €550 million bond that was due to mature in June 2022, thus resulting in Globalworth having no material debt maturing until March 2025.
In addition, during 2022 we:
· repaid the coupon on the 2022 bond and also the annual coupons of the 2025 and 2026 bonds,
· entered into a six-year term loan agreement for €85 million with IFC,
· drew down on part of the RCF available to us until April 2024,
· entered into a 10-year term loan agreement for €110 million with BCR/Erste Bank (both part of Erste Bank Group) for the refinancing of the logistics portfolio, not drawn at end of year 2022. Out of this amount, the Group is entitled to €95 million and the remainder will refinance one of our joint venture companies, and
· entered into a three-year term new RCF for €50 million with Erste Bank, not drawn until end of year.
Interest-bearing Loans and Borrowings Profile
The total consolidated debt for the Group on 31 December 2022 was €1,455.2 million (31 December 2021: €1,633.9 million).
Most of the debt remained in unsecured facilities, which accounted for 75.4% (31 December 2021: 77.9%) of the total debt outstanding. Unsecured facilities included the two bonds maturing in March 2025 and July 2026 accounting for €950.0 million, the €85.0 million facility from the IFC, and €60.0 million from a Revolving Credit Facility. The remainder debt (24.6%) is secured with real estate mortgages, pledges on shares, receivables and loan subordination agreements in favour of the financing parties.
The weighted average interest rate cost for the Group remained low throughout the year, despite the higher inflationary and interest rate environment, as 80.7% of our debt carries a fixed interest rate charge and 4.1% of debt facilities are hedged through interest rates caps, therefore the weighted average cost of debt on 31 December 2022 increased marginally by 16 basis points to 2.89% compared to 2021 despite EURIBOR increasing by over 200 basis points during the year.
The high level of fixed interest rate debt ensures natural hedging to the Euro, the currency in which the most significant part of our liquid assets (cash and cash equivalents and rental receivables) is originally denominated and the currency for the fair market value of our investment property. Based on the Group's debt balances on 31 December 2022, an increase of 100 basis points in the EURIBOR would result in a higher interest expense of €2.8 million per annum.
The average maturity period of our debt remained above 3.0 years at 3.3 years (2021: 3.5 years), not including the 10-year term loan facility from BCR/Erste Bank undrawn on December 2022.
· All our debt facilities are Euro denominated.
· Interest is based either on one month, three months or six months EURIBOR plus a margin (19.3% of the outstanding balance compared to 8.5% at 31 December 2021).
During 2022, we repaid €2.8 million in bank debt principal amounts, the entire remaining balance of the 2022 Eurobond (€323.1 million) and €45.7 million of accrued interest on the Group's outstanding debt facilities, including €37.6 million in relation to the full annual coupon for the Eurobonds of the Company.
Debt Covenants
As of 31 December 2022, the Group was in compliance with all of its debt covenants.
The Group's financial indebtedness is arranged with standard terms and financial covenants, the most notable as at 31 December 2022 being the following:
Unsecured Eurobonds, Revolving Credit Facility and IFC loan
· the Consolidated Coverage Ratio, with minimum value of 200% (150% applicable for the Revolving Credit Facility and IFC loan);
· the Consolidated Leverage Ratio, with maximum value of 60%;
· the Consolidated Secured Leverage Ratio with a maximum value of 30%; and
· the Total Unencumbered Assets Ratio, with minimum value of 125% (additional covenant applicable for the Revolving Credit Facility and IFC loan).
Secured Bank Loans
· the debt service cover ratio ("DSCR")/interest cover ratio ("ICR"), with values ranging from 120% to 350% (be it either historic or projected); and
· the LTV ratio, with contractual values ranging from 60% to 83%.
There have been no breaches of the aforementioned covenants occurring during the period ended 31 December 2022.
Weighted Average Interest Rate Versus Debt Duration to Maturity
|
| 30 Jun 20 | 31 Dec 20 | 30 Jun 21 | 31 Dec 21 | 30 Jun 22 | 31 Dec 22 |
| Weighted average interest rate | 2.52% | 2.73% | 2.73% | 2.73% | 2.55% | 2.89% |
| Weighted average duration to maturity | 4.2 | 4.5 | 4.0 | 3.5 | 3.8 | 3.3 |
Maturity Profile (by year) of the Principal Loan Outstanding at 31 Dec. 2022 (€ million)
| 2023 €'m | 2024 €'m | 2025 €'m | 2026 €'m | 2027 €'m | 2028 €'m | 2029 €'m |
| - | 94,314,000 | 662,184,849 | 400,000,000 | 62,260,000 | 85,000,000 | 151,825,000 |
6. Liquidity & Loan-to-Value Ratio ("LTVî)
Managing our resources has been a key area of focus for the Group, especially since the COVID-19 pandemic outbreak, and this careful management has carried on throughout this period of higher volatility.
As of 31 December 2022, the Group had cash and cash equivalents of €163.8 million (31 December 2021: €418.7 million), of which €7.8 million was restricted due to various conditions imposed by the financing banks.
In addition, the Group at year-end 2022 had undrawn €95.0 million (plus €15.0 million undrawn to be allocated to joint ventures) in secured committed debt facilities and a further €205 million in unsecured revolving credit facilities.
The Group's loan-to-value ratio on 31 December 2022 was 42.7%, compared to 40.1% on 31 December 2021, mainly due to the impact of negative revaluations in our standing properties, and capex invested in our portfolio which was not fully reflected in valuations and operations.
7. EPRA NRV
The EPRA Net Reinstatement Value ("NRV") is a measure used to highlight the value of a company's net assets on a long-term basis, on the assumption that the entities do not sell their assets.
EPRA NRV was €1,835.5 million as at 31 December 2022, lower by 4.3% compared to 31 December 2021 (€1,917.5 million). As a result, EPRA NRV per share also decreased to €8.29 per share (31 December 2021: €8.66 per share).
The decrease in EPRA NRV over the 12 months of 2022 was largely due to the negative revaluations of €89.5 million on our real estate property portfolio and the €59.8 million of dividends paid during the year to shareholders which offset the €12.5 million positive effect in our EPRA Earnings (€71.6 million for the year).
| EPRA NRV per Share (€) | |
|
| € |
| EPRA NRV Dec-21 | 8.66 |
| Income statement |
|
| EPRA Earnings | 0.32 |
| FV loss on Property portfolio | (0.40) |
| Non-EPRA Earnings | 0.1 |
| Changes in equity |
|
| Dividends | (0.27) |
| JV and NCI adjustment | (0.03) |
| EPRA NRV Dec-22 | 8.29 |
8. Cash Flows
| Year ended 31 Dec. | 2022 €'m | 2021 €'m |
| Operating Profit before Changes in Working Capital | 126.4 | 119.4 |
| Changes in Working Capital | (63.3) | (54.1) |
| Cash Flows from Operating Activities | 63.1 | 65.3 |
| Cash Flows used in Investing Activities | (73.8) | (101.4) |
| Cash Flows used in Financing Activities | (243.9) | (72.8) |
| Net Increase in Cash and Cash Equivalents | (254.6) | (108.9) |
| Cash and Cash Equivalents at Year End | 163.8 | 418.7 |
Cash flows from operating activities before working capital changes during 2022 was €126.4 million, higher by €7.0 million or 5.8% compared to 2021. Lower administrative expenses, also associated with the exceptional and non-recurring expenses incurred in 2021, and lower finance interest cost due to lower net lower indebtedness of the Group, which offset the lower net operating income.
Overall, cash inflow from operations for the 12 months of 2022 was €63.1 million, lower by 3.4% (or €2.2 million compared to 2021 as a result of higher interest and taxes paid by €1.2 million and negative changes in working capital by of €1.0m.
During the year, cash used in investments was €73.8 million, €27.6 million lower compared to €101.4 million in 2021. Despite a decrease in new acquisitions by €12.4 million compared to 2021, investment in 100% owned properties (standing and developments) reached €71.2 million (€2.4 million higher compared to 2021). Proceeds from sales, mainly from non-core residential units and ROFO assets, were €13.8 million higher compared to 2021, reaching €16.9 million for 2022.
Cash used in financing was €243.9 million in 2022 (€171.1 million higher compared to 2021), mainly associated with the repayment of €323.2 million for the 17/22 bond, the drawdown of €146.8 million from IFC and RCF facilities in the second half of the year and reduction of dividend distribution by €6.5 million to €59.8 million in 2022.
9. Dividends
| Year ended 31 Dec. | 2022 €'m | 2021 €'m |
| Dividends Paid - € m | 59.8 | 66.3 |
| Dividends Paid per Share - Cents | 27 | 30 |
Globalworth distributes bi-annually at least 90% of its EPRA Earnings to its shareholders. As a result, in March 2022, it paid an interim dividend of 13 cents per share (€28.8 million) in respect of the six-month period ended 31 December 2021. In addition, in September 2022, it paid the first interim dividend in respect of the six-month period ended 30 June 2022 of 14 cents per share (€31.0 million).
In total in 2022 the Group paid €59.8 million or 27 cents per share in dividends.
The results for the period are set out in the consolidated statement of comprehensive income on page 84.
EPRA Performance Measures Snapshot
Our performance under the EPRA guidelines
The European Public Real Estate Association ("EPRA"), is a widely recognised market standard guidance and benchmark provider for the European real estate industry.
The following performance indicators have been prepared in accordance with best practices as defined by EPRA in its Best Practices Recommendations guide, available on EPRA's website (www.epra.com).
| Figures in € million, unless otherwise indicated | 2022 | 2021 | Definition | Purpose | pgs |
| EPRA NRV | 1,835.50 | 1,917.46 | EPRA Net Reinstatement Value. | Metric making adjustments to the NAV per the IFRS financial statements to provide stakeholders with the most relevant information on the fair value of the assets and liabilities of a real estate investment company, assuming that entities never sell assets and aims to represent the value required to rebuild the entity. | 50 |
| EPRA NRV per share (€) | 8.29 | 8.66 | EPRA Net Reinstatement Value per share. | 50 | |
| EPRA Earnings | 71.6 | 59.10 | Earnings from operational activities. | Metric measuring a company's underlying operating results and an indication of the extent to which current dividend payments are supported by earnings. | 47 |
| EPRA Earning per share (€) | 0.32 | 0.27 | Earnings from operational activities per share. | 47 | |
| EPRA Net Initial Yield ("NIY") (%) | 5.2% | 5.0% | Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers' costs. | A comparable measure for portfolio valuations. | 149 |
| EPRA Topped-up NIY (%) | 5.8% | 5.7% | This measure incorporates an adjustment to the EPRA NIY in respect of the expiration of rent-free periods (or other unexpired lease incentives such as discounted rent periods and step rents). | A comparable measure for portfolio valuations. | 149 |
| EPRA Vacancy (%) | 14.0% | 13.0% | Estimated Market Rental Value (ERV) of vacant space divided by ERV of the whole portfolio. | A 'pure' (%) measure of investment property space that is vacant, based on ERV. | 149 |
Financial statements
Consolidated statement of comprehensive income
For the year ended 31 December 2022
| | Note | 31 December 2022 €'000 | 31 December 2021 €'000 |
| Revenue | 7 | 239,251 | 219,350 |
| Operating expenses | 8 | (99,571) | (75,098) |
| Net operating income | | 139,680 | 144,252 |
| Administrative expenses | 9 | (13,712) | (25,622) |
| Acquisition costs | | (7) | - |
| Fair value loss on investment property | 3.4 | (89,471) | (5,738) |
| Share-based payment expense | 24 | - | (532) |
| Depreciation and amortisation expense | | (673) | (536) |
| Other expenses | | (2,013) | (1,851) |
| Other income | | 524 | 1,051 |
| Foreign exchange gain | | 851 | 214 |
| Loss from fair value of financial instruments at fair value through profit or loss | 16 | 222 | (386) |
| Profit before net financing cost | | 35,401 | 110,852 |
| Finance cost | 10 | (52,532) | (55,539) |
| Finance income | | 2,694 | 1,749 |
| Share of profit of equity-accounted investments in joint ventures | 27 | 3,219 | 5,010 |
| Loss/profit before tax | | (11,218) | 62,072 |
| Income tax expense | 11 | (4,886) | (14,583) |
| Loss/profit for the year | | (16,104) | 47,489 |
| Items that will not be reclassified to profit or loss | |
| |
| Loss on equity instruments designated at fair value through other comprehensive income | | (5,391) | - |
| Total comprehensive income for the year | | (21,495) | 47,489 |
| | Note | 31 December 2022 €'000 | 31 December 2021 €'000 |
| (Loss)/profit attributable to: | | (16,104) | 47,489 |
| - ordinary equity holders of the Company | | (16,961) | 47,489 |
| - non-controlling interests | | 857 | - |
| | |
| |
| Total comprehensive income attributable to: | | (21,495) | 47,489 |
| - ordinary equity holders of the Company | | (22,352) | 47,489 |
| - non-controlling interests | | 857 | - |
| | |
| |
| Earnings per share (€ cents) | |
| |
| - Basic | 12 | (8) | 21 |
| - Diluted | 12 | (8) | 21 |
Financial statements
Consolidated statement of financial position
As at 31 December 2022
| | Note | 2022 €'000 | 2021 €'000 |
| ASSETS | |
| |
| Investment property | 3 | 2,945,460 | 2,966,080 |
| Goodwill | | 12,349 | 12,349 |
| Advances for investment property | 5 | 4,393 | 3,436 |
| Investments in joint ventures | 27 | 67,967 | 48,908 |
| Equity investments | | 7,521 | 12,109 |
| Other long-term assets | | 1,784 | 2,083 |
| Prepayments | | 226 | 338 |
| Deferred tax asset | 11.1 | 161 | 151 |
| Non-current assets | | 3,039,861 | 3,045,454 |
| | |
| |
| Financial assets at fair value through profit or loss | 16 | 3,554 | 7,324 |
| Trade and other receivables | 18 | 22,337 | 16,208 |
| Contract assets | 13 | 9,967 | 6,106 |
| Guarantees retained by tenants | | 98 | 885 |
| Income tax receivable | | 840 | 117 |
| Prepayments | | 2,430 | 2,104 |
| Cash and cash equivalents | 19 | 163,767 | 418,748 |
| | | 202,993 | 451,492 |
| Investment property held for sale | 3.3 | 126,009 | 130,537 |
| Total current assets | | 329,002 | 582,029 |
| Total assets | | 3,368,863 | 3,627,483 |
| | Note | 2022 €'000 | 2021 €'000 |
| EQUITY AND LIABILITIES | |
| |
| Issued share capital | 21 | 1,704,476 | 1,704,476 |
| Treasury shares | 24.5 | (4,859) | (4,917) |
| Fair value reserve of financial assets at FVOCI | | (5,469) | - |
| Share-based payment reserve | 24 | 156 | 156 |
| Retained earnings | | (37,798) | 38,914 |
| Equity attributable to ordinary equity holders of the Company | | 1,656,506 | 1,738,629 |
| Non-controlling interests | | 862 | - |
| Total equity | | 1,657,368 | 1,738,629 |
| | |
| |
| Interest-bearing loans and borrowings | 14 | 1,433,631 | 1,285,641 |
| Deferred tax liability | 11.1 | 154,866 | 150,713 |
| Lease liabilities | 3.2 | 19,861 | 18,762 |
| Guarantees retained from contractors | | 1,995 | 2,661 |
| Deposits from tenants | | 3,897 | 3,844 |
| Trade and other payables | | 1,034 | 956 |
| Non-current liabilities | | 1,615,284 | 1,462,577 |
| | |
| |
| Interest-bearing loans and borrowings | 14 | 21,600 | 348,279 |
| Guarantees retained from contractors | | 3,652 | 3,361 |
| Trade and other payables | | 35,679 | 39,788 |
| Contract liability | 13 | 1,743 | 1,940 |
| Other current financial liabilities | | 67 | 261 |
| Current portion of lease liabilities | 3.2 | 1,669 | 1,303 |
| Deposits from tenants | | 17,477 | 16,068 |
| Income tax payable | | 382 | 550 |
| | | 82,269 | 411,550 |
| Liabilities directly associated with the assets held for sale | 3.2, 3.3 | 13,942 | 14,727 |
| Total current liabilities | | 96,211 | 426,277 |
| Total equity and liabilities | | 3,368,863 | 3,627,483 |
The financial statements were approved by the Board of Directors on 23 March 2023 and were signed on its behalf by:
Andreas Tautscher
Director
Financial statements
Consolidated statement of cash flows
For the year ended 31 December 2022
| | Note | 2022 €'000 | 2021 €'000 |
| Profit/(loss) before tax | | (11,218) | 62,072 |
| Adjustments to reconcile profit/(loss) before tax to cash flows from operating activities | |
| |
| Fair value loss on investment property | 3.4 | 89,471 | 5,738 |
| Loss on sale of investment property | | 1,851 | 471 |
| Share-based payment expense | 24 | - | 532 |
| Depreciation and amortisation expense | | 673 | 536 |
| Net increase in allowance for expected credit losses | 20.2 | 44 | 1,134 |
| Foreign exchange (gain)/loss | | (851) | (214) |
| Loss from fair valuation of financial instrument at fair value through profit or loss | 16 | (222) | 386 |
| Share of (profit) of equity-accounted joint ventures | 27 | (3,219) | (5,010) |
| Finance income | | (2,694) | (1,749) |
| Financing cost | 10 | 52,532 | 55,539 |
| Operating profit before changes in working capital | | 126,367 | 119,435 |
| (Increase) in contract assets, trade and other receivables | | (10,547) | (4,513) |
| (Decrease) in contract liabilities, trade and other payables | | (6,435) | (3,872) |
| Interest paid | | (45,662) | (44,641) |
| Interest received | | 723 | 267 |
| Income tax paid | | (2,168) | (1,949) |
| Interest received from joint ventures | | 797 | 536 |
| Cash flows from operating activities | | 63,075 | 65,263 |
| | Note | 2022 €'000 | 2021 €'000 |
| Investing activities | |
| |
| Expenditure on investment property completed | |
| |
| and under development or refurbishment | | (71,235) | (68,846) |
| Payment for land acquisitions | | (1,732) | - |
| Advances for investment property | | 4,100 | - |
| Proceeds from sale of land | | 502 | - |
| Payment for acquisition of investment property | | (5,584) | (18,011) |
| Proceeds from sale of investment property | | 12,411 | 3,010 |
| Investment in financial assets at fair value through profit or loss | 16 | (38) | (143) |
| Proceeds from sale of financial assets through profit and loss | | 4,030 | 85 |
| Payments for investment in equity investments | 17 | (803) | (1,740) |
| Investment in and loans given to joint ventures | 27 | (28,510) | (23,354) |
| Repayment of loan from joint ventures | 27 | 13,429 | 8,111 |
| Payment for purchase of other long-term assets | | (371) | (468) |
| Cash flows used in investing activities | | (73,801) | (101,356) |
| Financing activities | |
| |
| Proceeds from issuance of share capital | 24.1 | - | 100 |
| Proceeds for issuance of new shares in subsidiary | |
| |
| from non-controlling interest | | 5 | - |
| Proceeds from interest-bearing loans and borrowings | 14 | 146,825 | - |
| Repayment of interest-bearing loans and borrowings | 14 | (325,963) | (2,796) |
| Payment of interim dividend to equity holders of the Company | 22 | (59,771) | (66,286) |
| Payment for lease liability obligations | 3.2 | (2,289) | (1,659) |
| Payment of bank loan arrangement fees and other financing costs | 15 | (2,725) | (2,168) |
| Cash flows used in financing activities | | (243,918) | (72,809) |
| Net (decrease) in cash and cash equivalents | | (254,644) | (108,902) |
| Effect of exchange rate fluctuations on cash and bank deposits held | | (337) | (151) |
| Cash and cash equivalents at the beginning of the year | 19 | 418,748 | 527,801 |
| Cash and cash equivalents at the end of the year | 19 | 163,767 | 418,748 |
Financial statements
Consolidated statement of changes in equity
For the year ended 31 December 2022
| | Note | Issued share capital €'000 | Treasury shares €'000 | Share-based payment reserve €'000 | Fair value reserve of financial assets at FVOCI €'000 | Retained earnings €'000 | Total €'000 | Non-controlling interests €'000 | Total Equity €'000 |
| As at 1 January 2021 | | 1,704,374 | (12,977) | 6184 | - | 57,783 | 1,755,364 | - | 1,755,364 |
| Shares issued to the Executive Directors and other senior management employees | | - | 339 | (339) | - | - | - | - | - |
| Interim dividends | | - | 72 | - | - | (66,358) | (66,286) | - | (66,286) |
| Share-based payment expense under the subsidiaries' employees share award plan | | - | - | 532 | - | - | 532 | - | 532 |
| Shares vested under the subsidiaries' employees share award plan | | - | 1,253 | (1,253) | - | - | - | - | |
| Shares issued for cash under Executive share option plan | | 102 | - | (2) | - | - | 100 | - | 100 |
| Cash-based portion of deferred annual bonus plan converted to deferred shares settlement | | - | - | (79) | - | - | (79) | - | (79) |
| Shares issued for long-term plan termination and employees incentive plan | | - | 1,476 | 33 | - | - | 1,509 | - | 1,509 |
| Shares vested under the deferred annual bonus incentive plan | | - | 4,920 | (4,920) | - | - | - | - | - |
| Total comprehensive income for the year | | - | - | - | - | 47,489 | 47,489 | - | 47,489 |
| As at 31 December 2021 | | 1,704,476 | (4,917) | 156 | - | 38,914 | 1,738,629 | - | 1,738,629 |
| Interim dividends | 22 | - | 58 | - | - | (59,829) | (59,771) | - | (59,771) |
| Shares issued in a newly acquired subsidiary | | - | - | - | - | - | - | 5 | 5 |
| Settlement of fair value reserve of equity instruments designated at FVOCI in cash | 17 | - | - | - | (78) | 78 | - | - | - |
| Total comprehensive income for the year | | - | - | - | (5,391) | (16,961) | (22,352) | 857 | (21,495) |
| As at 31 December 2022 | | 1,704,476 | (4,859) | 156 | (5,469) | (37,798) | 1,656,506 | 862 | 1,657,368 |
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