Positive operational results continued

Q2 2014 Financial Highlights

  • Rental and service revenues maintained at 27m (€27m in Q2 2013); rental margin improved to 75% (72% in Q2 2013)
  • Selling, administrative and finance costs kept at the expected level, similarly to Q2 2013
  • Revaluation loss resulting mainly from devaluation of retail properties in Croatia and Romania following a decrease in expected rental values and devaluation of long-term pipeline land plots in light of limited number of market transactions

H1 2014 Financial Highlights

  • Rental and service revenues maintained at 55m (€56m in H1 2013); rental margin at 74% (71% in H1 2013)
  • Selling, administrative and finance costs kept at the expected level, similarly to H1 2013
  • Revaluation loss of €67m (€70m in H1 2013) impacts H1 2014 results
  • Loan to value improved to 54% (59% as of 31 December 2013) as a result of debt repayment
  • Like-for-like cash flow from operations increased to 20m (€11m in H1 2013 after eliminating one-off cost)
  • Cash and deposits of €124m after repayment of bonds and related hedges (€85m as of 31 December 2013)

“So far 2014 proves that most of the markets GTC invested in continue to recover. Occupancy was maintained at high level and efficient cost control enabled GTC to achieve 75% gross margin on rental activities. Due to decline in expected rental values and lack of investors’ interest in Southern and Eastern Europe, especially in Croatia and regional cities in Romania, retail properties and long-term pipeline land plots showed a substantial market value decrease” – said Thomas Kurzmann, GTC new Chief Executive Officer. “GTC’s two key shopping malls projects in Warsaw are progressing on schedule and response from tenants is positive. Moreover, GTC is preparing itself for growth, analysing various investment and development opportunities in CEE and SEE. We remain focused on executing the Company’s new strategy. GTC’s mission is to invest in assets with upside potential and create profit from active management of a growing commercial real estate portfolio in CEE and SEE regions, supplemented by selected development activities” – added Thomas Kurzmann.

 

Financial overview

 

Rental and service revenues kept virtually unchanged at €27m in Q2 2014 and €55m in H1 2014 compared to €27m in Q2 2013 and €56m in H1 2013. Margin on rental activities was improved to 75% in Q2 2014 and 74% in H1 2014 (72% in Q2 2013 and 71% in H1 2013). As of 30 June 2014, GTC’s completed buildings were leased in 91%, therefore further rental revenue growth is probable.

Revenues from sale of residential properties increased to €5m in Q2 2014 and €9m in H1 2014, mostly due to improved sale of residential units in Romania and Poland.

Gross profit from operations went up to €21m in Q2 2014 and €41m in H1 2014 compared to €20m in Q2 2013 and €39m in H1 2013.

Selling expenses remained at the level of €0,8m in Q2 2014 and 1.4 in H1 2014.

Administrative expenses on a like-for-like basis were kept at the level of 3m in Q2 2014 and €6m in H1 2014.

Net loss on revaluations of investment property and residential projects was  €65m in Q2 2014 and €67m in H1 2014, mostly as a result of a devaluation of retail properties in Croatia and Romania following a decrease of expected rental values and expansion of yields and devaluation of long-term pipeline land plots in light of limited liquidity.

Finance expenses net were at the level of €11m in Q2 2014 and €22m in H1 2014.

Net loss amounted to €70m in Q2 2014 and €72m in H1 2014 and is attributable mainly to loss on revaluation of investment properties and residential projects.

Total debt of €960m as of 30 June 2014 includes bonds issued in March 2014 of €48m as well as the loan from Galeria Kazimierz of €61m. The average debt maturity was 4.4 years and the average cost of debt was 4.3% p.a. Loan to value ratio was at the level of 54% as at 30 June 2014. Interest coverage improved do2.14 in H1 2014 from 1.68 at 31 December 2013.

NAV per share stood at €1.7 as at 30 June 2014 compared to €1.9 as at 31 December 2013. EPRA NAV per share was also €1.7 while EPRA NNNAV/per sharewas €2.2.

Cash flow from operations went up to €20m in H1 2014 (€11m in H1 2013).

 

Key non-financial highlights

 

Appointment of Thomas Kurzmann as a new Chief Executive Officer

In May, Supervisory Board of Globe Trade Centre appointed Thomas Kurzmann as Company’s new Chief Executive Officer, effective August 2014. The decision followed GTC’s new strategy announced earlier in 2014.

 

Capital increase of €53 million in January

GTC issued 32 million J series ordinary bearer shares in January 2014, raising €53 million in cash. In the process of book building issue was 150% oversubscribed.

 

Bond issue of €48 million in March

GTC issued 20,000 new bonds worth €48 million in order to refinance a portion of the bonds maturing in April 2014 and be able to fund future growth of the Group. The bonds are listed on Catalyst ASO. The bonds are maturing in 2018/2019.

 

Finalization of construction of Pascal, building fully rented

GTC finalized the construction of 5,500 sq m Pascal office building in Kraków, Poland. The building draw attention of numerous key tenants, including IBM, Deloitte, and it reached 100% occupancy shortly after its completion.

 

Progress on Galeria Północna and Galeria Wilanów, applications for building permits to be submitted shortly

Administrative proceedings for both shopping mall projects in Warsaw reached their final stages, with application for building permit for Galeria Północna at Warsaw’s Białołęka district submitted in the second quarter of 2014. Application for Galeria Wilanów is being currently finalized and shall be filed in the coming months.

Land assembly for Galeria Północna at Warsaw’s Białołęka district is nearly finished. Agreements with a number of anchor tenants were signed, including reaching an agreement head of terms with a supermarket operator and key fashion chains. Advanced talks with next key tenants of both shopping malls are currently underway.

 

Significant new leases and lease renewals

 

GTC continues to benefit from outstanding reputation among renowned buyers and reputable tenants who value GTC quality. Despite demanding market conditions and growing pressure on rental rates throughout the region, the first half of 2014 was marked by a steady flow of new leases and renewals in Central and Eastern Europe.

Significant new leases:

  • ING Bank, Harfa Office Park and Gallerie Harfa (GTC owns 31,5% stake in the complex)            – space undisclosed on tenant’s request
  • LPP, Galeria Północna, Warsaw                         – 4,700 sq m
  • LPP, Galeria Wilanów, Warsaw                         – 4,600 sq m
  • IBM, Pascal, Korona Office Park, Cracow           – 1,700 sq m
  • UPS, University Business Park, Łódź                  – 1,000 sq m
  • Other leases in the region                               – 9,600 sq m (office sector); 4,300 sq m (retail sector)

Lease renewals:

  • 29,000 sq m of renewals in Budapest, Hungary (office sector)
  • 5,000 sq m of renewals in Poland (office sector)
  • 2,000 sq m of renewals in Poland (retail sector)
  • 2,000 sq m of renewals in Serbia (office sector)
  • 1,200 sq m of renewals in Bulgaria (retail sector)

 

***
The GTC Group, established in 1994, is a developer and commercial real estate manager in Central, Eastern and Southern Europe. The Group operates in Poland, Romania, Hungary, Croatia, Serbia, Bulgaria, Slovakia and Czech Republic.

GTC develops and actively manages real estate portfolio in two sectors of the market: office buildings and retail centres. Since its establishment, the Group has developed 43 office buildings and 12 shopping malls with a total net space amounting to more than 1 million sq m. GTC currently manages 28 commercial real estate projects with a total commercial space of over 589,000 sq m.

GTC S.A. is listed on Warsaw Stock Exchange on WIG30 index. The company’s shares are also included in the international indexes: Dow Jones STOXX Eastern Europe 300 index, GPR 250, which comprises the 250 largest and most liquid real estate companies of the world and the FTSE EPRA/NAREIT Emerging Index.