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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
24 September 2024
Globalworth Real Estate Investments Limited
("Globalworth" or the "Company")
Interim Results for the six months ended 30 June 2024
Globalworth, a leading office investor in Central and Eastern Europe, announces the release of its Interim Report and Unaudited Consolidated Financial Results for the six-month period ended 30 June 2024 (the "Interim Report").
The Interim Report is also available on Globalworth's website at: https://www.globalworth.com/investor-relations/reports-presentations/
For further information visit www.globalworth.com or contact:
Enquiries
| Rashid Mukhtar Group CFO
| Tel: +40 732 800 000 |
| Panmure Liberum (Nominated Adviser and Broker) Atholl Tweedie | Tel: +44 20 7886 2500 |
About Globalworth / Note to Editors:
Globalworth is a listed real estate company active in Central and Eastern Europe, quoted on the AIM-segment of the London Stock Exchange. It has become the pre-eminent office investor in the CEE real estate market through its market-leading positions both in Poland and Romania. Globalworth acquires, develops and directly manages high-quality office and industrial real estate assets in prime locations, generating rental income from high quality tenants from around the globe. Managed by over 250 professionals across Cyprus, Guernsey, Poland and Romania the combined value of its portfolio is €2.7 billion, as at 30 June 2024. Approximately 97.3% of the portfolio is in income-producing assets, predominately in the office sector, and leased to a diversified array of over 650 national and multinational corporates. In Poland Globalworth is present in Warsaw, Wroclaw, Lodz, Krakow, Gdansk and Katowice, while in Romania its assets span Bucharest, Constanta, Targu Mures and Craiova.
IMPORTANT NOTICE: This announcement has been prepared for the purposes of complying with the applicable laws and regulations of the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom. This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "targets", "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts and involve predictions. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business, results of operations, financial position, liquidity, prospects, growth or strategies and the industry in which it operates. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance. Save as required by law or regulation, the Company disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements in this announcement that may occur due to any change in its expectations or to reflect events or circumstances after the date of this announcement.
GLOBALWORTH REAL ESTATE INVESTMENTS LIMITED
INTERIM REPORT AND UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2024
FINANCIAL HIGHLIGHTS: H1 2024
| Combined portfolio open market value €2.7bn | | Shareholders' equity
€1.5bn | | EPRA NRV per share
€6.24 |
| -8.7% on YE-23 | | -4.1% on YE-23 | | -10.1% on YE-23 |
| LTV
39.9% | | Adjusted normalised EBITDA
€63.6m | | Net Operating Income
€72.4m |
| 42.2% at 31 Dec-23 | | -3.6% in H1-23 | | -1.8% in H1-23 |
| IFRS Earnings per share
-25 cents | | EPRA Earnings per share
11 cents | | Dividends paid in H1-24
11 cents |
| -11 cents in H1-23 | | 14 cents in H1-23 | | 15 cents in H1-23 |
CHIEF EXECUTIVE'S REVIEW
Dear Stakeholders,
2024 has the potential to become the turning point after a volatile and uncertain start of the decade, first with the Covid pandemic that swept across the globe starting with March 2020, followed by the break-out of Russo-Ukrainian conflict two years later. Although international environment remains a mix of still high capital costs and geopolitical tensions, the CEE countries' economies are expected to gain momentum in 2024 - 2025.
The European Commission May'24 forecasts show the EU GDP improving by 1.0% in 2024 and 1.6% in 2025 with Poland and Romania expected to outperform EU average and have a growth of 2.8% and 3.3% in 2024 followed by 3.4% and 3.1% in 2025, respectively.
Globalworth's performance throughout the business remained resilient, despite global and sectorial challenges, as we continued to implement our "local landlord" approach, with an increasing focus on sustainability.
Starting with the last months of 2023 and during the first semester of this year, considering the two significant bond maturities in 2025 and 2026, we have embarked on a complex refinancing process which was successfully completed in the second quarter of the year resulting in a significant strengthening of our debt maturity profile. Furthermore, in line with our focus on deleveraging and liquidity enhancing we have successfully divested our non-core logistic / light industrial portfolio in Romania during May and July.
Considering this, I would like to express my gratitude to all our team members for their positive attitude, dedication, and commitment, as well as extend our appreciation to our shareholders, partners, and communities for their unwavering support in helping us achieve these results.
Our Portfolio
Our portfolio predominantly consists of Class "A" office spaces. Having this in mind, during the first half of 2024, we have made important steps aimed at deleveraging and improving liquidity by divesting from several of our non-core assets.
Consequently, during May, we have successfully completed the sale of our fully owned logistic portfolio to CTP INVEST SPOL S.R.O, one of the leading logistic developers in Europe, for net proceeds amounting to c. €72.4 million after customary adjustments and deductions. The sold portfolio encompassed 7 industrial parks with 14 facilities offering 267.7k square meters of high-quality industrial spaces having an average occupancy of 90.4% by the end of December 2023.
Post June, we have sold our interests in the remaining of our standing logistic portfolio, which was owned through Joint Venture agreements, consisting of 3 logistic parks with a total Gross Lettable Area (GLA) of 136.4k square meters having an average occupancy of 94.8% as of June 2024. The buyer was Warehouses De Pauw (WDP), a Belgian-based logistic developer, with net proceeds to Globalworth amounting to c. €57.0 million.
By the end of June 2024, we had one built-to-suite logistic facility under construction in Craiova, Romania, with an estimated GLA of 5.9k square meters which was fully pre-leased to Returo SGR and subsequently delivered in August, while in Poland we were on course of finishing the refurbishment works in Renoma, our mixed-use property in Wroclaw.
Also, during the first six months of 2024, considering market context and the rising demand for flex offices, we have launched our own version of flexible office concept in several of our regional Polish properties. This concept is addressing tenants looking for smaller but high-quality spaces, usually for short and medium term, spaces that offer all the amenities they seek to attract and retain talents and that relate to their corporate identity.
Considering all the above, our overall total combined portfolio value decreased during the first half of 2024 by 8.3% to €2.7 billion mainly as an effect of non-core disposals in the period while the like for like decrease of our standing commercial assets owned throughout the period stood at 0.8%, commercial valuations still being impacted by high discount rates and general market context.
Our Leasing and Occupancy
The leasing of spaces within our portfolio constitutes a pivotal determinant of our business's success. It brings me satisfaction to report that during the initial half of 2024, we managed the leasing of 90.1k square meters of commercial spaces, with a Weighted Average Lease Length (WALL) of 4.8 years. This achievement is particularly noteworthy considering the persistently demanding market conditions.
As of June 30, 2024, the average occupancy rate across our combined commercial portfolio stood at 86.1%, decreasing in comparison to the year-end 2023, which stood at 88.3%. However, the like for like average occupancy in our standing commercial properties owned throughout the first six months of 2024 only marginally decreased by 0.5% from 87.1% to 86.6%.
In both the Polish and Romanian markets, we see persistent higher construction costs and interest rates which have led to a reduction in development activity and significantly constrained new supply. Consequently, we anticipate witnessing a diminished availability of top-tier office spaces in prime locations, below the average levels witnessed in previous periods, potentially driving higher tenant demand for existing properties.
Furthermore, the divergence between A-grade properties of robust environmental, social and governance (ESG) credentials and B-grade properties has been growing, both from an investment and leasing perspective. This development is poised to generate benefits to our portfolio of high-quality properties in the future.
Headline rental rates in our portfolio have started displaying a slight upward trend, influenced also by recent years' inflation, which, combined with the reduced supply and improving economic outlook is anticipated to serve as a strong buffer against the adverse impact of a decline in tenant demand due to sectorial trends like hybrid work.
Our total annualised contracted rent experienced a 4.4% decrease, reaching €192.3 million compared to the year-end 2023 figures (€201.2 million) driven mainly by the disposal of non-core assets during first part of 2024. Like-for-like annualised commercial contracted rents within our standing commercial portfolio exhibited a 3.1% upswing, to €182.6 million by the close of the first half of 2024.
Our Financial Results
Gross rental income increased with €1.3 million compared to the first half of last year as an effect of indexation that partially offset by the reduced rates at which existing leases were renewed for extended period or new leases were signed. However, on a net basis rental income declined with €1.6 million when accounting for lease incentives amortisation during the period.
Furthermore, net service charge result is €0.4 million lower than in prior period of last year, compensated by increase in fit-out margin and other income by €0.7 million thus Net Operating Income is €72.4 million, or €1.3 million lower, when compared to H1 2023.
Our adjusted normalised EBITDA reached €63.6 million, after deducting recurring administrative and other expenditure categories.
Undesirably, our net result for the initial half of 2024 amounted to a net loss of €65.3 million. This result is triggered primarily by fair value loss recorded on investment property, loss on sale of assets and impairment on investments in joint ventures.
Dividend
During March 2024, we announced the second interim dividend of €0.11 per share in respect of the twelve-month financial period ended 31 December 2023 with a scrip dividend alternative at a reference price of €1.96 per scrip aimed at preserving liquidity. Approximately 98.7% of the shareholders elected to receive scrip dividend shares thus resulting in only €0.4 million cash dividend outflow.
Also, in August 2024, we announced the payment of an interim dividend in respect of the six-month ended 30 June 2024 of €0.10 per ordinary share (which will be paid on 18 October 2024) and offers a scrip dividend alternative to the Interim Dividend. As communicated in scrip circular, the Company has received irrevocable undertakings from approximately 92.5% of the shareholders to elect the Scrip Dividend alternative shares in respect of all of their full cash entitlement to the Interim Dividend.
Balance Sheet
We are also executing our liability management strategy by extending near-term facilities and progressively arranging new secured facilities with local and regional banks in our markets. Our strong presence in the two capital cities, Bucharest and Warsaw, with several commercial office buildings having occupancy above 85% and high ESG credentials, provides us with a unique strength in sourcing additional secured facilities in the short term.
The first half of 2024 had several notable events in terms of financing, that lead to a decrease in total debt, as:
We exchanged our existing €850 million Notes with New €640 million Notes through an exchange exercise, we repaid €142.9 million from 18/25 Notes and €66.6 million from 20/26 Notes.
Subsequently to the exchange, we redeemed additional €65 million unsecured debt (24/29 New Notes €45 million and 24/30 New Notes €20 million).
Derecognized €97.5 million secured loans consequently to the disposal of subsidiaries holding industrial properties.
Following above corporate actions, the average debt maturity period improved to 5.2 years (3.7 years as of 31 December 2023) This brought down our leverage ratio to 39.9% (42.2% as of 31 December 2023) despite a 1% decline in the value of our like-for-like standing commercial portfolio. This is consistent with the Group's strategy to manage its long-term target LTV of around or below 40%.
It is important to note that Globalworth has no material debt maturing until 2027. Additionally, as of 30 June 2024, we have €210 million in cash and cash equivalents, which was further strengthened by the additional sale proceeds from JV logistics in July. We also have a further €187 million in undrawn debt facilities, out of which €50 million is available to draw until December 31, 2025.
The EPRA Net Reinstatement Value (NRV) as of 30 June 2024 was €1.66 billion, or €6.24 per share. This represents an 10% decrease from €6.94 per share on December 31, 2023. The decrease was primarily due to the issuance of a €13.9 million scrip dividend shares in April 2024, which diluted the NRV per share as well as a valuation loss on the property portfolio in H1-2024. This was partially mitigated by rental growth from indexation.
Fitch Ratings re-affirmed, in July 2024, Globalworth's investment grade rating and improved the outlook to stable following the annual review of our ratings. S&P Global Ratings maintained throughout the period our BB+ with negative outlook credit ratings.
Environmental and social
We maintained our A-rating by MSCI and a low-risk rating by Sustainalytics. We issued our sixth Sustainable Development Report during the period.
We continued investing in our green portfolio and, during the first six months of 2024, we certified or recertified 14 properties. At the end of June 2024, we had 47 green-certified properties valued at €2.2 billion.
We remain committed to our environmental target to reduce GHG emissions intensity by 46% by 2030 versus our baseline 2019 levels (for Scope 1 and 2), a target validated by the globally recognised Science Based Targets initiative (SBTi).
Outlook
As we move forward, many of the persistent headwinds that previously challenged the market have begun to dissipate. Inflation is increasingly under control, and interest rates are approaching central bank targets, providing a more stable economic backdrop. While geopolitical uncertainty remains a factor, key macroeconomic indicators point to continued strengthening in both financial and real estate markets.
The market fundamentals in our focus countries remain notably stronger than those of Western Europe. We are benefiting from a healthy supply-demand balance, with occupier demand being driven by solid economic growth and an encouraging return to the office. Within our capital-city markets, constrained supply continues to push rents and occupancy rates higher, reinforcing the sector's overall strength. Anecdotal evidence of rising tenant demand and declining vacancy rates in our core markets underscores the resilience and attractiveness of our properties. However, challenges remain in certain regional Polish markets, where we continue to monitor conditions closely to ensure we adapt to local dynamics. Nevertheless, as one of the largest and most integrated players in the region, we are well-positioned to capitalise on these broader market trends and further enhance our leadership.
Over the past year, we have remained committed to operational efficiency, while our robust liquidity position following our successful bond exchange, ensures we are well-prepared to navigate any remaining uncertainties. This financial strength also affords us the flexibility to selectively pursue investment opportunities that align with our strategic objectives. The reopening of the bond market for real estate issuers is also a positive development, easing concerns around the refinancing of maturing debt and creating a more favourable outlook for long-term growth.
Looking ahead, our strategy remains clear. We will continue to capitalise on our scale, expertise, and integrated model to deliver stable cashflows. We remain fully committed to delivering long-term value for our stakeholders, responding swiftly to market dynamics, and pursuing opportunities that support our growth ambitions.
Dennis Selinas
Chief Executive Officer
24 September 2024
MANAGEMENT REVIEW
REAL ESTATE ACTIVITY
| · In line with our focus on deleveraging and liquidity enhancing we have successfully divested our non-core logistic / light-industrial portfolio located in Romania · In May we have sold our fully owned logistic portfolio to CTP, one of Europe's largest publicly traded industrial and logistics property developers · The 50% share in logistic assets which was owned via joint venture companies was sold in July to WDP, a leading developer and investor in logistics real estate in Romania · Romania: · In February we have delivered the final 2 phases in Business Park Stefanesti, the fully delivered project being subsequently sold in May to CTP · As of June 30th, we had one logistic / light industrial facility under construction in Craiova which, as of completion in August 2024, has added another 5.9k sqm of high quality GLA to our portfolio · Poland: · In the first months of the year we have sold Bliski Centrum, an office building located in Warsaw offering a total GLA of 4.9k sqm · We have finalized the refurbishment / repositioning of Supersam mixed-use asset, while Renoma refurbishment is expected to be completed in the following months |
Disposal of non-core assets
As of May 31st, we have sold to CTP the fully owned logistics portfolio comprising five logistic / light-industrial parks with ten facilities in Timisoara, Arad, Oradea and Pitesti as well as a majority stake in two small business units' projects in Bucharest. The disposal is in line with our focus on enhancing liquidity, and reflective of the fact that logistic properties are considered non-core assets of the Group's portfolio. Net proceeds to Globalworth amounted to €72.4 million excluding working capital, minority interest and following the deduction of €95.8 million secured bank loans associated with the disposed portfolio.
| Fully Owned Logistic Portfolio (disposed in May 2024) | | | | | | |||||||
|
| Timisoara Industrial Park I | Timisoara Industrial Park II | Industrial Park West Arad | Industrial Park West Oradea | Pitesti Industrial Park | Business Park Chitila | Business Park Stefanesti | TOTAL | ||||
| Location | Timisoara | Timisoara | Arad | Oradea | Pitesti | Bucharest | Bucharest | Romania | ||||
| No. of facilities | 4 | 2 | 1 | 1 | 2 | 1 | 3 | 14 | ||||
| Globalworth share | 100% | 100% | 100% | 100% | 100% | 75% | 75% | > 50% | ||||
| GLA (k sqm) | 103.7 | 37.0 | 20.1 | 6.9 | 75.2 | 7.1 | 17.7 | 267.7 | ||||
| GAV (€m; incl. lands) | 68.6 | 31.2 | 17.7 | 6.7 | 59.2 | 7.3 | 15.9 | 206.6 | ||||
| Occupancy (%) | 100.0% | 54.4% | 100.0% | 100.0% | 100.0% | 98.1% | 51.0% | 90.4% | ||||
| 100% Rent (€ m) | 5.0 | 1.8 | 1.3 | 0.5 | 4.6 | 0.6 | 1.3 | 15.0 | ||||
Data as of 31 December 2023
Furthermore, in July, we have disposed of our 50% interests in logistic assets in Romania which were owned via joint venture companies (the "JV Portfolio") for a total net consideration to the Company estimated to €57.0 million.
| JV Portfolio (disposed in July 2024) | | | | | |||
|
| Chitila Logistics Park | Constanta Business Park | Targu Mures Logistics Hub | TOTAL | |||
| Location | Bucharest | Constanta | Targu Mures | Romania | |||
| No. of facilities | 1 | 2 | 1 | 4 | |||
| Globalworth share | 50% | 50% | 50% | 50% | |||
| GLA (k sqm) | 77.0 | 41.1 | 18.3 | 136.4 | |||
| GAV (€ m, incl. lands) | 47.6 | 55.1 | 17.2 | 119.9 | |||
| Occupancy (%) | 90.9% | 99.8% | 100% | 94.8% | |||
| 100% Rent (€ m) | 4.1 | 2.7 | 1.5 | 8.4 | |||
Data as of 30 June 2024, figures shown on 100% basis
Also, in the first months of the year, considering our deleveraging and liquidity enhancement strategy, we have sold Bliski Centrum, located in Warsaw, with a total GLA of 4.9k sqm, which, due to its relatively small size was not considered as a core asset by us.
Launching of Globalworth operated flex office concept
During the first semester of 2024, considering the evolution of hybrid work model across our markets of interest, especially in Poland, we have decided to meet the requests of our current and potential tenants by launching our own version of flexible office concept in Poland, which will be operated through a special group entity, GW Flex Sp. Z.o.o., who will be leasing spaces in our properties. This concept is addressing tenants looking for smaller but high-quality spaces, usually for short and medium term, spaces that offer all the amenities they seek in order to attract and retain talents and that relate to their corporate identity.
As of June 30th, we had 5.4k sqm of GLA in our flex office portfolio across five properties in regional Polish cities with an average occupancy of 54.1%.
| Globalworth Flex Office Portfolio |
| |||||
|
| Tryton | Quattro Business Park | Retro Office House | Silesia Star | Supersam | |
| Location | Gdansk | Krakow | Wroclaw | Katowice | Katowice | |
| GLA (k sqm) | 0.5 | 1.5 | 1.2 | 1.0 | 1.2 | |
| Occupancy (%) | 69% | 0% | 75% | 50% | 100% | |
Review of Developments
At the beginning of the year, we had two logistic projects under construction, of which Stefanesti Business Park was delivered and sold to CTP in the first semester while Craiova Logistic Park was subsequently delivered in August. From the two mixed-use properties under refurbishment at the start of the year, we have completed the works in Supersam, with Renoma remaining to be delivered until year end.
Current Developments & Refurbishment / Repositioning Projects
As of June 30th, we had one logistic property under development in Romania, Craiova Logistic Hub, our first property in Craiova, which, as of completion in August 2024, has added another 5.9k sqm of high quality GLA to our portfolio. This built to suite facility is 100% pre-leased to Returo SGR based on a 20-year lease.
| Developments | | |
|
| Craiova Logistic Park (delivered in August 2024) | |
| Location | Craiova | |
| GLA (k sqm) | 5.9 | |
| Occupancy (%) | 100% | |
| Development Cost (€ m) | 4.5 | |
| GAV (€ m) | 5.0 | |
| Contracted Rent (€ m) | 0.4 | |
| 100% Rent (€ m) | 0.4 | |
| Estimated Yield on Development Cost | 8.2% | |
In Poland the refurbishment of our iconic Renoma mixed-use asset is expected to be finalized in the following months with the repositioning of the property now offering a more attractive food court and an increase in office GLA compared to pre-refurbishment status.
| Properties Under Refurbishment / Repositioning | |
|
| Renoma |
| Location | Wroclaw |
| Status | Refurbishment / Repositioning |
| Expected Delivery | H2-2024 |
| GLA - on Completion (k sqm) | 48.3 |
| CAPEX to 30 Jun 24 (€ m) | 22.9 |
| GAV (€ m) | 111.0 |
| Estimated CAPEX to Go (€ m)* | 6.4 |
| ERV (€ m) | 9.4 |
| Estimated Yield on Completion of Project** | 9.0% |
* Estimated CAPEX to Go partially excludes tenant contributions which are subject to negotiation and may impact the final yield on Completion of the Project.
** Estimated Rental Value increase versus current Contracted rent + ERV on vacant spaces divided by total Development CAPEX.
Future Developments
We own, directly or through JV partnerships, other land plots in prime locations in Bucharest and Constanta, Romania and in Krakow, Poland, covering a total land surface of 0.9 million sqm (comprising 2.6% of the Group's combined GAV), for future developments of office, industrial or mixed-use properties. When fully developed, these land plots have the potential to add a total of a further 620.5k sqm of high-quality GLA to our standing portfolio footprint.
These projects, which are classified as "Future Development", continue to be reviewed by the Group, albeit periodically, with the pace at which they will be developed being subject to tenant demand and general market conditions.
| Future Developments | | | | | |
|
| Podium Park III | Green Court D | Globalworth West | Constanta Business Park (Phased)* | Luterana |
| Location | Krakow | Bucharest | Bucharest | Constanta | Bucharest |
| Status | Postponed | Postponed | Postponed | Planned | Planned |
| GLA (k sqm) | 17.7 | 17.2 | 33.4 | 525.8 | 26.4 |
| CAPEX to 30 Jun 24 (€ m) | 8.5 | 2.5 | 5.2 | 12.3 | 7.4 |
| GAV (€ m) | 7.1 | 7.4 | 6.2 | 37.2 | 12.3 |
| Estimated CAPEX to Go (€ m)** | 29.7 | 23.9 | 38.5 | 243.6 | 39.7 |
| ERV (€ m) | 3.1 | 3.6 | 5.8 | 27.7 | 6.7 |
| Estimated Yield on Development Cost | 8.1% | 13.6% | 13.3% | 10.8% | 14.1% |
(*) Part of the JV portfolio disposed in July 2024; figures shown on 100% basis.
(**) Initial preliminary development budgets on future projects to be revised prior to the permitting.
ASSET MANAGEMENT REVIEW
| · 90.1k sqm of commercial space taken-up or extended at an average WALL of 4.8 years with Poland accounting for 66.5% of leases signed in the first six months of 2024 · New leases (including expansions) accounted for 47.6% of our leasing activity at a WALL of 5.6 years, with renewals signed at a WALL of 4.0 years. · Total annualised contracted rent decreasing by 4.4% to €192.3 million compared to year end 2023 influenced by the sale of the fully owned logistic portfolio and of one small office asset in Warsaw · Like-for-like annualised contracted rent from our standing commercial assets owned throughout the first 6 months of the year increased by 3.1% to €182.6 million (€177.1 million as of Dec'23) · Total combined portfolio value decreased by 8.3% to €2.7 billion, mainly due to disposal of non-core assets and negative revaluation adjustments. · Like-for-like appraised value of standing commercial properties slightly decreasing to €2.5 billion (0.8% lower compared to 31 December 2023). |
Leasing Review
New Leases
Our principal focus continues to be the prolongation of leases with existing tenants in our portfolio and the take-up of available spaces in standing properties and developments.
In the first six months of 2024, the Group successfully negotiated the take-up (including expansions) or extension of 90.1k sqm of commercial spaces in Poland (66.5% of transacted GLA) and Romania (33.5% of transacted GLA), with an average WALL of 4.8 years. Between 1 January and 30 June 2024, our leasing activity involved new take-up of available spaces, with such leases accounting for 47.6% of our total leasing activity signed at a WALL of 5.6 years, while renewals were signed at a WALL of 4.0 years.
The office leasing market continues a challenging path, albeit a clear differentiation can be seen between capital cities compared to regional cities and between grade A and grade B properties. CEE economies are starting to pick up, with inflation easing and interest rates expected to follow suit, while hybrid work model was mostly acknowledged and incorporated by our markets of interests.
In total, we signed new take up for 42.9k sqm of GLA, with 56.1% involving spaces leased to new tenants, and the remaining areas being taken up by existing tenants which were expanding their operations.
New leases (new tenants) were signed with 25 tenants for 24.1k sqm of GLA at a WALL of 6.5 years. The majority were for office spaces, accounting for 83.1%, with the remainder involving industrial (12.7%) and retail/other commercial spaces. The largest new leases in this period were with Clever Media Network (2.0k sqm) in BOC Tower (Bucharest), Jaral (1.9k sqm) in Silesia Star (Katowice), Kinstellar (1.9k sqm) in Globalworth Tower (Bucharest) and MDPI Poland (1.7k sqm) in Podium Park (Krakow).
In addition, 27 tenants signed new leases, expanding their operations by 18.8k sqm at an average WALL of 4.6 years.
We renewed leases for a total of 47.2k sqm of GLA with 45 of our tenants at a WALL of 4.0 years. The most notable extensions involve FMC Technologies (6.9k sqm) in Podium Park, Maracana (5.8k sqm) in Constanta Business Park, Infor (4.9k sqm) in Retro Office House and Solid Group (3.3k sqm) in Batory Building while c.37% of the renewals by GLA signed were for leases that were expiring in 2025 or later.
| Summary Leasing Activity for Combined Portfolio in H1-2024 | |||
| | GLA (k sqm) | No. of Tenants* | WALL (yrs) |
| New Leases (incl. expansions) | 42.9 | 51 | 5.6 |
| Renewals / Extensions | 47.2 | 45 | 4.0 |
| Total | 90.1 | 87 | 4.8 |
| *Number of individual tenants | |||
Rental Levels
Starting with last year, headline rental levels started to display a slight upward pressure mostly influenced by indexation, but also by the limited new supply of high-quality spaces coming into the market. We expect this trend to continue, despite challenges in the market, but with different impact depending on the location, ESG credentials and office asset class.
Most of our leases typically adjust annually in the first quarter of the year and, in the first half, eligible leases were indexed at an average of 5.3%. However, this positive impact was partly offset by the rates at which leases were renewed or new leases signed throughout the period.
At the end of June 2024, our average headline rent in our standing properties for office, retail/commercial and industrial spaces were €15.8/sqm/month (€15.0 at YE-2023), €16.7/sqm/month (€16.7 at YE-2023) and €4.2/sqm/month (€4.3at YE-2023) respectively.
Office leases signed in the first half of the year were at an average rent of €15.7/sqm/month, industrial spaces at €4.1/sqm/month, and retail spaces at €12.1/sqm/month. The overall commercial GLA take-up during the first six months of 2024 was at an average rent of €13.9/sqm/month.
Contracted Rents (on annualised basis)
Total annualised contracted rent across our portfolio in Poland and Romania decreased by 4.4% to €192.3 million compared to year-end 2023 (€201.2 million), driven mainly by disposal of non-core assets in the first half of 2024 and, in a lesser extent, by indexation and net leasing activity in our projects.
Total annualised contracted rents in our standing commercial portfolio were €185.8 million on 30 June 2024, down by 3.0% compared to 31 December 2023, increasing to €186.2 million when including rental income generated by renting 92 residential units and other auxiliary spaces in Upground, the residential complex in Bucharest which we partially own.
Like-for-like annualised commercial contracted rents in our standing commercial portfolio increased by 3.1% to €182.6 million at the end of the first half of 2024 compared to 31 December 2023, mainly as an effect of rent indexation.
| Annualised Contracted Rent Evolution H1-2024 (€m) | |||
|
| Poland | Romania | Group |
| Rent from St. Comm. Props ("SCP") 31 Dec 2023 | 86.4 | 105.1 | 191.5 |
| Less: Assets sold | (1.1) | (13.2) | (14.4) |
| Rent from SCP Adj. for Properties sold | 85.3 | 91.8 | 177.1 |
| Less: Space Returned | (6.2) | (2.1) | (8.3) |
| Plus: Rent Indexation | 3.3 | 3.1 | 6.5 |
| Plus/Less: Lease Renewals (net impact) & Other | 0.0 | (0.0) | 0.0 |
| Plus: New Take-up | 4.0 | 3.4 | 7.3 |
| Total L-f-L Rent from SCP 30 Jun 2024 | 86.4 | 96.2 | 182.6 |
| Plus: Standing Commercial Properties Acquired During the Period | - | - | - |
| Plus: Developments Completed During the Period | 3.1 | - | 3.1 |
| Total Rent from Standing Commercial Properties | 89.5 | 96.2 | 185.8 |
| Plus: Residential Rent | - | 0.4 | 0.4 |
| Total Rent from Standing Properties | 89.5 | 96.6 | 186.2 |
| Plus: Active and Pre-lets of Space on Projects Under Development / Refurbishment | 5.7 | 0.4 | 6.1 |
| Total Contracted Rent as at 30 Jun 2024 | 95.2 | 97.0 | 192.3 |
| Combined Annualised Commercial Portfolio Contracted Rent Profile as at 30 June 2024 | |||
| | Poland | Romania | Group |
| Contracted Rent (€ m) | 95.2 | 96.6 | 191.8 |
| Tenant origin - % | |||
| Multinational | 66.5% | 81.1% | 73.8% |
| National | 32.2% | 17.3% | 24.7% |
| State Owned | 1.3% | 1.7% | 1.5% |
| Note: Commercial Contracted Rent excludes c.€0.4 million from residential spaces as at 30 June 2024
| |||
| Annualised Contracted Rent by Period of Commencement Date as at 30 June 2024 (€m) |
| |||||
| | Active Leases | H2-2024 | H1-2025 | H2-2025 | >2025 | Total |
| Standing Properties | 177.4 | 8.6 | 0.2 | - | - | 186.2 |
| Developments | 6.0 | 0.1 | - | - | - | 6.1 |
| Total | 183.4 | 8.7 | 0.2 | - | - | 192.3 |
| Annualised Commercial Portfolio Lease Expiration Profile as at 30 June 2024 (€m) | ||||||||||
| Year | H2-2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | >2032 |
| Total | 7.0 | 12.3 | 17.5 | 28.7 | 26.7 | 31.7 | 28.7 | 18.2 | 5.3 | 15.7 |
| % of total | 3.6% | 6.4% | 9.1% | 15.0% | 13.9% | 16.5% | 15.0% | 9.5% | 2.8% | 8.2% |
The Group's rent roll across its combined portfolio is well diversified, with the largest tenant accounting for 3.7% of contracted rents, while the top three tenants account for 9.5% and the top 10 account for 23.1%.
Cost of Renting Spaces
The headline (base) rent presents the reference point, which is typically communicated in the real estate market when a new lease is signed. However, renting spaces typically involves certain costs, such as rent-free periods, fitouts for the space leased, and brokerage fees, which the landlords incur. These incentives can vary significantly between leases and depend on market conditions, type of lease (new take-up or lease extension), space leased (office, industrial, other), contract duration and other factors.
In calculating our effective rent, we account for the costs incurred over the lease's lifetime, which we deduct from the headline (base) rent, thus allowing us to assess the profitability of a rental agreement.
Overall, in the first half of 2024, we successfully negotiated the take-up (including expansions) or extension of 84.5k sqm of commercial spaces in our portfolio, excluding leases signed with group entity for flexible office spaces. The weighted average effective rent for these new leases was €9.9/sqm/month with a WALL of 4.8 years. Industrial leases signed in the period accounted for 14.0% of the total leasing activity resulting in the lower average headline and effective rent.
The difference between headline (base) and effective rents in the first half of 2024 was, on average, 28.9%, which is higher than for FY2023 (average of 26.2%) as market conditions remained challenging.
In total, new leases signed in the first six months of the year will generate a future headline rental income of €77.7 million (including auxiliary spaces and revenues from GW flex offices), with leases from office properties accounting for 88.2% of future headline rental income.
| Weighted Average Effective Rent (€ / sqm / m) - H1-2024 |
|
|
| ||
|
| Poland | Romania | Group | ||
| Headline Commercial Rent | 15.6 | 10.8 | 13.9 | ||
| Less: Rent Free Concessions | (2.6) | (1.3) | (2.1) | ||
| Less: Tenant Fitouts | (2.1) | (0.5) | (1.5) | ||
| Less: Broker Fees | (0.7) | (0.2) | (0.5) | ||
| Effective Commercial Rent | 10.2 | 8.9 | 9.9 | ||
| WALL (in years) | 4.3 | 6.0 | 4.8 | ||
Portfolio Valuation
In line with our practice of biannual valuations, our entire portfolio in Poland and Romania was revalued as at 30 June 2024.
The valuations were performed by Knight Frank for our properties in Poland, with Colliers and Cushman and Wakefield valuing our properties in Romania (more information is available under note 4 of the unaudited interim condensed consolidated financial statements as of and for the period ended 30 June 2024).
Assigning the appraisal of our portfolio to independent and experienced service providers makes the process of determining the value properties transparent and impartial. Through our oversight, we ensure that a consistent methodology, reporting, and timeframe are respected.
Our portfolio, since the inception of the Group, has been growing to reach €3.2 billion as of 31 December 2022, following series of acquisitions and development of high-quality office and logistic / light industrial assets in Poland and Romania. Starting with the Covid pandemic, the office market begun a visible transformation characterized by the rise of hybrid work while differentiation between class A and class B properties became more obvious.
Therefore, our focus has switched to preserving the value of our core assets through selective investments, while also considering the disposal of non-core assets aimed at deleveraging and liquidity enhancing. Consequently, during the first seven months of 2024, we have successfully sold to reputed logistic investors our interests in the logistic / light industrial portfolio that we owned at the end of 2023.
As such, the portfolio's third-party appraised value on 30 June 2024 was estimated at €2.7 billion, impacted by the sale of assets worth €228.1 million and the like-for-like decrease (€18.9 million / 0.8%) in the appraised value of our standing commercial properties, leading to an overall decrease of 8.3% compared to the end of 2023.
In valuing our properties, the key market indicators used by our independent appraisers, although they vary, consider factors such as the commercial profile of the property, its location and the country in which it is situated. These factors have remained consistent with year-end 2023, with ERVs displaying selective upward pressure, especially in prime locations and for class A assets, while yields have seen a marginal decompression in secondary locations.
| Combined Portfolio Value Evolution 30 June 2024 (€m) | |||
|
| Poland | Romania | Group |
| Total Portfolio Value at 31 Dec 2023 | 1,474.8 | 1,520.0 | 2,994.8 |
| Less: Properties Held in Joint Venture (*) | - | (129.0) | (129.0) |
| Total Investment Properties at 31 Dec 2023 | 1,474.8 | 1,391.0 | 2,865.8 |
| Plus: Transactions | (12.4) | (215.7) | (228.1) |
| o/w New Acquisitions | - | - | - |
| o/w Disposals | (12.4) | (215.7) | (228.1) |
| Plus: Capital Expenditure | 6.8 | 13.6 | 20.4 |
| o/w Developments | 2.7 | 2.7 | 5.4 |
| o/w Standing Properties | 4.1 | 10.9 | 15.0 |
| o/w Future Developments | - | - | - |
| Plus: Net Revaluations Adjustments | (31.9) | (8.5) | (40.3) |
| o/w Developments | (4.1) | (0.0) | (4.1) |
| o/w Standing Properties | (27.8) | (8.2) | (36.0) |
| o/w Lands, Future Developments & Acquisitions | - | (0.2) | (0.2) |
| Total Investment Properties at 30 Jun 2024 | 1,437.3 | 1,180.4 | 2,617.7 |
| Plus: Properties Held in Joint Venture (*) | - | 129.7 | 129.7 |
| o/w Capital Expenditure & Acquisitions | - | 0.8 | 0.8 |
| o/w Net Revaluation Adjustments | - | (0.1) | (0.1) |
| Total Portfolio Value at 30 Jun 2024 | 1,437.3 | 1,310.1 | 2,747.4 |
(*) Joint Venture Portfolio, which was disposed in July 2024, is shown at 100%; Globalworth owned 50% stake as of June 30th,2024.
STANDING PORTFOLIO REVIEW
| · Standing portfolio footprint decreasing to 1,146.5k sqm valued at €2.6 billion as of 30 June 2024, following the disposal of the fully owned logistic portfolio. · Average standing occupancy of our combined commercial portfolio of 86.1%, lower vs. year-end 2023 (88.3%) · Like for like average commercial standing occupancy slightly declined by 0.5% to 86.6% as of 30 June 2024 (compared to 87.1% at year-end 2023). · Total contracted rent of €186.2 million in our standing properties (over 89% coming from standing office properties). · All our properties in Poland are now internally managed, resulting in 93.1% of our combined standing commercial portfolio by value (96.6% of office and mixed-use standing properties) being internally managed by the Group. |
Standing Portfolio Evolution
The footprint of our standing commercial portfolio decreased during the first half of 2024 following the successful disposal of our fully owned logistic portfolio. We consider these assets, together with a small office building located in Warsaw, which was sold in the first months of the year, as non-core assets, therefore the divestment decision was made having in mind our deleveraging and liquidity enhancement strategy.
Overall, our standing portfolio is predominantly focused on 28 Class "A" office (48 properties in total) and two mixed-use investments (with six properties in total) in central locations in Bucharest (Romania), Warsaw (Poland) and five of the largest office markets/cities of Poland (Krakow, Wroclaw, Katowice, Gdansk and Lodz), which account for 95.0% of our standing portfolio by value.
In addition, in Romania, we had 50% ownership through joint venture agreements in three other logistics/business parks (with four standing facilities) in Bucharest, Constanta and Targu Mures (the JV Portfolio, which was subsequently disposed in July) and we own part of a residential complex in Bucharest.
As of 30 June 2024, our combined standing portfolio comprised 34 investments (41 on 31 December 2023) with 59 buildings (71 on 31 December 2023) in Poland and Romania.
During the period, our standing commercial portfolio's total GLA decreased by 233.5k sqm or 17.1% to reach 1,133.9k sqm at the end of June. This evolution was attributable to the sale of the fully owned logistic portfolio (254.3k sqm of standing GLA as of 31 December 2023), the sale of Bliski Centrum in Warsaw (4.9k sqm of GLA) and the completion of refurbishment works in Supersam, our mixed-use asset in Katowice, Poland (26.7k sqm of GLA).
The appraised value of our combined standing portfolio as of 30 June 2024 was €2.6 billion (more than 99% in commercial properties) which was 6.4% lower compared to 31 December 2023, the overall decrease being mostly due to divestments completed during the period. The value of like-for-like standing commercial properties marginally decreased by 0.8% as of 30 June 2024 compared to 31 December 2023.
Globalworth Combined Portfolio: Key Metrics
| Total Standing Properties | 31 Dec. 2022 | 31 Dec. 2023 | 30 Jun. 2024 |
| Number of Investments | 41 | 41 | 34 |
| Number of Assets | 71 | 71 | 59 |
| GLA (k sqm) | 1,405.6 | 1,386.0 | 1,146.5 |
| GAV (€ m) | 2,893.6 | 2,736.4 | 2,561.2 |
| Contracted Rent (€ m) | 182.0 | 192.0 | 186.2 |
| Of which Commercial Properties | 31 Dec. 2022 | 31 Dec. 2023 | 30 Jun. 2024 |
| Number of Investments | 40 | 40 | 33 |
| Number of Assets | 70 | 70 | 58 |
| GLA (k sqm) | 1,383.2 | 1,367.4 | 1,133.9 |
| GAV (€ m) | 2,850.3 | 2,700.0 | 2,535.4 |
| Occupancy (%) | 85.6% | 88.3% | 86.1% |
| Contracted Rent (€ m) | 181.3 | 191.5 | 185.8 |
| Potential rent at 100% occupancy (€ m) | 211.6 | 217.7 | 213.4 |
| WALL (years) | 4.4 | 4.9 | 4.6 |
| Evolution of Combined Standing Portfolio over H1-2024 |
|
|
|
|
| |||||
| | 31 Dec. 2023
| LfL Change*
| New Acquisitions | Sales | New Deliveries
| Reclass. & Other Adj** | 30 Jun. 2024
|
| ||
| GLA (k sqm) | 1,386.0 | - | - | (265.3) | 26.7 | (0.9) | 1,146.5 |
| ||
| GAV (€ m) | 2,736.4 | (20.3) | - | (205.4) | 50.6 | - | 2,561.2 |
| ||
(*) Like-for-Like change represents the changes in GLA or GAV of standing properties owned by the Group at 31 December 2023 and 30 June 2024.
(**) Includes impact in areas (sqm) from the remeasurement of certain properties and other GAV adjustments (redevelopment capex, reclassification).
Standing Portfolio Occupancy
Our standing commercial portfolio's average occupancy as of 30 June 2024 was 86.1%, representing a decrease of 2.1% over the past six months (88.3% as of 31 December 2023), however this was impacted by the divestment of non-core assets having occupancy better than portfolio average and the addition of newly refurbished mixed-use property of Supersam (Katowice, Poland) which, as of 30 June 2024 had an occupancy of 65.5%. Like for like standing commercial occupancy, adjusted for the non-core assets disposed in the period (the fully owned logistic portfolio from Romania and Bliski Centrum office property in Warsaw, Poland) and for the mixed-use asset delivered in the period, decreased marginally by 0.5% from 87.1% to 86.6%. Across the portfolio, at the end of the first half of 2024, we had 976.6k sqm of commercial GLA leased to more than 630 tenants at an average WALL of 4.6 years, the majority of which is let to national and multinational corporates that are well-known within their respective markets.
In addition, we had 27.5k sqm leased in Renoma mixed-use property (Wroclaw, Poland) which was under refurbishment/repositioning as of 30 June 2024 and 5.9k sqm pre-let in our built to suit logistic project being developed in Craiova, Romania, which are not included in our standing portfolio metrics.
| Occupancy Evolution H1-2024 (GLA 'k sqm) - Commercial Portfolio | ||||||
|
| Poland | Occupancy Rate (%) | Romania | Occupancy Rate (%) | Group | Occupancy Rate (%) |
| Standing Available GLA - 31 Dec. 23 | 508.5 |
| 859.0 |
| 1,367.4 |
|
| Sold GLA | (4.9) |
| (254.3) |
| (259.3) |
|
| Acquired GLA | - | | - | | - | |
| New Built GLA | 26.7 | | - | | 26.7 | |
| Remeasurements, reclassifications | 0.0 | | (0.9) | | (0.9) | |
| Standing Available GLA - 30 Jun. 24 | 530.2 |
| 603.7 |
| 1,133.9 |
|
| Occupied Standing GLA - 31 Dec. 23 | 403.4 | 79.3% | 803.5 | 93.5% | 1,206.9 | 88.3% |
| Sold Occupied GLA | (4.8) | | (237.3) | | (242.1) | |
| Acquired/Developed Occupied GLA | 17.5 | | - | | 17.5 | |
| Expiries & Breaks | (33.1) | | (13.9) | | (47.0) | |
| Renewals* | 36.0 | | 9.3 | | 45.3 | |
| New Take-up | 20.3 | | 20.8 | | 41.1 | |
| Other Adj. (relocations, remeasurements, etc) | 0.0 | | 0.1 | | 0.1 | |
| Occupied Standing GLA - 30 Jun. 24 | 403.4 | 76.1% | 573.2 | 94.9% | 976.6 | 86.1% |
* Renewals are neutral to the occupancy calculation.
Standing Properties Operation and Upgrade Programme
Offering best-in-class real estate space to our business partners remains a key component of our strategy at Globalworth.
We believe that through a "hands-on" approach with continuous active management and investment in our portfolio, we can preserve and enhance the value of our properties, generate long-term income, and offer best-in-class real estate space to our business partners.
To be able to provide spaces for our current and future business partners' requirements, we keep (re)investing in our properties, maintain and, where required, improve the quality of our buildings and our services.
We are pleased that all our properties in Poland are now internally managed by the Group. In Romania, we manage all but one of our offices in-house. Overall, we internally manage 955.3k sqm of high-quality commercial spaces with an appraised value of €2.4 billion. Of our total standing commercial portfolio, internally managed properties account for 93.1% by value (96.6% of office and mixed-use standing properties) as of 30 June 2024.
In the first half of 2024, we invested €15.8 million in select improvement initiatives in our standing commercial portfolio. As a result of our ongoing in-house initiatives and property additions, we hold a modern portfolio with 43 of our standing commercial properties, accounting for 81.1% by GLA and 79.2% by commercial portfolio value, having been delivered or significantly refurbished since 2014.
| Internally Managed Commercial Portfolio as at 30 June 2024 | Poland | Romania | Group |
| Internally Managed GLA (k sqm) | 530.2 | 425.1 | 955.3 |
| % of Commercial GLA | 100% | 70% | 84% |
| % of Office and Mixed-Use GLA | 100% | 91% | 96% |
| Internally Managed GAV (€ m) | 1,319.2 | 1,040.8 | 2,360.0 |
| % of Commercial GAV | 100% | 86% | 93% |
| % of Office and Mixed-Use GAV | 100% | 93% | 97% |
SUSTAINABLE DEVELOPMENT UPDATE / OTHER INITIATIVES
| 14 properties were certified or recertified with BREEAM Very Good or higher certifications in our portfolio in H1-2024 Overall, 47 green certified properties in our portfolio valued at €2.2 billion accounting for 85.3% from our combined standing commercial portfolio value. 95.7% of our office and mixed-use properties by value have a WELL Health-Safety rating, further demonstrating the quality of our portfolio Issued the sixth sustainable development report for the Group for FY 2023 Globalworth maintained its low-risk rating by Sustainalytics at 11.1 and A by MSCI c.€140k donated to over13 initiatives in Romania and Poland. |
Green Buildings
Consistent with our commitment to energy-efficient properties, during H1-2024 we certified or recertified 14 properties in our portfolio with BREEAM Very Good or higher certifications.
Overall, as of 30 June 2024, our combined standing portfolio comprised 47 green-certified properties, accounting for 85.3% of our standing commercial portfolio by value. BREEAM-accredited properties account for 79.3% of our green-certified standing portfolio by value, with the remaining properties being holders of other certifications (LEED Gold or Platinum).
At Globalworth, we are aiming for 100% of our portfolio to be green-accredited. We are currently in the process of certifying or recertifying 8 other properties in our portfolio, principally targeting BREEAM certifications.
Furthermore, as part of our overall green initiatives, we kept our policy of securing 100% of the energy used in our Polish and Romanian properties from renewable sources.
In addition, as of 30 June 2024, 49 of our standing commercial properties had a WELL Health-Safety Rating, with a total value of €2.3 billion accounting for 95.5% of our standing office and mixed-use properties by value. Overall, 95.7% of our office and mixed-use portfolio by value (including Renoma) is rated for WELL Health-Safety, standing as further evidence of the quality of our portfolio.
Social Initiatives
In the first half of 2024, Globalworth and the Globalworth Foundation continued with their very active social programme, contributing €140k to over 13 initiatives in Romania and Poland.
Initiatives to which we contributed included:
For the love of heart
An initiative organized for Globalworth's tenant community, which aims to popularize preventive examinations and care for a healthy lifestyle; over 500 People took part in the examinations
Through Wola District for autism
The aim of the initiative is to work together for the benefit of people on the autism spectrum and their families, and to raise funds to support the activities of the SYNAPSIS Foundation
Open Your Heart to Children's Heart
This aims to encourage and support donations to the Children's Heart Association / Asociația Inima Copiilor, to help children with heart conditions.
In addition to these we had several campaigns within our communities among which it is noteworthy to mention:
Tree planting in Văcărești National Park
We gathered as a team to take care of the tree barrier in Văcărești National Park, the first urban natural park in Romania
Șona AIR Residency
Șona AIR offers the perfect environment for creators and artists to zero in on their work. It's a place where they can step away from everyday life and focus on exploration, reflection and the development of long-term projects. This program fosters collaboration, creating a dynamic and vibrant community of creativity where artists can flourish. By providing space, time and resources, Șona AIR sustains the next generation of artists to push the boundaries of their practice. Globalworth Foundation supports Șona AIR residency program together with Fundația Ștefan Câlția
Galeria Posibilă
The Globalworth Foundation and Galeria Posibilă partnered up to amplify the voice of emerging artists. We're dedicated to empowering up-and-coming artists, sparking conversations and connecting communities through our collaboration as gallery partners in this year's editorial program.
Brave Cut
At Globalworth, we understand the challenges faced by oncology patients undergoing cytostatic treatments, especially the emotional toll of hair loss. Our partnership with the Fundatia Renasterea pentru Sanatatea Femeii in the "Vieți împletite" initiative aimed to recognize women's individuality and their role in society. By offering personalized natural hair wigs, we aim to empower patients with more than just a cosmetic solution - it's about restoring their confidence and resilience throughout their journey.
Reporting
As part of our effort to improve disclosure in relation to our sustainable development strategy, initiatives and performance, we published Globalworth's "2023 Sustainable Development Report".
This is the sixth report published by the Group and has been prepared in accordance with the GRI Standards: Core option and with the European Public Real Estate Association's Sustainability Best Practice Reporting Recommendations (EPRA sBPR).
PORTFOLIO SNAPSHOT
Our real estate investments are in Poland and Romania, the two largest markets in the CEE. As at 30 June 2024, our portfolio was spread across 10 cities, with Poland accounting for 52.3% by value and Romania 47.7%.
| Combined Portfolio Snapshot (as at 30 June 2024) | |||
|
| Poland | Romania | Combined Portfolio |
| Standing Investments(1) | 18 | 16 | 34 |
| GAV(2) / Standing GAV (€m) | €1,437m / €1,319m | €1,310m / €1,242m | €2,747m / €2,561m |
| Occupancy | 76.1% | 94.9% | 86.1% |
| WALL(3) | 4.0 years | 5.3 years | 4.7 years |
| Standing GLA (k sqm)(4) | 530.2k sqm | 616.3k sqm | 1,146.5 sqm |
| Contracted Rent (€m)(5) | €95.2m | €97.0m | €192.3m |
| GAV Split by Asset Usage |
|
|
|
| Office | 80.8% | 86.0% | 83.3% |
| Mixed-Use | 19.2% | 0.0% | 10.0% |
| Industrial | 0.0% | 7.4% | 3.5% |
| Others | 0.0% | 6.5% | 3.1% |
| GAV Split by City |
|
|
|
| Bucharest | 0.0% | 93.3% | 44.5% |
| Constanta | 0.0% | 5.0% | 2.4% |
| Targu Mures | 0.0% | 1.3% | 0.6% |
| Craiova | 0.0% | 0.4% | 0.2% |
| Warsaw | 42.8% | 0.0% | 22.4% |
| Krakow | 20.5% | 0.0% | 10.7% |
| Wroclaw | 17.3% | 0.0% | 9.0% |
| Katowice | 11.5% | 0.0% | 6.0% |
| Lodz | 4.2% | 0.0% | 2.2% |
| Gdansk | 3.7% | 0.0% | 1.9% |
| GAV as % of Total | 52.3% | 47.7% | 100.0% |
| | | | |
| 1. Standing Investments representing income producing properties. One investment can comprise multiple buildings. e.g. Green Court Complex comprises three buildings or one investment | |||
| 2. Includes all property assets, land and development projects valued at 30 June 2024 | |||
| 3. Includes pre-let commercial standing and development/re-development assets. WALL of standing commercial properties in Poland, Romania and the Combined portfolio are 4.0 years, 5.3 years and 4.6 years, respectively. | |||
| 4. Including 12.6k sqm of residential assets in Romania | |||
| 5. Total rent comprises commercial (€185.8 million) and residential (€0.4 million in Romania) standing properties, rent in assets under redevelopment (€5.7 million in Poland) and development pre-lets (€0.4 million in Romania).
| |||
| Note: Occupancy of standing commercial properties adjusted with the active leases related to our ESG-commitments (3,460 sqm in BOB Tower, Bucharest, signed with social assistance authority) and with the available area of the spaces leased to GW Flex Sp. Z.o.o, our group entity overseeing the implementation of flex offices concept in our portfolio, was 75.4%, 94.5% and 85.6% as of 30 June 2024 for Poland, Romania and at group level, respectively. | |||
CAPITAL MARKETS UPDATE
| Inflation returning to single digits in the last year is expected to generally benefit capital markets, but geopolitical risks remain high with the potential to bring back high volatility and uncertainty across the globe. Globalworth's share price in this period continued to trade consistently below our last reported EPRA NRV, but historically this is also attributable to the limited free float of our shares. We have successfully exchanged our €850 million aggregate bonds outstanding at the beginning of the year with maturities in 2025 and 2026 by replacing with €640 million new bonds maturing in 2029 and 2030 followed by €65 million mandatory redemption and a €83 million buyback in July, thus significantly improving our financial profile. Fitch re-affirmed the investment grade rating following their July review of Globalworth andimproved the outlook to stable, while S&P maintained the group's corporate credit rating to BB+ with a negative outlook. |
Equity Capital Markets and Shareholder Structure Update
The first half of 2024 was characterised by a gradual recovery after almost two years of continued high inflation which drove interest rates to their highest levels in a decade. With inflation returning into the lower single digits area, we expect capital costs to follow a similar dynamic, however we keep an eye on the continuation of geopolitical risks, as they have the potential to greatly disturb economic cycles and induce volatility and uncertainty in the capital markets.
Real estate valuations have continued to be impacted in H1-24 by the high capital costs and a more cautious approach of investors in what regards office industry, with the higher risk premia demanded by investors being reflected in the resulting valuation yields as of 30 June 2024.
As of 30 June 2024, FTSE EPRA Developed Europe and the FTSE EPRA Global indices recorded a performance of -5.8% and -2.9%, respectively, for the six months starting on 1 January 2024 which is close to the Globalworth share price evolution which was at -5.8%, however we must underline the limited free float of our shares.
Globalworth's share price in this period has been trading consistently below its last reported 31 December 2023 EPRA NRV level of €6.94 / share, reaching its lowest closing price on 17 June 2024 at €2.38 per share and its highest price on 16 Jan 2024 at €3.07 per share.
Zakiono Enterprises Ltd, which is jointly and equally owned by CPI Property Group S.A. ("CPI") and Aroundtown SA ("Aroundtown"), holds 60.8% of the share capital of the Group, followed by Growthpoint Properties Ltd with 29.5%.
| Globalworth Shareholding |
|
| |||
| | | 30 June 23 | 30 June 24 |
| |
| CPI Property Group | Together: Zakiono Enterprises | 60.7% | 60.8% |
| |
| Aroundtown |
| ||||
| Growthpoint Properties | | 29.4% | 29.5% |
| |
| Oak Hill Advisors | | 5.3% | 5.3% |
| |
| Others | | 4.6% | 4.4% |
| |
| Basic Data on Globalworth Shares (Information as at 30 June 2024) | ||
| Number of Shares | 266.1m plus 0.8m shares held in treasury | |
| Share Capital | €1.8bn | |
| WKN / ISIN | GG 00B979FD04 | |
| Symbol | GWI | |
| Free Float | 7.6% | |
| Exchange | London AIM | |
| Globalworth Share Performance |
|
| ||
| | H1-2023 | H1-2024 |
| |
| Market Capitalisation (€ million) - 30 June | 715 | 649 |
| |
| 30-June Closing Price (€) | 3.03 | 2.44 |
| |
| 52-week high (€) | 5.05 | 3.07 |
| |
| 52-week low (€) | 2.41 | 2.05 |
| |
| Dividend paid per share (€) | 0.15 | 0.11 |
| |
| Globalworth H1-2024 Share Price Performance |
|
|
Bonds Update
We finance ourselves through a combination of equity and debt, and we compete with many other real estate companies for investor trust to support our initiatives.
To issue Eurobonds efficiently and benefit from market opportunities, we have established a Euro Medium Term Notes (EMTN) programme in 2018, allowing the Group to issue up to €1.5 billion of bonds. From this programme, €950 million was raised through bonds issued in March 2018 and July 2020 (inaugural green bond), with maturities in 2025 and 2026.
At the beginning of the year, our two Eurobonds outstanding in total of €850 million, together with the €85 million unsecured facility granted by IFC in June 2022 made most of our debt structure.
Faced with high interest rates, investor risk aversion and the two significant bond maturities, we had embarked on a complex refinancing and deleveraging process at the end of last year. The successful negotiation and implementation of the bond exchanges, completed in H1-2024, were crucial in resolving near-term debt maturities and enhancing the company's financial position.
As a result, we have exchanged our outstanding €450 million notes due in 2025 and €400 million notes due in 2026 with €307 million green notes due in 2029 and €333 million green notes due in 2030 at a coupon of 6.25%, therefore repaying €2210 million to our bondholders from our own cash sources. Furthermore, following the completion of sale of our fully owned industrial portfolio, we have redeemed at par an additional €65 million in accordance with the terms and conditions of our new outstanding bonds.
Post-June 2024, continuing its deleveraging path, GWI launched an offer to buy back up to €60 million of the outstanding bonds, amount which was further increased and successfully settled in July by accepting €83 million, resulting in the aggregate value of our two outstanding bonds decreasing to €492 million.
This proactive approach to managing debt and liquidity underscores GWI's commitment to maintaining financial health and strategic flexibility in an evolving market landscape.
Globalworth is rated by two of the three major agencies, with Fitch maintaining their investment credit rating following their July review of the Group while improving the outlook to stable and S&P maintaining the group's corporate credit rating to BB+ with a negative outlook, the S&P rating being reviewed prior to the completion of our bond exchange and subsequent repayments.
| Rating |
| |
| | S&P | Fitch |
| Rating | BB+ | BBB- |
| Outlook | Negative | Stable |
| Basic Data on the Globalworth Bonds |
|
| |
| | GWI bond 24/29 | GWI bond 24/30 |
|
| ISIN | XS2809858561 | XS2809868446 |
|
| Segment | Euronext Dublin | Euronext Dublin |
|
| Minimum investment amount | €100,000 and €1,000 thereafter | €100,000 and €1,000 thereafter |
|
| Coupon | 6.250% | 6.250% |
|
| Issuance volume | €307.1 million | €333.4 million |
|
| Outstanding 30 June 2024 | €262.1 million | €313.4 million |
|
| Maturity | 31 March 2029 | 31 March 2030 |
|
| Performance of the Globalworth Bonds |
| |
| | H1-2024 | |
| GWI bond 24/29 | | |
| 30 June closing price | 96.66 | |
| Yield to maturity at 30 June | 7.49% | |
| GWI bond 24/30 | | |
| 30 June closing price | 93.55 | |
| Yield to maturity at 30 June | 7.98% | |
FINANCIAL REVIEW
Introduction and Highlights
We commenced the financial year with an average debt maturity of 3.7 years and €450 million Notes set to mature into short-term debt over the following quarters. In the first half of 2024, we focused on strengthening our capital structure and deleveraging the balance sheet through the disposal of non-core assets. We successfully exchanged €850 million of existing Notes for new 5-year and 6-year Notes with a combined value of €640 million. Additionally, we repaid €276 million in debt, disposed of investment properties valued at €229 million, and maintained a strong liquidity position of €397 million, including €187 million in undrawn secured and revolving credit facilities (RCF).
We continue to invest in our standing assets, prioritising ESG initiatives focused on energy efficiency and tenant comfort. Our commitment to responsible financial management remains unwavering.
To effectively communicate our performance, we rely on a range of metrics widely recognized in the real estate sector. These include consolidated figures, incorporating our joint ventures, which best reflect the way we manage our portfolio and operations. In addition, we report like-for-like metrics and adopt standards set by EPRA, aimed at enhancing transparency and ensuring comparability across the European real estate industry.
| Revenues €125.0 +5.0% on H1-2023 | NOI1 €72.4m -1.8% on H1-2023 |
| IFRS Earnings per share2 -25 cents -11 cents in H1-2023 | Combined Portfolio Value (OMV)1 €2.7bn -8.7% on 31 Dec. 2023 |
| EPRA NRV1,3 €1,660.3m -5.2% on 31 Dec. 2023 | EPRA NRV per share1,3 €6.24 -10.1% on 31 Dec. 2023 |
| Adjusted normalised EBITDA1 €63.6m -3.6% on H1-2023 | EPRA Earnings per share1,2 11 cents 14 cents in H1-2023 |
| LTV1,4 39.9% 42.2% at 31 Dec. 2023 | Dividends paid in H1-2024 per share 11 cents 15 cents in H1-2023 |
1. See Glossary for definitions.
2. See note 12 of the unaudited condensed consolidated financial statements for calculation.
3. See note 20 of the unaudited condensed consolidated financial statements for calculation.
4. See note 17 of the unaudited condensed consolidated financial statements for calculation.
2. Revenues and Profitability
We generated total consolidated revenue of €125 million in the first half of 2024, reflecting a 5% increase over the same period in 2023 of €119.1 million.
Our core revenue stream, gross rental income, recorded a slight increase of 1.3% to €96.5 million in H1 2024, compared to H1 2023. Properties in Romania showed a 7% increase in gross rental income generated by indexation, higher occupancies in offices segment, €1.1 million early termination fees which offset €0.7 million lower rental income from industrial sale in May 2024. In Poland we recorded a 4% decline in gross rental income mainly due to vacancies in regional properties.
When accounting for tenant incentives, which are amortized during the life of the lease, the net rental income decreased with 2%, by €1.6m, to €78.9 million, with 5% net increase in Romania and 9% net decrease in Poland.
The overall consolidated revenue increased by €5.9 million, the decline in net rental income was compensated by an increase with €7.1 million in fit out income and €0.4 million (or 1%) increase in our service charge income to €37.3 million (from €36.9 million in H1 2023).
Overall, our revenues remained relatively evenly split between our two markets of operation, with Poland accounting for 45% (49% in H1-2023) and Romania 55% (51% in H1-2023).
Our Net Operating Income ("NOI"), after considering property and fit out costs, was €72.4 million, lower by 1.8% compared to H1 2023. Overall operating expenses in our portfolio increased by €7.3 million to €52.7 million, out of which €6.5 million increase in fit out costs and €0.8 million, or 1.9% in operating costs. Most of the operating expenses, c.83% (c. 84% in H1 2023) were reinvoiced to tenants as the majority of our leases are triple net.
Adjusted normalised EBITDA lower by 3.6% to €63.6 million from H1-2023 (€66.0 million) resulted from €1.4 million decrease in NOI and €1.1 million increase in administrative expenses representing high inflationary environment in first half.
We recorded in H1 2024, finance costs of €48.4 million (€27.9 million in H1 2023), with €20.4 million additional cost. Most of the increase is generated by:
€11.9 million higher debt issue costs amortisation, primarily from the one-off debt close-out cost related to bond exchange exercise in April 2024, of €12.8 million
€0.6 million increase in fixed rated bonds interest and
€7.9 million increase in interest expense recorded for secured loans from the new secured facilities drawn down in later half of 2023 or during first of 2024 and due to higher Euribor base rates for like-for-like loans carrying variable interest rate.
Finance income was lower by €10.7 million, however, after excluding the one-off gain recorded in H1 2023 related to the bond buyback, of €15.8 million, finance income recorded an increase of €5.1 million:
€3.8 million from the deposit income from short-term and overnight placement with banks and
€1.3 million interest income on loans receivable from the joint ventures, deferred consideration for Warta receivable.
Our share from joint ventures is €13.2 million loss in H1 2024 (gain of €2.6 million H1 2023). The loss includes €15.2 million valuation loss recorded on investment properties held by the joint venture companies, thus aligning the total amount of the consideration received from the disposal of joint venture investments in July 2024.
Earnings before tax reached to €65.1 million loss for H1 2024 (€44.3 million loss in H1 2023), the increase in net finance cost plus the one-off loss recorded from sale of wholly owned industrial properties of €24.1 million and the loss recorded from joint ventures was compensated by lower revaluation loss compared to similar period in 2023. We recorded in current period of €50.5 million valuation loss (€102.9 million in H1 2023).
EPRA earnings for the first six months of 2024 were €29.8 million (or 11 cents per share), lower by €4.3 million. EPRA earnings per share decline is amplified by the increase in weighted average number of shares being of 259.8 million in H1 2024 (228.4 million in H1 2023) following the issue of scrip dividend shares in October 2023 and April 2024.
IFRS earnings per share of negative 25 cents (€65.3 million loss) in H1 2024 (11 cents negative in H1 2023 or €24.6 million loss). The corporate income tax largely remained similar to prior period at €3.5 million with a €0.3 reduction, however deferred tax income seen significantly decline compared to H1- 2023 when we recorded €23.5 million lessen deferred tax liability.
3. Balance Sheet
Real estate comprises the majority of our assets, with investment properties and cash equivalents exceeding 95% of our total value as at 30 June 2024.
Our combined market value of the investment property portfolio is €2,735 million decreased by €260.2 million (31 Dec. 2023: €2,995 million), out of which €2,618 million is wholly owned investment property and €117 million (31 Dec. 2023: €129 million) represents the 100% value of the properties owned by the two joint ventures in which we own a 50% stake.
As of 30 June 2024, the balance sheet value of our investment property (freehold and properties held for sale) is €2,618 million, €248 million lower compared to year-end 2023. The reduction is due to properties disposed during the period with a value of €229 million (comprising of wholly owned logistics portfolio in Romania of €207 million, a held for sale property in Poland of €12.4 million and €9.0 million from the sale of non-core residential apartments) and the fair value losses of €50.5 million (representing 65% in Poland and 35% in Romania) which was partly mitigated with value accretive capital expenditure of €31.8 million on development and standing properties.
The logistics portfolio comprised of five logistics / light-industrial parks with ten facilities in Timisoara, Arad, Oradea and Pitesti as well as a majority stake in two small business units in Bucharest which was sold to CTP INVEST SPOL S.R.O.
Further breakdown of our capital expenditure in detail can be found in the below pie chart:
In the first six months of 2024, we exchanged our 2025 and 2026 Notes with an early repayment of €210 million (€142.9 million from 18/25 Notes and €66.6 million from 20/26 Notes) with five year and six-year Notes maturity in 2029 and 2030 respectively at 6.25% coupon under new terms and conditions of the new issued Notes. Furthermore, subsequently after the disposal of wholly owned logistics properties, we redeemed further Notes for an amount of €65 million at par (24/29 Notes: €45 million and 24/30 Notes: €20 million).
We closed the first half of 2024 with cash position to €210.3 million (€396.3 million at 31 December 2023) with €187 million additional liquidity available from the undrawn facilities.
Total assets at the end of the period were €3,002 million, lower by 12.9% compared to 31 December 2023 (€3,445 million).
EPRA NRV was €1,660.3 million as of 30 June 2024, lower by 5.2% compared to 31 December 2023 (€1,750.6 million). As a result, EPRA NRV per share also decreased to €6.24 per share (31 December 2023: €6.94 per share) by 10.1%. The EPRA NRV decline was driven by €50.5 million negative effect of fair value gains on the portfolio, loss recorded from sale of investment properties, share of loss from joint venture investment and increase in the fully diluted number of shares.
4. Dividends
Globalworth distributes bi-annually at least 90% of its EPRA Earnings to its shareholders. During the first half of 2024, the distributions included the option to a scrip dividend alternative so that qualifying shareholders can elect to receive new ordinary shares in the Company instead of cash in respect of all or part of their entitlement to the dividend. Qualifying shareholders who validly elect to receive the Scrip Dividend Alternative become entitled to a number of Scrip Dividend Shares in respect of their entitlement to the Dividend that is based on a price per Scrip Dividend Share calculated on the basis of a discount of 20% to the average of the middle market quotations for the Company's shares on the five consecutive dealing days from and including the Ex-Dividend Date, the "Reference Price".
The dividend declared for the six-month period ended 31 December 2023 was 11 cents per share. Following the election of scrip dividend 13.9 million new shares were issued in April 2024, while the Group paid in total €0.4 million as cash dividend, resulting in 98.6% shareholders opting to reinvest in the Company.
The results for the period are set out in the consolidated statement of comprehensive income on page 31.
5. Financing and Liquidity Review
Following the recent successful liability management exercise by refinancing of unsecured and secured debt in first half of 2024, the Group's focus shifted toward maintaining liquidity and optimising financing costs. Our key priorities included building cash reserves, managing debt maturities falling due in next twelve months, reduction in weighted average cost of debt and ensuring access to revolving credit facilities for unexpected needs.
We close monitor our cost of debt with strategies like hedging or adjusting the fixed versus floating rate debt mix to protect against rising rates. Additionally, regular compliance checks with debt covenants and exploring opportunities for further cost of debt reduction is crucial to maintaining financial flexibility. To enhance the balance sheet, we are focused on disposing of none core and underperforming assets to improve liquidity, while redeploying funds into higher-yielding projects.
Debt Summary
The total debt of the Group at 30 June 2024 was €1,248 million (31 Dec. 2023: €1,603 million) comprising mainly of medium to long-term debt, denominated entirely in Euro, comprising of €84 million unsecured loans, €573 million New unsecured Notes and €591 million secured loans.
The first half of 2024 had several notable events in terms of financing, that lead to a decrease in total debt, as:
During the existing Notes exchange exercise, we repaid €142.9 million from 18/25 Notes and €66.6 million from 20/26 Notes;
Subsequently to the exchange, we redeemed additional €65 million unsecured debt (New 24/29 Notes €45 million and 24/30 New Notes €20 million);
Derecognized €97.5 million secured loans consequently to the disposal of subsidiaries holding industrial properties.
In addition, we performed several events in order to increase the liquidity of the Group:
We drew €25 million twelve-year term secured debt facility which was signed with Libra Bank.
We entered into two new seven-year term secured loans agreement with Erste Group partially in May and June for a total amount of €137 million with both facilities available to draw within 6 months from the signing date.
The Group continuously strives to maintain a low weighted average interest rate cost, which as of 30 June 2024 was 5.10% (3.7% as of 31 December 2023), while the average maturity period improved to 5.2 years (3.7 years as of 31 December 2023), as depicted in the chart below. The changes are a consequence of the bond exchange exercise that led to the New Notes being issued under the current market conditions.
In this high inflation and interest rate environment, it is important to note that at the end of the period, Globalworth had a total of c.86% of its debt issued originally in credit facilities carry a fixed interest rates (75.3%) or at floating interest rates which are however it was hedged (10.3%).
Liquidity & Loan to value ratio (LTV")
Managing our financial and operational resources has been a key area of focus for the Group, especially since the COVID-19 pandemic outbreak, and this careful management has carried on throughout this period of higher volatility and uncertainty.
As of 30 June 2024, the Group had cash and cash equivalents of €210.3 million (31 December 2023: € 396.3 million) of which an amount of €18.1 million was restricted due to various conditions imposed by the financing Banks. In addition, the Group had available liquidity from committed undrawn loan facilities of €187million.
The Group's loan to value ratio on 30 June 2024 was 39.9% (42.2% as of 31 December 2023). This is consistent with the Group's strategy to manage its long-term target LTV of around or below 40%.
Debt Structure as at 30 June 2024
Debt Structure - Secured vs. Unsecured Debt
The majority of the Group's debt on 30 June 2024 is unsecured: 52.7% (31 December 2023: 58.4%), with the remainder secured with real estate mortgages, pledges on shares, receivables and loan subordination agreements in favour of the financing parties.
Debt Denomination Currency and Interest Rate Risk
Our loan facilities are entirely Euro denominated and bear interest based either on one month, three months or six months Euribor plus a margin (14.5% of the outstanding balance compared to 18.3% as of 31 December 2023), or at a fixed interest rate (75.3% of the outstanding balance compared to 76.1% as of 31 December 2023).
The high degree of fixed interest rate debt ensures a natural hedging to the Euro, the currency in which the most significant part of our liquid assets (cash and cash equivalents and rental receivables) is originally denominated and the currency for the fair market value of our investment property. Based on the Group's debt balances on 30 June 2024, an increase of 100 basis points in the EURIBOR will result in an increase of interest expense of €1.8 million per annum.
Debt Covenants
As of 30 June 2024, the Group is in compliance with all of its debt covenants.
The Group's financial indebtedness is arranged with standard terms and financial covenants, the most notable as of 30 June 2024 being the following:
Unsecured Eurobonds, Revolving Credit Facility and IFC loan
the Consolidated Coverage Ratio, with minimum value of 150% (covenant value was aligned for all debt facilities).
the Consolidated Leverage Ratio, with maximum value of 60%.
the Consolidated Secured Leverage Ratio with a maximum value of 30%, and
the Total Unencumbered Assets Ratio, with minimum value of 125% (additional covenant applicable for the Revolving Credit Facility and IFC loan).
Secured Bank Loans
the debt service cover ratio ('DSCR') / interest cover ratio ('ICR'), with values starting from 120% (be it either historic or projected), and
the LTV ratio, with contractual values ranging from 45% to 83%.
6. Principal Risks and Uncertainties
The key risks which may have a material impact on the Group's performance, together with the corresponding mitigating actions, are presented on pages 63 to 69 of the Annual Report for the year ended 31 December 2023, which is available at www.globalworth.com.
These risks comprise the following:
Market conditions and the economic environment, particularly in Romania and Poland
Changes in the political or regulatory framework in Romania, Poland or the European Union
Inflation in Romania and Poland
Execution of investment strategy
Valuation of the portfolio
Inability to lease space
Counterparty credit risk
Sustainable portfolio risk and response to climate change
Lack of available financing and refinancing in interest environment
Breach of loan covenants
Changes in Interest and Foreign Exchange Rates, and
Compliance with fire, structural, health and safety, or other regulations
There have been no new risks identified during the six-month period ended 30 June 2024, and the identified risks are expected to continue to remain relevant during the second half of 2024.
7. Going Concern
The Directors have considered the Company's ability to continue to operate as a going concern based on the Management's cash flow projections for the 15 months subsequent to the date of approval of the unaudited interim condensed consolidated financial statements. The Directors believe that the Company would have sufficient cash resources to meet its obligations as they fall due and continue to adopt the going concern basis in preparing the unaudited interim condensed consolidated financial statements as of and for the six months ended 30 June 2024.
GLOBALWORTH REAL ESTATE INVESTMENTS LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2024
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2024
| | | 30 June 2024 | 30 June 2023 |
| | | Unaudited | Unaudited |
| | Note | €'000 | €'000 |
| Revenue | 7 | 125,034 | 119,050 |
| Operating expenses | 8 | (52,652) | (45,306) |
| Net operating income | | 72,382 | 73,744 |
| Administrative expenses | 9 | (9,287) | (7,755) |
| Fair value loss on investment property | 3 | (50,527) | (102,884) |
| Share-based payment expense | 21 | (167) | (167) |
| Loss on disposal of subsidiary | 24 | (24,111) | (164) |
| Depreciation and amortisation expense | | (404) | (289) |
| Other expenses | | (1,204) | (1,182) |
| Other income | | 1,162 | 2,215 |
| Foreign exchange loss | | (249) | (569) |
| Profit/(Loss) from fair value of financial instruments at fair value through profit or loss | | 1,368 | (121) |
| Loss before net financing cost | | (11,037) | (37,172) |
| Finance cost | 10 | (48,386) | (27,945) |
| Finance income | 10.1 | 7,528 | 18,224 |
| Share of (loss)/ profit of equity-accounted investments in joint ventures | 22 | (13,198) | 2,613 |
| Loss before tax | | (65,093) | (44,280) |
| Income tax (expense)/ income | 11 | (154) | 19,701 |
| Loss for the period | | (65,247) | (24,579) |
| Items that will not be reclassified to profit or loss | | | |
| Gain on equity instruments designated at fair value through other comprehensive income | |
90 |
- |
| Other comprehensive income for the period, net of tax | | 90 | - |
| Total comprehensive income for the period | | (65,157) | (24,579) |
|
Loss attributable to: | |
(65,247) |
(24,579) |
| - ordinary equity holders of the Company | | (65,292) | (25,078) |
| - non-controlling interests | | 45 | 499 |
|
Total comprehensive income attributable to: | |
(65,157) |
(24,579) |
| - ordinary equity holders of the Company | | (65,202) | (25,078) |
| - non-controlling interests | | 45 | 499 |
| | |
|
Restated* |
| Earnings per share | | | |
| - Basic | 12 | (25) | (11) |
| - Diluted | 12 | (25) | (11) |
The IFRS earnings per share as at 30 June 2023 have been restated following the IAS 33 'Earnings per share' requirements regarding accounting for scrip dividend shares issued in the period of 01 January 2023 to 30 June 2024.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2024
| | | 30 June 2024 | 31 December 2023 |
| | | Unaudited | Audited |
| | Note | €'000 | €'000 |
| ASSETS | |
| |
| Investment property | 3 | 2,610,785 | 2,843,085 |
| Goodwill | | 12,039 | 12,039 |
| Advances for investment property | 5 | 6,682 | 7,175 |
| Investments in joint ventures | 22 | 57,096 | 70,098 |
| Equity investments | | 7,993 | 7,844 |
| Other long-term assets | | 1,997 | 1,780 |
| Other receivables | 14.1 | 22,479 | 21,182 |
| Prepayments | | 129 | 448 |
| Financial assets at fair value through profit or loss | | 3,576 | - |
| Deferred tax asset | 11 | 1,736 | 1,423 |
| Non-current assets | | 2,724,512 | 2,965,074 |
| Financial assets at fair value through profit or loss | | - | 197 |
| Trade and other receivables | 14 | 21,389 | 23,122 |
| Contract assets | | 4,801 | 6,985 |
| Guarantees retained by tenants | | 55 | 99 |
| Income tax receivable | | 78 | 1,084 |
| Prepayments | | 5,238 | 2,002 |
| Cash and cash equivalents | 15 | 210,283 | 396,259 |
| | | 241,844 | 429,748 |
| Investment property held for sale | 3.3 | 35,500 | 50,352 |
| Total current assets | | 277,344 | 480,100 |
| Total assets | | 3,001,856 | 3,445,174 |
| EQUITY AND LIABILITIES | |
| |
| Issued share capital | 18 | 1,796,809 | 1,769,456 |
| Treasury shares | 21.1 | (4,773) | (4,797) |
| Fair value reserve of financial assets at FVOCI | | (5,379) | (5,469) |
| Retained earnings | | (251,098) | (158,066) |
| Equity attributable to ordinary equity holders of the Company | | 1,535,559 | 1,601,124 |
| Non-controlling interests | | - | 1,411 |
| Total equity | | 1,535,559 | 1,602,535 |
| Interest-bearing loans and borrowings | 13 | 1,130,192 | 1,574,771 |
| Deferred tax liability | 11 | 121,921 | 139,299 |
| Lease liabilities | 3.2 | 23,598 | 20,482 |
| Deposits from tenants | | 3,693 | 3,774 |
| Guarantees retained from contractors | | 2,664 | 2,902 |
| Trade and other payables | | 399 | 78 |
| Non-current liabilities | | 1,282,467 | 1,741,306 |
| Interest-bearing loans and borrowings | 13 | 118,281 | 28,609 |
| Guarantees retained from contractors | | 4,540 | 5,594 |
| Trade and other payables | | 35,350 | 36,051 |
| Contract liability | | 2,352 | 3,289 |
| Other current financial liabilities | | - | 1,311 |
| Current portion of lease liabilities | | 2,191 | 1,956 |
| Deposits from tenants | | 17,746 | 18,018 |
| Income tax payable | | 242 | 807 |
| | | 180,702 | 95,635 |
| Liabilities directly associated with the assets held for sale | 3.3 | 3,128 | 5,698 |
| Total current liabilities | | 183,830 | 101,333 |
| Total equity and liabilities | | 3,001,856 | 3,445,174 |
The financial statements were approved by the Board of Directors on 23 September 2024 and were signed on its behalf by: Andreas Tautscher,
Director
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2024
| | | Issued share capital |
Treasury shares | Share- based payment reserve | Fair value reserve of financial assets at FVOCI |
Retained earnings |
Total | Non- controlling interests |
Total Equity |
|
| | Note | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 |
|
| As at 1 January 2023 | | 1,704,476 | (4,859) | 156 | (5,469) | (37,798) | 1,656,506 | 862 | 1,657,368 |
|
| | |
| |
|
| | | | |
|
| Interim dividends paid in cash and scrip dividend | 18,19 | 65,134 | 62 | - | - | (66,272) | (1,076) | - | (1,076) |
|
| Transaction costs on issuance of shares for cash | 18 | (154) | - | - | - | - | (154) | - | (154) |
|
| Transfer from reserve to retained earnings | | - | - | (156) | - | 156 | - | - | - |
|
| Shares issued in subsidiary with non-controlling interest | | - | - | - | - | - | - | 237 | 237 |
|
| Total comprehensive income for the period | | - | - | - | - | (54,152) | (54,152) | 312 | (53,840) |
|
| As at 31 December 2023 | | 1,769,456 | (4,797) | - | (5,469) | (158,066) | 1,601,124 | 1,411 | 1,602,535 |
|
| | |
| |
|
| | | | | |
| Interim dividends paid in cash and scrip dividend | 18,19 | 27,364 | 24 | - | - | (27,740) | (352) | - | (352) | |
| Transaction costs on issuance of shares for cash | 18 | (11) | - | - | - | - | (11) | - | (11) | |
| Settlement of fair value reserve of equity instruments designated at FVOCI in cash | | - | - | - | 90 | - | 90 | - | 90 | |
| Non-controlling interest component of subsidiaries disposed | | - | - | - | - | - | - | (1,456) | (1,456) | |
| Total comprehensive income for the period | | - | - | - | - | (65,292) | (65,292) | 45 | (65,247) | |
| As at 30 June 2024 | | 1,796,809 | (4,773) | - | (5,379) | (251,098) | 1,535,559 | - | 1,535,559 | |
| | | Issued share capital |
Treasury shares | Share- based payment reserve | Fair value reserve of financial assets at FVOCI |
Retained earnings |
Total | Non- controlling interests |
Total Equity |
| | Note | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 |
| As at 1 January 2023 | | 1,704,476 | (4,859) | 156 | (5,469) | (37,798) | 1,656,506 | 862 | 1,657,368 |
| | |
| |
|
| | | | |
| Interim dividends paid in cash and scrip dividend | 18,19 | 32,617 | 32 | - | - | (33,247) | (598) | - | (598) |
| Transaction costs on issuance of scrip dividend shares | | (138) | - | - | - | - | (138) | - | (138) |
| Total comprehensive income for the period | | - | - | - | - | (25,078) | (25,078) | 499 | (24,579) |
| As at 30 June 2023 | | 1,736,955 | (4,827) | 156 | (5,469) | (96,123) | 1,630,692 | 1,361 | 1,632,053 |
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2024
| |
Note | 30 June 2024 €'000 | 30 June 2023 €'000 |
| Loss before tax | | (65,093) | (44,280) |
| Adjustments to reconcile profit/(loss) before tax to net cash flows | |
| |
| Fair value loss on investment property | 3.4 | 50,527 | 102,884 |
| Loss on sale of investment property | | 756 | 97 |
| Share-based payment expense | 21 | 167 | 167 |
| Depreciation and amortisation expense | | 404 | 289 |
| Net movement in allowance for doubtful debts | 16.2 | 277 | 769 |
| Foreign exchange loss | | 83 | 569 |
| Loss/(gain) from fair valuation of financial instrument | | (1,368) | 121 |
| Loss on disposal of subsidiary | 3.5, 24 | 24,111 | 164 |
| Share of profit/(loss) of equity-accounted joint ventures | 22.4 | 13,198 | (2,613) |
| Net financing costs | 10, 10.2 | 40,858 | 9,721 |
| Operating profit before changes in working capital | | 63,920 | 67,888 |
| Decrease/(increase) in trade and other receivables | | (3,569) | 4,951 |
| Decrease in trade and other payables | | (3,988) | (2,346) |
| Interest paid | | (40,697) | (24,625) |
| Interest received | | 4,983 | 1,168 |
| Income tax paid | | (2,924) | (3,278) |
| Interest received from joint ventures | | 407 | 173 |
| Cash flows from operating activities | | 18,132 | 43,931 |
| Investing activities | | | |
| Expenditure on investment property completed and under development or refurbishment | | (28,927) | (29,102) |
| Proceeds from disposal of subsidiary | | 68,985 | 4,000 |
| Proceeds from sale of investment property | | 21,314 | 2,278 |
| Proceeds from sale of financial assets through profit and loss | | 3,322 | - |
| Payments for equity investments | | (182) | (108) |
| Investment in and loans given to joint ventures | 22 | (3,332) | (8,360) |
| Proceeds from joint ventures for loans given | 22 | 3,727 | 7,135 |
| Receipt from equity investments held at FVOCI | | 123 | - |
| Payment for purchase of other long-term assets | | (614) | (232) |
| Cash flows used in investing activities | | 64,416 | (24,389) |
| Financing activities | | | |
| Payment of transaction costs on issuance of scrip dividend shares | | (11) | (138) |
| Proceeds from interest-bearing loans and borrowings | 13 | 25,975 | 96,500 |
| Payments of interest-bearing loans and borrowings | 13 | (276,953) | (146,554) |
| Payment of interim dividend (net of scrip) | 18 | (352) | (598) |
| Payment for lease liability obligations | 3.2 | (1,779) | (2,079) |
| Payment of bank loan arrangement fees and other financing costs | | (15,605) | (1,206) |
| Cash flows from financing activities | | (268,725) | (54,075) |
| Net decrease in cash and cash equivalents | | (186,177) | (34,533) |
| Effect of exchange rate fluctuations on cash and bank deposits held | | 201 | 1,311 |
| Cash and cash equivalents at the beginning of the period | 15 | 396,259 | 163,767 |
| Cash and cash equivalents at the end of the period | 15 | 210,283 | 130,545 |
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SECTION I: BASIS OF PREPARATION
Basis of Preparation
Corporate Information
Globalworth Real Estate Investments Limited ('the Company' or 'Globalworth') is a company with liability limited by shares and incorporated in Guernsey on 14 February 2013, with registered number 56250. The registered office of the Company is at PO Box 336, Fourth Floor, Plaza House, Admiral Park, St Peter Port, Guernsey, GY1 3UQ. Globalworth, being a real estate Company, has had its ordinary shares admitted to trading on AIM (Alternative Investment Market of the London Stock Exchange) under the ticker "GWI" since 2013.
On 23 July 2021 Zakiono Enterprises Limited, a company wholly owned by Tevat Limited, become a controlling shareholder by holding 60.6% share capital of the company through public offer. Tevat Limited is a joint venture between CPI Property Group S.A. and Aroundtown SA.
The Company's Eurobonds have been admitted to trading on the official List of the Irish Stock Exchange in April 2024. The main country of operation of the Company is Guernsey. The Group's principal activities and nature of its operations are mainly investments in real estate properties, through both acquisition and development, as set out in the Strategic Report section of the 2023 Annual Report.
Directors
The Directors of the Company are:
Dennis Selinas, Executive, Group Chief Executive Officer
Martin Bartyzal, Independent Non-Executive, Chair of the Board, Member of the Remuneration Committee
Norbert Sasse, Non-Executive, Member of the Investment Committee
Richard van Vliet, Independent Non-Executive, Member of the Audit & Risk Committee and Remuneration Committee
Andreas Tautscher, Senior Independent Non-Executive, Chair of the Audit and Risk Committee, Member of Nomination Committee
David Maimon, Independent Non-Executive, Member of the Audit & Risk Committee and Investment Committee
Piotr Olendski, Independent Non-Executive, Chair of the Remuneration Committee
Daniel Malkin, Independent Non-Executive, Chair of the Nomination Committee, Member of the Audit & Risk Committee
Favieli Stelian, Independent Non-Executive, Chair of the Investment Committee, Member of the Remuneration Committee
Panico Theocharides, Non-Executive, Member of the Nomination Committee
Basis of Preparation and Compliance
The interim condensed consolidated financial statements of the Group (or 'financial statements' or 'consolidated financial statements') as of and for the six-months period ended 30 June 2024 have been prepared in accordance with International Accounting Standard (IAS) 34 "Interim Financial Reporting". These consolidated financial statements are prepared in Euro ("EUR" or "€"), rounded to the nearest thousand, being the functional currency and presentation currency of the Company.
These financial statements have been prepared on a historical cost basis, except for investment property, financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income which are measured at fair value.
These financial statements are prepared on a going concern basis. The Directors have considered the Company's ability to continue to operate as a going concern based on the Management's cash flow projections for the 15 months subsequent to the date of approval of the unaudited interim condensed consolidated financial statements. The Directors believe that the Company would have sufficient cash resources to meet its obligations as they fall due and continue to adopt the going concern basis in preparing the unaudited interim condensed consolidated financial statements as of and for the six months ended 30 June 2024.
Accounting policies
These consolidated financial statements apply the same accounting policies, presentation and methods of calculation as those followed in the preparation of the Group's consolidated financial statements for the year ended 31 December 2023, which were prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU') and the Companies (Guernsey) Law 2008, as amended. The interim condensed consolidated financial statements included in this Interim Report do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the consolidated financial statements for the year ended 31 December 2023.
Basis of Consolidation
These condensed consolidated financial statements comprise the financial statements of the Company and its subsidiaries ('the Group') as of and for the period ended 30 June. Subsidiaries are fully consolidated (refer to note 23) from the date of acquisition, being the date on which the Group obtains control, and continues to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the period from the date of obtaining control to 30 June, using consistent accounting policies. All intra-group balances, transactions and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Non-controlling interest represents the portion of profit or loss, other comprehensive income and net assets not held by the Group and is presented separately in the income statement and within equity in the consolidated statement of financial position, separately from net assets and profit and loss attributable to the equity holders of the Company.
Foreign Currency transactions and balances
Foreign currency transactions during the period are initially recorded in the functional currency at the exchange rates approximating those ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies other than functional currency of the Company and its subsidiaries are retranslated at the rates of exchange prevailing on the statement of financial position date. Gains and losses on translation are taken to profit and loss. Non -monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
2. Critical Accounting Judgements, Estimates and Assumptions
The preparation of consolidated financial statements in conformity with IFRS requires management to make certain judgements, estimates and assumptions that affect reported amounts of revenue, expenses, assets and liabilities, and the accompanying disclosures and the disclosures of contingent liabilities.
Selection of Functional Currency
The Company and its subsidiaries used their judgment, based on the criteria outlined in IAS 21 "The Effects of Changes in Foreign Exchanges Rates", and determined that the functional currency of all the entities is the EUR. In determining the functional currency consideration is given to the denomination of the major cash flows of the entity e.g., revenues and financing.
As a consequence, the Company uses EURO (€) as the functional currency, rather than the local currency Romanian Lei ("RON") for the subsidiaries incorporated in Romania, Polish Zloty ("PLN") for the subsidiaries in Poland and Pounds Sterling ("GBP") for the Company and the subsidiary incorporated in Guernsey.
Further additional critical accounting judgements, estimates and assumptions are disclosed in the following notes to the financial statements.
Investment Property, see note 3 and Fair value measurement and related estimates and judgements, see note 4;
Commitments (operating leases commitments - Group as lessor), see note 6;
Taxation, see note 11;
Trade and other receivables, see note 14;
Share-based payment reserve, see note 21;
Investment in Joint Ventures, see note 22; and
Investment in Subsidiaries, see note 23.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SECTION II: INVESTMENT PROPERTY
This section focuses on the assets on the balance sheet of the Group which form the core of the Group's business activities. This includes investment property (both 100% owned by the Group and by the Joint Ventures), related disclosures on fair valuation inputs, commitments for future property developments and investment property-leasehold and related lease liability recognised for the right of perpetual usufruct of the lands.
Further information about the property portfolio is described in the Management Review section of the Interim Report.
3. Investment Property
| Investment property - freehold | ||||||||
| | Completed investment property | Investment property under refurbishment | Investment property under development | Land for further development | Sub-total | Investment property leasehold- Right of usufruct of the land | TOTAL | |
| | Note | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 |
| 1 January 2023 | | 2,699,554 | 152,381 | 29,450 | 40,200 | 2,921,585 | 23,875 | 2,945,460 |
|
Land acquired during the period | |
- |
- |
435 |
- |
435 |
- |
435 |
| Subsequent expenditure | | 40,618 | 8,584 | 1,569 | 33 | 50,804 | - | 50,804 |
| Net lease incentive movement | | 4,886 | 3,035 | (43) | - | 7,878 | - | 7,878 |
| Capitalised borrowing costs | | 6 | - | 144 | - | 150 | - | 150 |
| Transfer to completed investment property | | 15,740 | - | (4,000) | - | 11,740 | - | 11,740 |
| Disposal during the year | | (6,792) | - | - | (7,000) | (13,792) | - | (13,792) |
| Fair value loss on investment property | | (155,394) | (1,000) | (385) | (2,233) | (159,012) | (578) | (159,590) |
| 31 December 2023 | | 2,598,618 | 163,000 | 27,170 | 31,000 | 2,819,788 | 23,297 | 2,843,085 |
| Subsequent expenditure | | 16,893 | 1,441 | 2,762 | 57 | 21,153 | - | 21,153 |
| Net lease incentive movement | | 9,167 | 46 | 59 | - | 9,272 | - | 9,272 |
| Capitalised borrowing costs | 10 | 1 | - | - | - | 1 | - | 1 |
| Disposal during the year | 24 | (193,709) | - | (11,726) | (11,016) | (216,451) | - | (216,451) |
| Transfer to completed investment property | | 50,610 | (50,610) | - | - | - | - | - |
| Additions of right of usufruct of the land | 3.2 | - | - | - | - | - | 3,559 | 3,559 |
| Fair value gain /(loss) on investment property | | (45,900) | (2,917) | 35 | (341) | (49,123) | (711) | (49,834) |
| 30 June 2024 | | 2,435,680 | 110,960 | 18,300 | 19,700 | 2,584,640 | 26,145 | 2,610,785 |
3.1 Investment Property - Freehold
Judgements
Classification of Investment Property
Investment property comprises completed property, property under construction or refurbishment and land bank for further development which are not occupied substantially for use by, or in the operations of, the Group, nor for sale in the ordinary course of business, but are held primarily to earn rental income and for capital appreciation. The Group considers that, when the property is in a condition which will allow the generation of cash flows from its rental, the property is no longer a property under development or refurbishment but an investment property. If the property is kept for sale in the ordinary course of the business, then it is classified as inventory property.
Disposal of Investment Property not in the Ordinary Course of Business
The Group enters into contracts with customers to sell properties that are complete. The sale of completed property is generally expected to be the only performance obligation and the Group has determined that it will be satisfied at the point in time when control transfers. For unconditional exchange of contracts, this is generally expected to be when legal title transfers to the customer. For conditional exchanges, this is expected to be when all significant conditions are satisfied. The recognition and measurement requirements in IFRS 15 are applicable for determining the timing of derecognition and the measurement of consideration (including applying the requirements for variable consideration) when determining any gains or losses on disposal of non-financial assets when that disposal is not in the ordinary course of business.
Other Disclosures Related to Investment Property
Interest-bearing loans and borrowings are secured on investment property freehold, see note 13 for details. Further information about individual properties is disclosed in the asset management review section in the Interim Report.
3.2 Investment property - Leasehold
Right of Perpetual Usufruct of the Land (the "RPU") or "right-of-use assets"
Under IFRS 16, right-of-use assets that meet the definition of investment property are required to be presented in the statement of financial position as investment property. The Group has the right of perpetual usufruct of the land (the "RPU" or "right-of-use assets") contracts for the property portfolio in Poland which meet the definition of investment property under IAS 40. Therefore, the Group has presented its 'Right-of-use assets' in the statement of financial position under the line item "Investment property" along with the investment property - freehold in the statement of financial position. The corresponding lease liabilities are presented under the line item 'Lease liabilities' as non-current and the related short-term portion are presented in the line item "Current portion of lease liability".
3.3 Assets Held for Sale
Judgements and Assumptions Used in the Classification of Investment Properties as Held for Sale
In 2021, the Group entered into a preliminary agreement to sell the properties held by Dolfia sp. z o.o., Ebgaron sp. z o.o., Lamantia sp. z o.o., Nordic Park Offices sp. z o.o. and Warta Tower sp. z o.o., for a total consideration of €125.2 million. In July 2023 Warta Tower sale was concluded and terminated the original SPA for remaining four properties and in March 2024 we sold Bliski, the property held by Ebgaron sp. z o.o. for a total consideration of €12.4 million.
At 30 June 2024, there are two buildings classified as held for sale for which the Group is committed to sell and is actively looking for negotiating with the buyers. The properties classified as held for sale were valued at €35.5 million.
All the assets under the held for sale group are available for immediate sale in their present condition subject only to terms that are usual and customary for sales of such assets. The management has an active disposal programme with appropriate approvals from the Board and is planning to complete the sale in the near future by signing a new SPA with a new buyer(s).
The carrying values of investment properties held for sale at 30 June 2024 are fair valued after taking into account the existing SPA and management's intention to actively market these assets for sale at a price that is reasonable in relation to its current fair value under present market conditions. Therefore, the Group continues to classify the carrying value of these investments under investment property held for sale and disclose separately the liabilities directly associated with the assets held for sale.
| | Note | 31 December 2023 | CAPEX | Fair value loss | Disposal during the year | Movement during the period | 30 June 2024 |
| Completed Investment property | 3.1 | 45,900 | 145 | (615) | (12,390) | (12,860) | 33,040 |
| Investment property - leasehold | 3.2 | 4,452 | - | (78) | (1,914) | (1,992) | 2,460 |
| Investment property held for sale | | 50,352 | 145 | (693) | (14,304) | (14,852) | 35,500 |
| Lease liabilities | 3.2 | 4,319 | - | - | - | (1,916) | 2,403 |
| Deferred tax liability | 11 | 1,379 | - | - | - | (654) | 725 |
| Liabilities directly associated with the assets held for sale | | 5,698 | - | - | - | (2,570) | 3,128 |
| Net assets held for sale | | 44,654 | 145 | (693) | (14,304) | (12,282) | 32,372 |
3.4 Investment property - Fair value gain/(loss)
| | | 30 June 2024 | 30 June 2023 |
| | Note | €'000 | €'000 |
| Fair value loss on investment property | | (50,527) | (102,884) |
| - Related to investment property -freehold | 3.1 | (49,834) | (97,854) |
| - Related to investment property -held for sale | 3.3 | (693) | (5,030) |
3.5 Sale of investments property
In May 2024, the Group successfully closed the sale for part of its logistics portfolio with the properties disposed having a total value of €207 million. The portfolio comprised of five logistics / light-industrial parks with ten facilities in Timisoara, Arad, Oradea and Pitesti as well as a majority stake in two small business units in Bucharest and was sold to CTP INVEST SPOL S.R.O.
For further information please refer to note 24 Disposal of subsidiaries.
4. Fair Value Measurement and Related Estimates and Judgements
Investment Property Measured at Fair Value
The Group's investment property portfolio for Romania was valued by Colliers Valuation and Advisory SRL and Cushman & Wakefield International Real Estate Advisor Ltd and for Poland by Knight Frank Sp. z o.o.. All independent professionally qualified valuers hold a recognised relevant professional qualification and have recent experience in the locations and segments of the investment properties valued using recognised valuation techniques.
Our Property Valuation Approach and Process
The Group's investment department includes a team that reviews twice in a financial year the valuations performed by the independent valuers for financial reporting purposes. For each independent valuation performed, the investment team along with the finance team:
verifies all major inputs to the independent valuation report.
assesses property valuation movements when compared to the initial valuation report at acquisition or latest period end valuation report; and
holds discussions with the independent valuer.
The fair value hierarchy levels are specified in accordance with IFRS 13 Fair Value Measurement. Some of the inputs to the valuations are defined as "unobservable" by IFRS 13 and these are analysed in the tables below. Any change in valuation technique or fair value hierarchy (between level 1, level 2 and level 3) is analysed at each reporting date or as of the date of the event or variation in the circumstances that caused the change. As of 30 June 2024 (2023: same) the values of all investment properties were classified as level 3 fair value hierarchy under IFRS 13 and there were no transfers from or to level 3 from level 1 and level 2.
Valuation Techniques, Key Inputs and Underlying Management's Estimations and Assumptions
Property valuations are inherently subjective as they are made on the basis of assumptions made by the valuer. Valuation techniques comprise the discounted cash flows, the sales comparison approach, and the residual value method.
The Group has based its assumptions and estimates on the parameters available when the unaudited interim condensed consolidated financial statements were prepared, including the amendments or possible amendments of the current lease contracts, delays to non-committed capital expenditure, cost-cutting initiatives and delays in construction activity. The key assumptions concern the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next reporting period. However, all such assumptions or estimates are sensitive to change due to the current market environment. The climate-related risks are embedded in the determination of future cash flows that are used for the fair value of investment properties. Further information is disclosed in Operational Review and Strategic Review sections of the 2023 Annual report. Such uncertainty is reflected in the assumptions used for the valuation and the Group disclosed below the sensitivity to different key inputs to overall valuation.
Key information about fair value measurements, valuation technique and significant unobservable inputs (Level 3) used in arriving at the fair value under IFRS 13 are disclosed below:
|
| Fair value | | | | |
| | ||||
| Class of property | 30 June 2024 | 31 December 2023 | Valuation | Country | Location | Input | 30 June 2024 | 31 December 2023 | |||
|
| €'000 | €'000 | Technique |
|
|
|
|
| |||
| Completed | 501,270 | 517,960 | DCF | Poland | Warsaw | Rent per sqm | €11.50 - €22.50 | €11.50 - €22.50 | |||
| Investment property | | | | | | Discount rate | 5.58%-10.85% | 5.72%-9.10% | |||
|
| | | | | | Exit yield | 5.80%-7.90% | 5.70%-7.75% | |||
| Completed held for sale | (33,040) | (45,900) | | Poland | Warsaw | |
| | |||
| | 653,460 | 671,060 | DCF | Poland | Regional | Rent per sqm | €12.50 - €15.50 | €11.50 - €15.25 | |||
|
|
|
| | | | Discount rate | 6.92%-14.14% | 6.43%-10.07% | |||
|
|
| | | | | Exit yield | 6.65%-10.00% | 6.50%-7.50% | |||
| | 164,490 | 115,670 | DCF | Poland | Mixed - used | Rent per sqm | €13.50 - €24.00 | €14.00 - €24.00 | |||
|
|
|
| | | | Discount rate | 5.93%-8.37% | 5.64%-7.12% | |||
|
| | | | | | Exit yield | 5.63%-6.92% | 5.47%-6.50% | |||
| | 1,113,500 | 1,109,500 | DCF | Romania | Office | Rent per sqm | €2.00 - €35.00 | €2.00 - €35.00 | |||
|
| | | | | | Discount rate | 8.30% - 9.1% | 8.25% - 9.5% | |||
|
|
| | | | | Exit yield | 6.75% - 7.65% | 6.5% - 7.65% | |||
| | - | 183,900 | DCF | Romania | Industrial | Rent per sqm | - | €2.91 - €9.00 | |||
|
|
|
| | | | Discount rate | - | 8.5% - 9.25% | |||
|
|
| | | | | Exit yield | - | 6.75% - 7.25% | |||
| | 10,200 | 10,100 | DCF | Romania | Residential | Rent per sqm | €7.72 - €24.20 | €7.72 - €24.20 | |||
|
|
|
| | | | Discount rate | 9.75% - 9.75% | 9.75% - 9.75% | |||
|
|
| | | | | Exit yield | 7.75% - 7.75% | 7.75% - 7.75% | |||
| | 25,800 | 36,328 | SC | Romania | Residential | Sales value (sqm) | € 1,500 | € 1,500 | |||
| Sub-total | 2,435,680 | 2,598,618 | | | | | | | |||
| Investment | 6,200 | 15,900 | RM | Romania | Office | Rent per sqm | €13.00 - €15 | €11.50 - €18 | |||
| property under development |
|
| | | | Discount rate | 9.50% - 9.50% | 8.50% - 9.50% | |||
|
| | | | | | Exit yield | 7.75% - 7.75% | 6.75% - 7.75% | |||
|
| | | | | | Capex (€m) | € 0.00 | € 75.68 | |||
| | 5,000 | 11,700 | DCF | Romania | Industrial | Rent per sqm | €4.35 - €4.35 | €5.20 - €9.70 | |||
|
|
|
| | | | Discount rate | 9.00% - 9.00% | 9.00% | |||
|
| | | | | | Exit yield | 7.25% - 7.25% | 7% | |||
|
| 7,100 | 7,070 | DCF | Poland | Mixed - used | Rent per sqm | €15.00 -€15.00 | €13.50 -€13.50 | |||
|
| | | | | | Discount rate | 6.96% - 8.26% | 6.87% - 8.25% | |||
|
| | | | | | Exit yield | 6.69%-6.69% | 6.61%-6.61% | |||
|
| | | | | | Capex (€m) | € 0.00 | € 0.00 | |||
| Investment | 110,960 | 163,000 | DCF | Poland | Mixed - used | Rent per sqm | €15.00 -€15.00 | €13.50 -€13.50 | |||
| property under refurbishment | | | | | | Discount rate | 6.96% - 8.26% | 6.87% - 8.25% | |||
|
| | | | | | Exit yield | 6.69%-6.69% | 6.61%-6.61% | |||
| | | | | | | Capex (€m) | € 0.00 | € 0.00 | |||
| Land bank - for further | - | 9,500 | SC | Romania | Industrial | Sales value (sqm) | €27 - €27 | €27 | |||
| development | 19,700 | 14,000 | RM | Romania | Industrial | Rent per sqm | €16.00-€20.00 | €3.25-€20.00 | |||
| |
| | | | | Exit yield | 6.75% - 7.2% | 7.15% - 8.25% | |||
| TOTAL | 2,584,640 | 2,819,788 | | | | | | | |||
Income approach: Discounted Cash Flows ('DCF'), Residual Method ('RM')
Market approach: Sales Comparison ('SC')
All classes of property portfolio were categorised as Level 3 under the fair value hierarchy. The fair value movement on investment property recognised, as loss, in the income statement includes an amount of €50.5 million (June 2023: loss of €102.9 million) for fair value measurements as of the statement of financial position date related to investment properties categorised within Level 3 of the fair value hierarchy. In arriving at estimates of market values as at 30 June 2024 and 2023, the independent valuation experts used their market knowledge and professional judgement and did not rely solely on comparable historical transactions. In these circumstances, there was a greater degree of uncertainty in estimating the market values of investment properties than would have existed in a more active market.
Sensitivity Analysis on significant estimates used in the valuation
The assumptions on which the property valuations have been based include, but are not limited to, rent per sqm (per month), discount rate, exit yield, cost to complete, comparable market transactions for land bank for further development, tenant pro file for the rented properties, and the present condition of the properties. These assumptions are market standard and in line with the International Valuation Standards ('IVS'). Generally, a change in the assumption made for the rent per sqm (per month) is accompanied by a similar change in the rent growth per annum and discount rate (and exit yield) and an opposite change in the other inputs.
A quantitative sensitivity analysis, in isolation, of the most sensitive inputs used in the independent valuations performed, as of the statement of financial position date, are set out below:
| €0.5 change in rental value per month, per sqm1 | | 25 bps change in market yield | | 5% change in Capex | | €50 change in sales prices per sqm2 | | 2.5% change in vacancy in Perpetuity3 | ||||||||
| Investment property | Year | Country | Increase | Decrease | | Increase | Decrease | | Increase | Decrease | | Increase | Decrease | | Increase | Decrease |
| | | | €'000 | €'000 | | €'000 | €'000 | | €'000 | €'000 | | €'000 | €'000 | | €'000 | €'000 |
| Completed | 2024 | Poland | 34,440 | (34,420) |
| (54,570) | 59,100 |
| - | - |
| n/a | n/a |
| (29,500) | - |
| | 2024 | Romania | 22,400 | (22,600) |
| (40,200) | 42,700 |
| - | - |
| 700 | (800) |
| (11,700) | 10,100 |
| | 2023 | Poland | 31,730 | (37,030) | | (57,730) | 57,070 | | - | - | | - | - | | (32,150) | - |
| | 2023 | Romania | 28,200 | (27,900) | | (46,700) | 50,700 | | - | - | | 1,100 | (1,100) | | (12,500) | 10,100 |
| Under | 2024 | Poland | - | - | | - | - | | - | - | | - | - | | - | - |
| development | 2024 | Romania | 1,700 | (1,700) |
| (1,900) | 2,000 |
| (2,300) | 2,200 |
| - | - |
| - | - |
| | 2023 | Poland | - | - | | - | - | | - | - | | - | - | | - | |
| - | 2023 | Romania | 3,000 | (3,000) | | (3,600) | 3,900 | | (3,500) | 3,500 | | - | - | | (200) | 100 |
| Under | 2024 | Poland | 3,300 | (3,310) |
| (4,780) | 5,150 | | - | - |
| n/a | n/a |
| (2,730) | - |
| refurbishment | 2023 | Poland | 3,510 | (6,860) | | (8,700) | 5,910 | | - | - | - | - | - | | (6,070) | - |
| Further | 2024 | Romania | 2,100 | (2,200) |
| (3,200) | 3,500 |
| (3,200) | 3,200 |
| - | - |
| - | - |
| development | 2023 | Romania | 2,100 | (1,900) | | (2,000) | 2,300 | | (2,000) | 2,200 | | 400 | (500) | | - | - |
The quantitative sensitivity analysis was computed as €0.25 change in rental value per month, per sqm for four industrial properties in 2023.
The quantitative sensitivity analysis was computed as €1.5 change in sales price per sqm for industrial properties portfolio in 2023.
The vacancy in perpetuity sensitivity analysis is not followed for the Polish properties portfolio as this factor is considered in the valuation methodology as part of yields and not a variable in isolation.
4.1 Investment properties owned by Joint Ventures
| | | Completed investment property | Investment property under development | Land for further development | TOTAL |
| | Note | €'000 | €'000 | €'000 | €'000 |
| 1 January 2023 | | 73,700 | 8,400 | 36,900 | 119,000 |
| Subsequent expenditure | | 7,037 | - | 382 | 7,419 |
| Net lease incentive movement | | 251 | - | - | 251 |
| Transfer to completed investment property | | 8,400 | (8,400) | - | - |
| Fair value gain/(loss) on investment property | | 2,412 | - | (35) | 2,377 |
| 31 December 2023 | | 91,800 | - | 37,247 | 129,047 |
| Subsequent expenditure | | 1,897 | - | 10 | 1,907 |
| Net lease incentive movement | | 446 | - | 1 | 447 |
| Transfer to completed investment property | | - | - | - | - |
| Fair value gain/(loss) on investment property | 22.3 | (4,595) | - | (9,966) | (14,561) |
| 30 June 2024 | 22.2 | 89,548 | - | 27,292 | 116,840 |
Sensitivity analysis on significant estimates used in the valuation of investment properties owned by the joint venture
As disclosed in note 22, the Group also has investments in three joint ventures where investment properties were valued at fair value under the similar Group accounting policies by Colliers Valuation and Advisory SRL.
The table below describes key information about the fair value measurements, valuation technique and significant unobservable inputs (Level 3) used in arriving at the fair value under IFRS 13.
| Carrying value | | | | Range |
| ||
| Class of Joint Venture property | 30 June 2024 | 31 December 2023 | Valuation technique | Country | Input | 30 June 2024 | 31 December 2023 |
| | €'000 | €'000 |
|
| | | |
| Completed | 89,548 | 91,800 | DCF | Romania | Rent per sqm | €2.00 - €10.00 | €2.00 - €10.00 |
| Investment | | | | | Discount rate | 8.50% - 9.00% | 4.28% - 4.52% |
| property | | | | | Exit yield | 7.00% -7.25% | 7.00% - 7.25% |
| Land bank - for further development |
27,292 |
37,247 |
SC |
Romania |
Sales value sqm |
€30.00 - €70.00 |
€30.00 - €70.00 |
| TOTAL | 116,840 | 129,047 | | | | | |
Income approach: DCF: Discounted Cash Flows, Market approach: SC: Sales Comparison\
A quantitative sensitivity analysis (for properties owned by joint ventures), in isolation, of the most sensitive inputs used in the independent valuations performed, as of the statement of financial position date, are set out below. Generally, a change in the assumption made for the estimated rental value is accompanied by a directionally similar change in the rent growth per annum and the discount rate (and exit yield), and an opposite change in the long-term vacancy rate.
| | | | €0.25 change in rental value per month, per sqm | | 25 bps change in market yield | | 5% change in capex | | €1.5 change in sales prices per sqm | | 2.5% change in vacancy in perpetuity | ||||||||||||
| Joint ventures | | | Increase | Decrease | | Increase | Decrease | | Increase | Decrease | | Increase | Decrease | | Increase | Decrease | |||||||
| Investment Property | Year | Country | €'000 | €'000 | | €'000 | €'000 | | €'000 | €'000 | | €'000 | €'000 | | €'000 | €'000 | |||||||
| - Completed | 2024 | Romania | 3,000 | (2,900) |
| (2,900) | 3,200 |
| - | - |
| - | - |
| (1,200) | 1,100 | |||||||
|
| 2023 | Romania | 2,400 | (2,400) | | (3,300) | 3,200 | | | | | | | | (1,400) | 1,000 | |||||||
| - Further | 2024 | Romania | - | - |
| - | - |
| - | - |
| 2,200 | (2,200) |
| - | - | |||||||
| development | 2023 | Romania | - | - | | - | - | | - | - | | 1,400 | (1,400) | | - | - | |||||||
The Group is committed to responding to the effects of climate change and its Sustainability Policy covers the impact of the Group's operations and processes, the long-term environmental performance of the properties owned and developed, as well as the reduction of energy consumption and greenhouse gas emissions. The Group, therefore, actively invests in properties which are either certified as environmentally friendly or have the potential to be classified as such following our own initiatives.
The Company conducted a climate change transition and physical risks and opportunities assessment, across its value chain, in alignment with TCFD recommendations (i.e. Task Force on Climate-Related Financial Disclosures). Climate analysis indicates that the probability of floods to occur is very likely across RCPs climate scenarios (2.6, 4.5 and 8.5 W/m 2) for several locations in Poland and likely in Romania, where construction operations are in progress. As Globalworth considers that extreme precipitation and flood events will increase and that direct operations might be compromised, it is investing in solutions that will provide business continuity. Already, we are implementing procedures and flood protection has been purchased for the majority of the properties, as we consider flooding to be one of the main natural hazards occurring in Poland and Romania, which, in certain circumstances, may take the form of a disaster.
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