Planned capital increase will stimulate GTC’s further growth

Globe Trade Center S.A. (“GTC” or the “Company”), a leading commercial real estate company focused on CEE and SEE, proposes to its shareholders to increase its share capital and issue up to 140 million of new shares. The Company intends to invest the additional equity capital for the acquisition of value added, cash-generating assets, as well as for the construction of selected existing development projects.

Following a change in the shareholder structure at the end of 2013, GTC revised its mid-term strategy to take advantage of the new opportunities in the current market environment; the focus will be on creating value through opportunistic acquisitions and active portfolio and asset management of its growing portfolio in CEE and SEE, supplemented by carefully selected development activities of its existing landbank.

To effectively execute on this strategy, GTC’s Management Board recommends to its shareholders to approve and participate in the announced rights issue of up to 140 million of new shares. The newly raised capital will fuel the company’s further growth and profitability.

We have carefully selected potential acquisition and development targets that meet our stringent investment criteria. We will acquire value added, cash-generating assets and selectively develop projects from our existing landbank which offer the highest risk adjusted returns to GTC. We will focus our new investments to major cities in Poland and capital cities in CEE and SEE, namely Warsaw, Bucharest, Budapest and Belgrade. We strongly believe that the commercial real estate market in combination with the current fiscal policy of the European Union resulting in an extraordinarily low interest rate environment creates unique acquisition opportunities allowing for accretive growth. Our main shareholder, Lone Star, fully supports the management’s revised strategy which is the main objective for this capital increase. We are committed to convince our other shareholders of the merits of this strategy and to vote for the capital increase” – Thomas Kurzmann, GTC’s Chief Executive Officer commented.

Lone Star Fund, GTC’s main shareholder, confirmed its full support of the strategy and the management’s initiative to issue additional capital.

This capital increase is important to further strengthen GTC’s balance sheet and for the execution of its growth strategy” – added Alexander Hesse, Chairman of the Supervisory Board of GTC.

The shareholders’ meeting, at which shareholder will vote on the proposed right issue, is scheduled for 23 April 2015.

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GTC Group is at the forefront of the commercial real estate sector in Central, Eastern and Southern Europe. Its shares are listed on the Warsaw Stock Exchange and featured in the WIG30 index as well as many other international indices.

The Group was founded in 1994. Ever since we have been active on the real estate markets in Poland, Romania, Serbia, Croatia, Bulgaria, Hungary and Slovakia and we have developed 60 commercial buildings, offering over 1,000,000 sq m of lease area and nine residential projects offering over 400,000 sq m of floor space. Today GTC owns and manage 35 commercial buildings, office buildings and shopping centers, the combined space area of which is 665,000 sq m.

Disclaimer:
Not for release, publication or distribution, directly or indirectly, in or into the United States of America, Australia, Canada or Japan.
This document has been prepared by Globe Trade Centre S.A. (the “Company”), is for informational purposes only and under no circumstances shall constitute an offer or invitation to make an offer, or form the basis for a decision, to invest in the securities of the Company. This document does not constitute marketing or advertising material within the meaning of Article 53 of the Act on Public Offerings, the Conditions for Introducing Financial Instruments to an Organised Trading System, and Public Companies.
A decision as to whether to increase the share capital of the Company has not been made yet. The extraordinary general meeting of the shareholders of the Company, the agenda of which includes a resolution on the share capital increase, has been convened to be held on 23 April 2015 (the “EGM”). The announcement regarding the convocation of the EGM was published on 27 March 2015 by means of current report No. 8/2015. On the same date, the draft resolution of the EGM regarding the share capital increase was published on the Company’s website (www.gtc.com.pl). In case of the adoption by the EGM of the resolution on the share capital increase by way of the issuance of new shares (the “Shares”) in the Company subject to pre-emptive rights, the Company intends to file with the Polish Financial Supervision Authority (the “PFSA”) an application for the approval of a prospectus (the “Prospectus”) which will be the sole legally binding document containing information about the Company and the offering of its Shares in Poland (the “Offering”). The Company will be authorised to carry out the Offering only after the EGM has adopted the above-mentioned resolution and the Prospectus has been approved by the PFSA. The Company will make the Prospectus available pursuant to applicable law.
This document does not constitute a recommendation within the meaning of the Regulation of the Polish Minister of Finance Regarding Information Constituting Recommendations Concerning Financial Instruments or Issuers Thereof dated 19 October 2005.
This document (and the information contained herein) does not contain or constitute an offer of securities for sale, or solicitation of an offer to purchase securities, in the United States, Australia, Canada or Japan, or any other jurisdiction. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States of America, unless registered under the Securities Act or unless an exemption from the registration requirements set forth in the Securities Act applies to them. No public offering of the securities will be made in the United States of America.
To the maximum extent permitted under the applicable provisions of law, no representation, warranty or undertaking, expressed or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. The information, opinions and forward-looking statements contained in this document are subject to change without notice. The forward-looking statements included in this document involve a number of known and unknown risks, uncertainties and other factors that could cause the Company’s or its industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. The Company does not undertake publicly to update or revise any forward-looking statement that may be made herein, whether as a result of new information, future events or otherwise. Any business outlook information contained in this document shall be read as the internal targets of the Company and shall not be construed as financial projections or forecasts. These targets may or may not prove to be accurate. Neither the Company nor any of its subsidiaries or any other related entities shall be held accountable for any damage resulting from the use of this document, a part hereof, or its contents or in any other manner in connection with this document.

Continues improvement of key financial and operational metrics

Globe Trade Centre S.A. (“GTC”) released its 2014 financial results today. The results have been prepared in accordance with the International Financial Reporting Standards (IFRS) and are presented in euro.

2014 Financial Highlights

  • Rental and service revenues maintained at €110m in 2014 (€110m in 2013)
  • Rental margin improved to 74% (71% 2013)
  • Underlying profit before tax  up to €29m in 2014 (€19m in 2013) due to improvement in operations combined with cost savings
  • Interest cover up to 2.1x (1.7x in 2013)
  • Loan to Value (LTV) at 54% (53% as of 31 December 2013)
  • Average interest cost down to 4.2% (4.3% in 2013)
  • Cash flow from operations increased to €40m (€26m in 2013) mostly due to decline in the interest expenses coupled with improvement in cash from rental activity
  • Cash and deposits of €113m at year end
  • Revaluation loss of €194 in 2014 (€185 in 2013)
  • Preliminary agreement for settling the Felicity loan with an asset at the recent valuation is agreed with the lenders

Throughout 2014, the company’s management has been focusing its efforts on further streamlining the company and cost reductions. This has resulted in steady and continuous improvement of key operational ratios.

Thomas Kurzmann, GTC Chief Executive Officer, comments: “I believe that GTC’s operations have significantly improved, with strong and stable rental and service revenues. Following reassessment of performance of our portfolio in secondary cities and B-class locations in Romania, Croatia, Bulgaria and Hungary we decided to stop supporting some of the non-performing assets and to intensify our efforts to sell them. As a result, we recognised significant decline in valuations of some of the properties and land bank in those locations. However, we managed to find potential buyers for some of those properties. Moreover, we with our lenders, which will allow us to sell those assets and shift the loans to GTC’s level. We consider this as a great step forward, as it will allow the team to focus purely on the future development and acquisition program.”

“We have passed significant milestones in leasing and administrative proceedings on our developments Galeria Północna and Galeria Wilanów in Warsaw. We expect that building permit for Galeria Północna will be issued by mid-2015, this will be followed by immediate commencement of construction.”

“GTC’s team in Serbia managed to expedite construction of FortyOne office project in Belgrade. The building is scheduled for completion in the third quarter of 2015. We also continue analysing potential acquisition of income producing assets with upside potential. We are prepared to realize that part of our strategy as soon as funds from the capital rise is available”– concluded Thomas Kurzmann.

Financial overview

Rental and service revenues kept unchanged at €110m in 2014 compared to €110m in 2013. Margin on rental activities was improved to 74% in 2014 (71% in 2013).

Revenues from sale of residential properties increased to €15m in 2014, mostly due to improved sale of residential units in Romania and Poland. Margin on sale of residential properties was 1%.

Gross profit from operations increased to €81m in 2014 compared to €78m in 2013, mostly due to cuts in the operating expenses of non-performing properties.

Selling expenses remained virtually unchanged at the level of €3m in 2014 compared to €3m in 2013.

Administrative expenses, excluding provision for stock based program, remained unchanged at €11m in 2014 compared to €11m in 2013.

Underlying profit before tax  up to €29m in 2014 compared to €19m in 2013 due to improvement in gross margin from operations coupled with cost savings.

Net loss on revaluations of investment property and residential projects was €194m in 2014. The decline is attributed mainly to a decline in fair value of assets located in secondary cities in Romania, Croatia and Bulgaria, as well as land bank in Budapest. In previous years GTC supported the operations of certain projects with an intent to improve their operating performance. However, those efforts have not brought expected improvement. Following the reassessment of performance of Group`s portfolio in secondary cities and B-class locations in Romania, Croatia, Bulgaria and Hungary during fourth quarter of 2014, we decided to no longer support certain of these assets and to sell the Company`s non-performing assets. As a result, the valuations were based on less favourable assumptions with respect to future performance of certain shopping malls, which resulted in changes of estimated rental value of the projects, their required additional investments and their risk-adjusted yields.

Interest expenses net were at the level of €37m in 2014 compared to €43m in 2013.

Net loss of €207m in 2014 is attributable mainly to loss on revaluation of investment properties and residential projects.

Total debt of €811m as of 31 December 2014 (down from €888m as of 31 December 2013). The average debt maturity was 5.1 years and the average cost of debt was 4.2% p.a. (down from 4.3% in 2013).

Loan to value ratio was at the level of 54% as at 31 December 2014 compared to 53% as at 31 December 2013.

Interest coverage improved to 2.1x as at 31 December 2014 from 1.7x as at 31 December 2013.

NAV per share stood at €1.4 as at 31 December 2014 compared to €1.9 as at 31 December 2013.

Cash flow from operations went up to €40m in 2014 (€26m in 2013) mostly due to improvements in occupancy and rental income in the Group’s projects in Kraków, Łódź and Katowice, as well as cost cuts combined with decline in interest paid.

Key achievements

Share issue

In January 2014, GTC has executed a successful issue of 32 million series J ordinary bearer shares. The issue was 250% oversubscribed, proving strong interest in the company from both Polish and international investors.

Bonds refinancing

In March 2014, GTC has successfully issued 20,000 new bonds in total nominal value of PLN 200 million maturing in 2018/2019. The bonds were issued to Polish financial institutions and are listed on Catalyst Alternative Trading Systems.

Early in 2014, GTC has repaid €102m of bonds maturing in April 2014, as well as hedges related to bonds, consequently decreasing balance of liabilities from the proceeds from the bonds issue and partially from the share issue.

Commencement of FortyOne office project in Belgrade

In October 2014, GTC conducted an official ground breaking ceremony for its newest project in Serbia, the class-A FortyOne office complex. FortyOne will offer 10,300 sq m of leasable space, which today is 60% pre-leased. Phase one of the project is scheduled for completion and opening in Q3 2015, as construction works progress ahead of plan.

Completion and opening of Pascal in Kraków

Following the re-launch of construction of Pascal, the last phase of valued and esteemed Korona Office Complex in Kraków, Poland, in the first half of 2014. GTC has finalized construction works in regard to this 5,600 sq m office building. Currently, Pascal is fully operational and leased.

Progress in two key shopping mall projects in Warsaw

As of 31 December 2014, both projects reached a respectable number of pre-lease agreements. With regard to Galeria Północna, 10 agreements for total 19,921 sq m of space were signed, which brought the project’s pre-lease level to 31%. There is a significant number of pre-lease agreements that is under advanced negotiations.

Galeria Wilanów saw 11 pre-lease agreements for a total of 15.627 sq m of space signed by the end of 2014. This amounts to a pre-lease level of 25%, with additional pre-lease contracts in the pipeline.

Applications for building permits for both projects are currently being processed. In regard to Galeria Północna, the process has reached its final stage and as for Galeria Wilanów, the application process is progressing.

New leases and lease renewals

Despite continuous market pressure on rental rates, GTC benefits from outstanding reputation among renowned tenants, who value company’s experience and quality. Year 2014 was marked by numerous significant new leases and renewals, as well as pre-lease agreements for GTC’s new projects, totalling 147,500 sq m in Central and Eastern as well as South East Europe.

Significant renewals and extensions:

  • Hungarian Gov., Budapest, Hungary – 28,787 sq m
  • ExxonMobil in Center Point, Budapest, Hungary – 19,000 sq m
  • IBM in Korona Office Complex, Kraków, Poland – 7,154 sq m
  • Microsoft in City Gate complex, Bucharest, Romania – 6,845 sq m
  • Roche in City Gate complex, Bucharest, Romania – 2,881 sq m

Significant pre-lease agreements:

  • Carrefour in Galeria Północna and Galeria Wilanów, Warsaw, Poland – 16,100 sq m (combined)
  • LPP Group in Galeria Północna and Galeria Wilanów, Warsaw, Poland – 9,350 sq m (combined)
  • Cinema City in Galeria Północna and Galeria Wilanów, Warsaw, Poland – 7,300 sq m (combined)
  • H&M in Galeria Północna, Warsaw, Poland – 2,100 sq m

1 Profit before taxes, movement in valuation of investment assets, depreciation and change in fair value of hedges

2 Profit before taxes, movement in valuation of investment assets, depreciation and change in fair value of hedges

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GTC Group is at the forefront of the commercial real estate sector in Central, Eastern and Southern Europe. Its shares are listed on the Warsaw Stock Exchange and featured in the WIG30 index as well as many other international indices.
The Group was founded in 1994. Ever since we have been active on the real estate markets in Poland, Romania, Serbia, Croatia, Bulgaria, Hungary and Slovakia and we have developed 60 commercial buildings, offering over 1,000,000 sq m of lease area and nine residential projects offering over 400,000 sq m of floor space. Today GTC owns and manage 35 commercial buildings, office buildings and shopping centers, which combined space accounts for 665,000 sq m.