Globe Trade Centre S.A. (GTC) released its 2010 results today. The results are prepared in accordance with International Financial Reporting Standards (IFRS) and presented in Euro.
- Completed commercial space increased to 532,000 sq m
- Rental revenues up significantly to EUR 97m in 2010 (+30% y-o-y)
- Rental margin stable at 76%
- Gross margin from operations increased to EUR 97m (+14% y-o-y)
- Profit from property portfolio revaluation, net of EUR 43m
- Net income of EUR 29m up significantly from net loss of EUR 139m in 2009
- Stable cash balance of EUR 192m supports further development
- Sale of Topaz and Nefryt office buildings contributed to the high cash amount
“As initially expected, 2010 was a transition year, which brought the first signs of compression of yields and an increased tenant demand vs. 2009 for office and retail space in new projects.” – says Eli Alroy, the Chairman of Supervisory Board.
Total revenues from operations increased by 8% year-on-year to EUR 169m, mainly due to 30% growth in rental income to EUR 97m and a comparable increase in service income to EUR 27m, driven by income from newly completed buildings and improved occupancy. The operating margin on rental activity was stable at 76%.
The increase in rental revenues was, however, partially offset by lower revenues from residential sales. Residential sales in 2010 were EUR 45m (down from EUR 60m in 2009), coupled with a decrease in inventory.
The gross margin on operations increased 14% year-on-year, to EUR 97m.
Positive revaluation of investment property, net of EUR 43m brought the value of the group’s investment properties to EUR 2.37 bn. The revaluation was driven by compression of yields, mainly in Poland, and completion of new assets, what indicates continued improvement in both the investment and occupancy market.
“Average yield on our properties compressed by 0.2pp during 2010 with the strongest decrease of 0.5 pp on average in Poland for prime assets” – said Erez Boniel, CFO and Member of the Management Board of GTC. “Additionally, we completed net 70,000 sq m of commercial space, which increased the value of our investment portfolio. Notwithstanding the above, the portfolio still includes some of the newly built assets, which their potential revaluation gain is not reflected in the total value”.
Profit from operations improved significantly to EUR 111m from a loss of EUR 122m in 2009.
Financial expenses were EUR 73m (vs. EUR 44m in 2009) mainly due to an increase in interest expenses resulting from completion of assets, as during the construction process the Group capitalises the interest but upon completion the interest is expensed. The average cost of debt financing remains attractive at 5%.
GTC maintains favourable structure of debt maturity, with about 50% of debt expiring in 2017 or later. This provides the company further comfort in realising its development plan.
Net income of EUR 29m was up significantly from a net loss of EUR 139m in 2009.
New leasing agreements
In the last few months the group signed a number of lease agreements for its office and retail space, including:
- TK Maxx in Galeria Jurajska for 2,850 sq m of retail space
- H&M in Avenue Mall Zagreb for 1,840 sq m of retail space
- Pure Health and Fitness in Galeria Stara Zagora for 1,100 sq m of retail space
- Bank Millennium in Francuska Office Center in Katowice for 800 sq m of mixed office and retail space
- Cora Hypermarche in Galleria Arad for 9,000 sq m of retail space
- Strabag Group, AEGON and Warta Life in University Business Park for a total of 2,200 sq m of office space
Plans for 2011
The group plans to complete the Platinium IV office building (Poland) which is fully let to Aviva Group around mid-year. Additionally, the third building in Okęcie Business Park will be completed by the end of the year. In developments outside Poland, , the group will open Avenue Mall Osijek (Croatia) very soon as well asGaleria Arad (Romania) in the fourth quarter of 2011.
“The pipeline assumes completion of 89,000 sq m of office and retail space in 2011 and additional 132,000 sq m in 2012.” – said Hagai Harel, International Development Manager at GTC. “When the plans materialises the group will own 11 shopping malls and 28 office building with total of 621,000 sq m at the end of 2011 and 753,000 sq m at the end of 2012, assuming no assets disposal.”
As for new projects, the group plans to commence the development of Platinium V (Poland), Avenue Park Zagreb (Croatia), Willson Office Park (Poland) andKarkonowska office building (Poland). Additionally the Group will continue its endeavours on design of Galeria Wilanów. The Group may also consider entering into other projects based on market conditions.
During the last quarter of 2010 and early 2011 the Group and its properties were honoured with a number of industry awards, including Office Developer of the Decade by the industry magazine Eurobuild and Developer of the Year in the region of Central-Eastern and South-Eastern Europe in 2010 in the CEE Real Estate Quality Awards by CEE Insight Forum. It is the fourth such award in GTC’s history.