GTC achieved in 2007 a record profit of EUR261m
Operating profit rose 38% to EUR 323 m
Q4 2007 profit amounted to EUR 60m
Globe Trade Centre S.A. (GTC) posted in 2007 record profits of EUR 261m (an increase 32% YoY). The operating profit grew 38% to EUR323 m. The company achieved development margin of 120% on new buildings completed in 2007. GTC’s total portfolio of completed, under development and pipeline projects reached 2.1m sqm of net commercial and residential space.
In Q4 2007 profit reached EUR60m, posting an impressive gain of 376% compared to Q4 2006. Completion of new office buildings in Poland and Serbia comprising 46 000 sqm net rentable area (NRA) contributed vastly to these results, bringing EUR69.3m revaluation gain. Buildings in Warsaw (Platinium Business Park and Okęcie Business Park) and Kraków (Edison) were valued based on the yields of approx. 6%, while 19 Avenue office in Belgrade was valued at a yield of 7.6%.
In 2007 GTC completed nearly 100 000 sqm of net space. In addition to office buildings finished in the fourth quarter, the company delivered Newton office building in Kraków and luxurious houses in the Phase 3 of Osiedle Konstancja in Warsaw. In June Avenue Mall in Zagreb was completed, attracting 800 000 shoppers every month after the opening.
Efficient cost control and strong leasing momentum resulted in achieving impressive margin on cost for the properties completed in 2007 – 120%. Also the operating margin was impressive: in 2007 gross operating margin on rental revenues increased to 79% from 71% in 2006, mainly due to the rebalancing of office portfolio, through replacement of mature properties such as Mokotów Business Park, with more efficient, newly developed class A office buildings.
The sale of Mokotów Business Park, America House and Lighthouse building affected the operating revenues in 2007, which slightly dropped to EUR73 m from EUR 80.9 m in 2006. However, as operating margin improved, the gross margin from rental operations grew 9% to EUR 41.2m.
The sale of completed properties is part of GTC’s strategy of asset diversification, allowing to capitalize on old investments and raise funds for new investments. In 2007 GTC divested two major office developments, each comprising approx. 27 000 sqm of NRA. America House in Bucharest was sold for EUR120 m , reflecting a record 5.55% yield, and Lighthouse Building in Prague was valued at EUR76.5 m based on the 5.65% yield.
GTC’s is increasing its portfolio of retail projects, leverging on the success of already completed shopping malls and Galleria brand name. Galeria Mokotów, Galeria Kazimierz and Avenue Mall are attracting in total on average 2.4 million clients per
The pipeline of 17 new retail projects includes developments in Romania, Czech Republic, Bulgaria, Serbia and Croatia. The construction of the largest GTC’s investment – Galeria Jurajska in Częstochowa (48 000sqm NRA) has already started and is scheduled for completion in H2 2009.
The leasing momentum in GTC’s office buildings is strong – all existing buildings are 100% let, and new projects are nearly fully leased upon completion. Office markets in major Polish cities (Warsaw, Kraków, Wrocław) and Bucharest look particularly attractive, with vacancies ranging from 1% to 3%. GTC is expanding to ther Polish cities (Łódz, Katowice) as well developing new office projects in Prague, Budapest, Bucharest, Zagreb and Belgrade – the pipeline of new office projects includes in total nearly 700 000 sqm of NRA, of which majority is going to be completed in the next 3-4 years.
In 2007 GTC’s residential projects enjoyed strong demand from buyers, as 60% of apartments offered for sale have been already sold. New projects in Belgrade (Park Apartments), Bucharest (Rose Garden and Felicity 1&2), Prague (Prague Marina1 and Green City1&2), Warsaw (Konstancja 4), Budapest (Sasad Resort 1) and Bratislava (Vinohradis1) are to be completed in 2008-2009, however both revenues and profits will be recognised only upon completion and hand over of keys. Total residential portfolio of the company includes approx. 9 000 apartments (GTC’s part excluding partners) under
various stages of development. The projects are situated in very attractive locations, targetting mostly middle upper segment.
The financial strength of the Company and its ability to raise new financing is one of the main drivers of GTC’s expansion. GTC is well postioned to execute its 2008-2009 expansion plan, providing for investment of EUR1.5bn in land acqusition and development of new projects. The Company prudently uses the financial leverage – the long term debt to total
assets ratio was 33%, while cash position amounted to EUR346m at the end of 2007. Such an excellent financial standing, together with well-established relations with the largest banking groups in Europe, allows to obtain project financing at favourable terms.
In 2007, the amount of bank loans, for which terms and conditions were agreed or final contracts were signed, exceeded 350 million EUR. The loans bear margin ranging from 100 to 150 bps, depending on the country. In April 2007, the Company issued bonds worth 800 million PLN – the largest tranche of debt securities sold by a Polish company in the domestic market to date.
GTC strengthened its position in all three sectors of operation. In 2007 GTC acquired nearly 700 000 sqm of net building rights of commercial and residential projects. Currently the portfolio of completed, under development and pipeline projects
reached almost 2.1m sqm of net office, retail and residential space. The investment schedule provides for completion of more than 1.5 million sqm of net space in 2008-2010.