Globe Trade Centre S.A. (GTC) released its second quarter and half year 2011 results today. The results are prepared in accordance with International Financial Reporting Standards (IFRS) and presented in Euro.
- Sale of 50% stake in Galeria Mokotów at an asset value of €475m will bring c. €110m of free cash
- Platinium IV completed and already fully occupied by Aviva Group
- Avenue Mall Osijek completed and opened
- A land for new office building in Bucharest acquired
- Rental revenues up to €26m (+9% y-o-y) in the second quarter and up to €50m (+5% y-o-y) in the half year
- Gross profit from operations at €25m in the second quarter and €47m in the half year
- Revaluation and impairment loss of €38m reflects a conservative approach and the general macro economic trends
- Sale of Galeria Mokotów crystallizes a tax income of €13m
- Investments of €104m compared to €82m in the corresponding period of 2010
- Completed commercial space of 536,000 sq m valued at €1.9bn
“Euro debt crisis and its contagion to European financial markets resulted in delay in economic recovery particularly in South Eastern Europe. We initially expected such a recovery to start in 2011, however the economic trends in the second quarter of this year indicate that the recovery is taking longer than we anticipated. The main impact of this delay on the retail properties in South Eastern Europe reflects decrease in spending power, especially in non-food products, and downward pressure on rental rates in shopping centres, which resulted in a decrease in assets value.” – says Eli Alroy, the Chairman of Supervisory Board. “Nevertheless, company’s fundamentals are sound, especially given that 50% of the standing portfolio operates in Poland.” – adds Eli Alroy.
Rental revenues increased by 9% to €26m in the second quarter of 2011 and by 5% to €50m in the half year over the corresponding periods of 2010. An increase comes mainly from assets that were completed after 30 June 2010, including Galeria Stara Zagora and Avenue Mall Osijek. Some of the buildings are still under-occupied or in the lease free period as at 30 June 2011 thus there is a potential for further rental revenue growth supported by an increase in occupancy.
Margin on rental revenues was 71% in the second quarter of 2011 and 72% in the half year accounting for some of the new assets where occupancy rate is still low.
Revenues from sale of residential properties at €7m in the second quarter 2011 and at €10m in the half year, resulting from a slowdown in sale of residential properties coupled with an increase in discounts for the buyers of apartments. Margin on sale of residential properties was positive at 3% in the second quarter of 2011.
The gross profit from operations increased by 4% to €25m in the second quarter and stood at €47 in the half year. As income from some of Group’s assets have not been stabilized as at 30 June 2011, achieved results on the operating level have still potential for improvement in the future.
Revaluation of investment property was negative and stood at €38m in the first half of 2011. This reflects less than 2% of the value of the Group’s investment properties and indicates their resilience to macro economic situation resulting from high quality.
“Euro zone debt crisis, which has been dominating the markets in the second and early third quarter contributes to volatility in asset prices, as long as all underlying issues remain unresolved. This leads to an increased risk aversion in the near-term which in turn have been reflected in valuations of GTC projects as of 30 June 2011, however we do not deem it as a sustainable trend. We expect that the current weakness may reverse, once macro economic trends improve.” – said Erez Boniel, CFO and Member of the Management Board of GTC. “We believe that there is a substantial upside in our properties in South Eastern Europe, which will materialize once the real estate cycle comes back on a growth path.”.
Net loss was €47m in the second quarter and €38m in the half year which resulted mainly from loss on revaluation of investment properties partially offset by an income tax benefit.
Investment was at the level of €104m in the half year as compared to €82m in the corresponding period of 2010. GTC will continue with its selected development plans in its core markets based on its liquidity and debt raising ability. The Company plans to deliver additional 42,000 sq m the second half of this year, which will bring the total completions for the year to 82,000 sq m.
Value of investment properties was at the level of €2.2bn as of 30 June 2011 (excluding €244m of assets held for sale), after the revaluation and impairment loss that was recognized in the first half of 2011 and reflects macro economic situation as of 30 June 2011. The next review of the value of properties and land bank will be conducted as of 30 September 2011.
NAV per share stood at €4.7 per as at 30 June 2011 compared to €4.8 as at 31 December 2010.
GTC maintains favorable structure of debt maturity, with about 50% of debt expiring in 2017 or later. The average cost of debt financing remains attractive at 5.5%. This provides the company further comfort in realizing its development plan.
Sale of Galeria Mokotów
On 1 August 2011, after meeting all conditions set forth in the preliminary agreement GTC signed an agreement for sale of a 50% stake in its landmark development – Galeria Mokotów, based on the 100% asset value of €475m. The buying is an affiliate of Unibail Rodamco S.E. – the current co-owner and manager of the shopping center.
The transaction will bring GTC approx €110m of free cash.
Platinium IV completed and fully occupied
The construction of the fourth building of Platinium Business Park (located at the intersection of Domaniewska and Wołoska streets) ended in May 2011, after record 13 months after obtaining construction permit. The 12-storey building, with a lease area of 13,000 sq m had been entirely leased by Aviva Group, who moved into the building in summer this year.
Avenue Mall Osijek completed and opened
On 7th of April, GTC and the European Bank for Development and Reconstruction opened the Avenue Mall in Osijek, the entertainment and shopping centre of the eastern part of Croatia and the fourth largest city in the country with the population of 120,000 inhabitants. The catchment area for Avenue Mall Osijek is estimated at 500,000 inhabitants. Successful and prominent market identity of Avenue Mall is a new landmark on the retail map of Osijek and the powerful contribution to the regional economy.
Avenue Mall Osijek offers nearly 27,000 sq m NRA and 80 retail units. The mall is 90% leased, while the rest of space is subject of advanced negotiations. Development of Avenue Mall Osijek is co-financed by the European Bank for Development and Reconstruction and Raiffeisen. The European Bank for Development and Reconstruction is also a 20% shareholder in the investment.
Avenue Mall Osijek, apart from the role of shopping destination, will provide its visitors a highly developed entertainment segment, including the most modern cinema in Croatia – Cineplexx (7 screens), playroom for children, as well as several bars and restaurants with terraces. One of the biggest Müller stores in Croatia and Mercator hypermarket in more than 2,500 sq m. will provide visitors the opportunity to buy everyday products in one place. The fashion stores offer includes more than 50 international and local fashion brands that create the best fashion segment of any shopping center outside Zagreb. The list of tenants who have recognized the quality and potential of the city of Osijek and the region includes: Cineplexx, Mercator, Müller, United Colors of Benetton, Sportina Group, Esprit, Terranova, Elipso, Jysk and many others.
New office project in Bucharest acquired
The building called Ana Tower, will be located in the close vicinity of GTC’s latest award-winning office project – City Gate. The project will be a 50-50% partnership between GTC Romania and Ana Group, while GTC will be managing the project on behalf of the joint venture.
Ana Tower will provide approximately 30,000 sq m of A-class office space located on 24 floors in the most attractive office destination in Bucharest, in the north part of the city. Tenants and visitors of the property will enjoy, apart from the prestigious location and high standard offices, many amenities that include also two hotels located next to the building and excellent public transportation access.
Ana Tower is the fifth office building which GTC develops in Bucharest, after Europe House, America House, City Gate South and City Gate North, out of which two first office building were successfully sold.
Galleria Arad attracts Inditex Group
Galleria Arad continues to attract the most important international fashion retailers beside its strong food anchor Cora Hypermarket and entertainment anchor Cinema City.
Top brands from the renowned fashion retail group Inditex, including Zara, Bershka, Stradivarius and Pull&Bear will occupy approx. 3,700 sq m in Galleria Arad. The mall comprises about 33,600 sq m of leasable area.
Galleria Arad is right now 92% pre leased. Opening of Galleria Arad is planned for October this year.