Globe Trade Centre S.A. (GTC) released its 2012 results today. The results have been prepared in accordance with the International Financial Reporting Standards (IFRS) and are presented in Euro.
Strategy: Progress of the 3 year strategic plan (2012-2014)
- GTC realized 35% of the three-year assets disposal program via sale of Platinium Business Park (Poland) and a land plot in Galati (Romania) which generated €64m of free cash;
- GTC raised €100m in a successful rights issue in June 2012;
- GTC extended maturity of €73m bonds until 2017-2018 and prepaid €25m of bonds;
- GTC acquired remaining 50% of Galeria Wilanów project.
2012 Financial Highlights
- Rental and service revenues stable at €129m despite sale of Galeria Mokotów and Platinium Business Park;
- Rental and service revenue on like-for-like basis up to €148m from €144m in 2011;
- Earnings before taxes, interest and revaluations up to €61m (€57m in 2011) due to improvement in selling and administrative expenses;
- Net revaluation of investment properties and impairment of €115m mainly related to retail properties in Romania, Bulgaria and Croatia following a decrease of expected rental rates resulting from further deterioration in the local economies;
- Loan to value ratio improved to 53% (60% in 2011);
- Cash flow from operations after interest payment and one-off payments related to hedge settlements, stable at €21m (€21m in 2011).
2012 Operating Highlights
- New leases of over 58,000 sqm;
- Significant lease renewals and extensions of 50,000 sqm office space and 17,000 sqm retail space;
- Occupancy at 91% compared to 87% in 2011;
- Opening of Galleria Burgas (Bulgaria); 37,000 sqm shopping mall opened on 15 May, over 87% let;
- Completion of Platinium Business Park V (Poland);
- LEED Gold certificate for Corius (Warsaw), Platinium Business Park V building (Warsaw) and Galleria Burgas (Bulgaria).
“2012 was a challenging year, but we managed to implement an important part of our strategy while significantly improving our operating and financial results. Our cash position was materially improved via a successful rights issue and the sale of Platinium Business Park. In addition our balance sheet improved thanks to a 3.5 year extension of €73m of bonds until 2017-2018. All those steps were accompanied by a reduction in selling, administrative and financial expenses which allowed us to increase our operating results and cash from operations. Alongside, we managed to lease over 58,000 sqm of new office and retail space and renew or extend over 67,000 sqm of office and retail space, which taking into consideration current market conditions, should be seen as a big achievement,” – said Alain Ickovics, Chairman of the Supervisory Board of GTC S.A. “We are entering 2013 stronger with an aim to continue our program to further increase liquidity and decrease leverage in order to comfortably meet our financial obligations and finance further properties development, including three new shopping malls, two in Warsaw and one in Belgrade as well as planning an office building in Bucharest,” – added Alain Ickovics.
Rental and service revenues were stable y-on-y at €129m in 2012 and 2011, despite sale of Galeria Mokotów in August 2011 and Platinium Business Park I-IV in October 2012. Loss of revenues following sale of Galeria Mokotów and Platinum Business Park I-IV was partially offset with revenues generated by newly completed properties and increased overall occupancy. As of December 2012, GTC’s completed buildings were leased in 91%, therefore further rental revenue growth is probable. The margin on rental revenues was also stable at 70% in 2012 (72% in 2011).
Revenues from the sale of residential properties decreased to €19m in 2012 from €25m in 2011 mostly due to slow down in sale of residential units resulting from unfavourable economic conditions in Romania.
Gross profit from operations was €90m in 2012 compared to €95m in 2011 mostly due to lower sale of residential units.
Selling expenses decreased by 45% y-o-y to €4m in 2012 mainly due to decrease in advertising expenses following improved occupancy and completion of leasing of newly completed assets, as well as sale of Galeria Mokotow.
Administrative expenses excluding cost of share base programme decrease to €14m in 2012 from €24 in 2011 mainly due to cost optimization actions that were taken by the management, and also due to fact that in 2011 certain one-off items were recognized related to the sale of Galeria Mokotów.
Net loss on revaluations of investment property and impairments of residential projects was €115m in 2012 and is attributable mostly due to the Eurozone credit crisis that resulted in a decrease in expected rental values and expansion of yields mainly in Bulgaria, Romania and Croatia.
Financial expenses decreased to €72m, which was mainly due to a decrease in interest on financial liabilities of €5m and change in fair value of hedging instruments of €7m related to hedge ineffectiveness resulted from prolongation and repayment of bonds.
Net loss amounted to €132m in 2012. This is attributable mainly to a loss on revaluation of investment properties and impairment of residential projects.
The value of the property portfolio was at the level of €1,811m as at 31 December 2012 (including €42m of assets held for sale). The next review of the value of completed assets and the land bank will be conducted as of 31 March 2013 by the management
NAV per share stood at €2.7 as at 31 December 2012 compared to €3.7 as at 31 December 2011, mostly due to a rights issue (100,000,000 shares) at a price below book value.
Key achievements of 2012
Strategy progress – focus on improving cash position and deleveraging
Sale of Platinium Business Park – one of the biggest transactions in Poland
Subsidiaries of GTC Group and Allianz Real Estate Group concluded a final agreement on the sale of Platinium Business Park in Warsaw. The preliminary agreement on the sale of five buildings in the complex was signed by GTC and Allianz in June 2012. The companies finalized the sale of the Platinium I-IV buildings on 31 October 2012, after satisfying all conditions set forth in the preliminary agreement. The sale of the fifth building was finalized in February 2013.
The final price of five buildings in Platinium Business Park is EUR 173m and reflects the investment yield of 6.7%. The transaction generated a total free cash of €60m.
Platinium Business Park stands out for its award-winning architectural design, technical specifications, as well as quality of it tenants. It is located at the intersection of Domaniewska and Wołoska streets. Five buildings of the complex, with a total rentable area of approx. 56,000 sqm, are nearly entirely let. Regardless of the sale transaction, GTC may develop on this site another building consisting of approx. 13,000 sqm on which Allianz Real Estate Group would have an option to purchase upon completion.
Successful rights issue
The issue of 100,000,000 series I ordinary bearer shares with a nominal value of PLN 0.10 per share was more than two times oversubscribed. The exercise of the pre-emptive rights within the rights issue subscription period resulted in 3,671 principal subscriptions for 97,822,615 series I shares. Simultaneously, 482 additional subscriptions were submitted for 105,374,171 series I shares. Kardan N.V. participated in the rights offering pro rata to its stake. Thanks to the rights issue GTC raised PLN 445 million in equity (gross of costs).
Maturity of approx. €73m of the existing bonds prolonged to 2017-2018 and €46m were repaid
GTC had offered investors to prolong the maturity of some of the existing bonds by way of acquiring new bonds in exchange for existing ones. The offer was directed to selected institutional investors who were the bondholders of the bonds issued by GTC in 2007 and 2008. As a result of the acceptance of the offer, GTC issued two portions of bearer, unsecured bonds in the total nominal value of approx. €73m. The bonds will be amortized over 2017 and 2018 in 3 equal tranches with the final maturity 30 April 2018.
The interest on the new bonds is based on the 6M WIBOR and a 4% p.a. margin set forth in the terms and conditions of the bonds. With the aim of further deleveraging, GTC has decided to purchase for redemption purposes additional bonds with a value of approximately €25m at an average price approx. 98% of its nominal value.
Projects completed in 2012
Galleria Burgas opened in Bulgaria
The 12th shopping mall developed by GTC Group was opened in May. It was the only property of this type put into use in Bulgaria in the first half of 2012. Galleria Burgas is the first modern shopping centre with such strong tenant mix in the Southern part of the country. The mall hosts 37,000 sqm of net rentable area and is over 87% let. Galleria Burgas is anchored by Inditex group (Zara, Bershka and Oysho brands), H&M, Carrefour (4,700 sqm supermarket), a Cinema City multiplex with 10 halls (first cinema of this size and quality in the region of Burgas), Pure Fitness and many other leading international and local brands.
Platinium Business Park V building completed and fully leased before being sold
Construction of the 11-storey office building, with a net rentable area of 12,108 sqm ended in June 2012. The area of a typical floor is 1,024 sqm, and each floor can be efficiently arranged into separate offices or open spaces. The list of tenants of Platinium Business Park V includes such firms as VeriFone Poland, PSA Group, Schrack-Seconet, K2 and Starcom. The sale of the building to Allianz Real Estate Group was finalized in February 2013.
Corius building completed and leased (Okęcie Business Park, Warsaw)
The 3rd office building in Okęcie Business Park was put into use in early January 2012. It offers 8,970 sqm of class A office space on seven storeys. The typical floor space is 1,434 sqm. Tenants have also 205 parking spaces at their disposal. Corius building is equipped with suspended floors, suspended ceilings, soundproof tilt windows, full air conditioning, state-of-the-art building management system, access control and professional security. The list of tenants includes such firm as EGIS, Pandora A/S, Polish Airports and Polish Border Guard.
Projects under preparation
Focus on development of two shopping malls in Warsaw
In 2012, GTC purchased from Polnord the remaining 50% of the Galeria Wilanów shopping and entertainment center project, located in one of the most affluent districts of Warsaw. As a result, GTC now develops and manages the project by itself. Galeria Wilanów will comprise up to 76,500 sqm of net rentable retail space. The first phase of the project will comprise approx. 60,000 sqm of net rentable area, and the cost of that stage is estimated at EUR 160m. The project is under advanced preparations (the architectural plan is approaching its final stage), and will be started as soon as all permits are obtained.
Simultaneously, GTC plans to develop another shopping and entertainment centre located in the Northern part of Warsaw. The mall will be constructed on a 4.9 hectare site in the Białołęka area and will encompass approximately 60,000 sqm of net rentable space upon its completion. GTC is envisaging developing the mall in two phases (45,000 sqm and 15,000 sqm). According to the local zoning plan, the whole site that belongs to GTC (the acquisition of the remaining 10% of land from the City of Warsaw is in progress) is designated for commercial services and large scale retail projects. Thanks to good access to public transport, the catchment area of the new mall will extend to the neighboring districts. The total catchment area of GTC’s site is estimated at nearly 520,000 inhabitants. The value of the investment is estimated at approx. EUR 160m.
Both planned shopping centers enjoy strong interest from anchor tenants, including leading international brands.
Other projects in the pipeline
Depending on the market situation, GTC allows for development of new projects in selected countries of the SEE region. These projects would include a shopping centre in Belgrade (Serbia), with a total net leasable area of 32,000 sqm (with potential expansion of another 13,000 sqm), as well as an office building in a prime location in Bucharest (Romania), with a total net leasable area of 32,000 sqm.
Important leases improved occupancy
GTC’s continues to benefit from its ability to deliver high quality space and from its track record of providing tailor-made solutions for companies from various business sectors. In 2012, GTC signed a significant number of new lease agreements for office and retail space (over 34,000 and 24,000 sqm, respectively), which will improve its overall occupancy and, as a result, have a positive impact on cash flow and the valuation of certain assets in its portfolio:
New lease agreements (over 58,000 sqm):
– New tenants in office buildings in Warsaw: Platinium Business Park V – PSA Peugeot Citroën Group (3,500 sqm), VeriFone (1,100 sqm), Shrack Seconet (410 sqm), and Okęcie Business Park – Polish Airports (1,900 sqm), Border Guard (700 sqm).
– New tenants in Francuska Office Centre in Katowice: Rockwell (2,100 sqm), Trac Tec (1,200 sqm), American Heart of Poland (1,000 sqm), Oracle (1,000 sqm), KPMG (800 sqm), Vattenfall (700 sqm), Arpid (340 sqm).
– New tenants in University Business Park in Łódź: Citibank International PLC (2,000 sqm with further extension option), Hewlett-Packard (1,500 sqm with further extension option).
– New lease agreements for retail space in GTC malls signed with leading local and international brands (e.g. Bershka, DIY, Benetton Kids, and Atlantic).
Significant renewals and extensions (50,000 sqm office space and 17,000 sqm retail space)
– State Street has extended the lease agreement for approximately 15,000 sqm office space in Kazimierz Office Centre in Cracow. The extension has been concluded for 10 years.
– Subsidiaries of the international advertising group Publicis have decided to stay at Platinium Business Park for another 7 years. In addition to 9,500 sqm, Publicis has secured an additional 2,200 sqm. GTC has also extended the lease agreement with GE Healthcare for another 5 years (1,500 sqm).
– Hungarian Economic Development Center has extended the lease agreement for 8,000 sqm office space in Center Point building in Budapest
– Hewlett-Packard has extended the lease agreement for 6,600 sqm office space in Globis building in Wrocław.
– IBM (over 5,000 sqm), Raiffeisen Bank (1,000 sqm), City Handlowy (700 sqm), Deloitte (600 sqm) and Ergomed (300 sqm) have extended their lease agreements in GTC Office Centre in Krakow. Hitachi has secured an additional 400 sqm, increasing the total area of their office to nearly 2,000 sqm.
– Warta has leased an additional 1,600 sqm office space at University Business Park.
– Lux Med has extended the lease agreement for 1,500 sqm office space in Globis office building in Poznań
– Eaton (1,200 sqm) and Mitsubishi (1,000 sqm) have extended their lease agreements in Nothus office building (Okęcie Business Park in Warsaw)
Awards & certificates
LEED Gold certificates for all projects completed in 2012
U.S. Green Building Council (USGBC) granted LEED® Gold for Core and Shell certificate to Platinium V and Corius office buildings in Warsaw, as well as to Galleria Burgas. The certificate covers all stages of development process, including choice of location, design and construction works, as well as implementation of planned solutions.
At the time of grating the certificates, Platinium V and Corius buildings were only the second and third facility in Poland with LEED for Core and Shell, respectively. Galleria Burgas is the first real estate project and the first shopping mall in Bulgaria that meets the harsh criteria of USGBC.
All three objects were raised with full respect for the environment. They were constructed from materials that increase energy efficiency and enable maximum effectiveness of heating, air conditioning and lighting systems. USGBC also valued the location of the facilities, easy access to public transport, effectiveness of waste segregation and quality of the internal environment.
GTC won the global Euromoney Real Estate Survey
For the 4th time in its history, GTC won recognition in the prestigious Real Estate Survey organized by the international finance magazine Euromoney. GTC has been named Best Overall Developer in Romania and Serbia, and Best Mixed Developer in Poland.
The awards process canvassed the opinions of more than 1,900 senior real estate bankers, developers, investment managers, corporate end-users and advisory firms in over 70 countries. The panel of specialists singled out GTC for the quality and scale of its development projects, its skilful assessment, innovations and effective management.