globalworthTM
THE LEADING
OFFICE
INVESTOR
IN ROMANIA
ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
INTRODUCTION
GLOBALWORTH
FOCUSES ON
MAXIMISING VALUE
FROM REAL ESTATE
INVESTMENT
OPPORTUNITIES IN
ROMANIA AND THE
BROADER CEE AND
SEE REGION
Overview
1
2016 Highlights
At a Glance
Investment Proposition
Investment Journey
Strategic review 10
Chairman’s Statement
Our Market
Business Model
Strategy in Action
Chief Executive’s Statement
Management Review
Investment Review
Leasing Review
Financial Review
Financing and Liquidity Review
Corporate Social Responsibility
Risk Report
Viability Statement
Board of Directors
The Team
Portfolio review 64
2
4
6
8
12
14
18
20
28
30
34
36
38
40
42
50
55
56
60
Globalworth Tower
BOB
BOC
Green Court Building “A”
Green Court Building “B”
Globalworth Plaza
Unicredit HQ
TCI
City Offices
Gara Herastrau
Upground Towers
TAP
Globalworth Campus
Dacia Warehouse
Governance
100
Corporate Governance Report
Directors’ Report
72
74
76
78
80
82
84
86
88
90
92
94
96
98
Consolidated Statement of
Financial Position
Consolidated Statement of
Changes in Equity
Consolidated Statement of
Cash Flows
Section I: Basis of Preparation
Section II: Investment Property
Section III: Financial Results
Section IV: Financial Assets and
Liabilities
Section V: Share Capital
and Reserves
Section VI: Business Combinations
and Related Disclosures
Section VII: Other Disclosures
102
104
Independent Auditor’s Report
to the Members of Globalworth
Real Estate Investments Limited
Remuneration Committee Report
107
Investing Policy
Audit Committee Report
109
Schedule of Properties
Financial Statements
112
Consolidated Statement of
Comprehensive Income
114
Glossary
Company Directory
115
116
117
118
119
123
128
134
137
139
143
149
150
152
155
Green Court “B"
overview
Strategic review
Portfolio review
governance
financial StatementS
GLOBALWORTH ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
1
2016 HiGHLiGHTs
a Year of Strong reSUltS
FINANCIAL
portfolio open market value
€977.5m
+5% on 2015
epRA nAV
€783.8m
+38% on 2015
normalised eBiTdA
€36.3m
+62% on 2015
Loan to value ratio
43.4%
epRA nAV per share
857 cents
-6% on 2015
net operating income
€43.6m
+54% on 2015
epRA earnings
€8.6m
+€13.9m on 2015
epRA earnings per share
13.34 cents
+22.75 cents on 2015
nAV
€715.4m
+43% on 2015
nAV per share
791 cents
-1% on 2015
Gain on the valuation of property
earnings before tax
€6.7m
€49.4m in 2015
€12.2m
€62.5m in 2015
To learn more about our business and
investments visit us online at globalworth.com
overview
Strategic review
Portfolio review
governance
financial StatementS
OPERATIONAL
¡ completed a €200 million
¡ increased commercial
equity capital raise at €8.0 per
share, subscribed by
Growthpoint properties Ltd
and Oak Hill
standing GLA by 22% to
370k sqm
– Total standing GLA of
420k sqm
¡ completed a €180 million
senior secured real estate
bond subscribed by the
canada pension plan
investment Board (cppiB) and
cairn capital
¡ delivered two class “A” office
properties in Bucharest
increasing the total number of
standing properties to 14
– The flagship Globalworth
Tower in Q1-16
(GLA: c.54.7k sqm)
– The Gara Herastrau office
property in Q2-16
(GLA: c.12k sqm)
¡ signed tenancies for a total of
98k sqm of commercial GLA in
our properties in 2016
¡ four office and light-industrial/
warehouse facilities under
construction in Bucharest and
Timisoara
¡ 332k sqm of commercial space
let or pre-let with a WALL of
6.5 years
¡ Total average occupancy of
commercial standing GLA at
c.83.1%
¡ Received green accreditation
for three office properties,
including Leed platinum for
Globalworth Tower (in 2017),
increasing the total number of
green accredited properties in
the portfolio to eight
2016 was a busy and successful year for Globalworth.
We delivered strong results, improved the fundamentals
of our business, and continued to strengthen our
position as one of the leading real estate players in
Romania and the wider region.
Geoff Miller
chairman
2
GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
3
AT A GLAnce
comPetitivelY PoSitioneD
in an attractive marKet
We are a fully integrated real estate company
operating in the CEE and SEE region with a primary
focus on Romania, where we acquire, develop and
directly manage primarily high-quality office and
logistics/light-industrial real estate assets.
Sector:
High-quality commercial properties, with primary
focus on:
– Offices
– Logistics / Light-industrial
region:
– cee and see Region
– Romania (primary market of focus)
aSSetS:
– existing or to be developed, undervalued or
underperforming properties with transformation
potential into performing and marketable assets
with long / stable cash flow
tenantS:
– multinational corporate groups
and financial institutions
leaSe termS:
– Long-term
– Triple net
– euro-denominated
– Annually indexed
City Offices
overview
Strategic review
Portfolio review
governance
financial StatementS
standing & operational*
assets: value “as is”
€882m
current developments:*
value “as is”
€78m
Land for development:
value “as is”
€18m
portfolio appraised value
upon completion
€1.1bn
*for presentation purposes only we have
included under 'standing and Operational
properties' the three facilities of TAp leased to
Valeo, continental and elster offering total GLA
of 81.4k sqm valued at €42.0 million, with facilities
either under or with potential for further
development (Valeo, continental and Litens)
presented as 'developments' with an appraised
value of €7.5 million.
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GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
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5
INVESTMENT STRATEGY
overview
Strategic review
Portfolio review
governance
financial StatementS
inVesTmenT pROpOsiTiOn
we Have a roBUSt recorD
of Performance anD
oUr StrengtHS PoSition
US for fUrtHer growtH
see inVesTmenT JOuRneY
on page 8
see OuR mARKeT
on page 14
see Business mOdeL
on page 18
see mAnAGemenT ReVieW
on page 30
OuR finAnciAL ReVieW
on page 38
see finAnciAL sTATemenTs
on page 112
portfolio open market value
€977.5m
+5%
Gara Herastrau & Green Court
Buildings “A” and “B”
6
GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
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7
WE HAVE AFULLY INTEGRATED PLATFORM66 professionals, majority located in BucharestIn-house expertise in investment, project, asset and property managementWE HAVE ALONG-TERM STABLE CASH FLOW 329k sqm of commercial space let or pre-let with a WALL of 6.5 years86% of contracted rent generated by multinationals 93% of commercial contracted rent expiring ≥ 2020WE HAVE ASTRONG FINANCIAL POSITION€43.6 million of net operating income, expected to increase further in the short-medium term LTV of 43.4% with no material debt maturities in the short termc.€221 million of cash at 31 December 2016 expected to be deployed in the near termWE HAVE APROVEN STRATEGY Investment in a diverse pool of properties (standing / developments) allowing for higher risk-adjusted returnsc.238k sqm of commercial GLA successfully negotiated in our propertiesAverage portfolio lease length of 6.5 years, longer than average in the market WE HAVE AFAVOURABLE MARKET IN WHICH WE OPERATE Romania (principal country of operation) is one of the fastest growing economies in EuropeStrong macro-economic outlookImproving real estate market, with further growth potentialWE HAVE AROBUST TRACK RECORDSuccessfully completed a number of corporate (debt and equity) and real estate transactionsDeployed €860 million in Romania’s real estate market in the past 3 1/2 yearsDeveloped 170k sqm of high quality commercial GLAAssembled a portfolio of high-quality properties valued at €1.1 billion overview
Strategic review
Portfolio review
governance
financial StatementS
inVesTmenT JOuRneY
€860 million of inveStmentS
undeRTAKen since incepTiOn WiTH 20 pROpeRTies
cuRRenTLY WORTH €1.0 BiLLiOn And €1.1 BiLLiOn
upOn cOmpLeTiOn Of deVeLOpmenTs
2013
2015
Key corporate events
Acquisitions
completion of developments
feB 2013
SeP 2013
feB 2014
aPr 2014
JUl 2014
JUl 2013
Dec 2013
mar 2014
JUn 2014
Dec 2014
mar 2015
JUn 2015
oct 2015
feB 2016
JUn 2016
aPr 2015
SeP 2015
Dec 2015
maY 2016
Dec 2016
2015
2017
1
Globalworth plaza, was previously referred to as nusco Tower.
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9
Acquisition of UniCredit HQ and Globalworth Plaza1Delivery of Continentalwarehouse in TAPAcquisition ofGreen Court “A”Delivery of Elsterfacility in TAPEquity Capital raise €54 millionAcquisition ofGreen Court “B”Delivery of GlobalworthTower€180 million Bond issuesubscribed by CPPIB and Cairn CapitalDelivery of Gara HerastrauEquity Capital raise €200 million subscribed byGRT and OakHillIncorporation of GWIListing on LSE AIM, raising €54 millionAcquisition of GAMAcquisition of Globalworth Tower siteAcquisition of TCIAcquisition of BOB, BOC & Upground TowersEquity Capitalraise €144 millionAcquisition of GWI Campus siteAcquisition of TAPAcquisition of Gara Herastrau &Luterana lands OvERvIEW
STRATEGIC REvIEW
PORTFOLIO REvIEW
GOvERNANCE
FINANCIAL STATEMENTS
STRATEGIC
REVIEW Chairman’s Statement
Our Market
Business Model
Strategy in Action
Chief Executive’s Statement
Management Review
Investment Review
Leasing Review
Financial Review
Financing and Liquidity Review
Corporate Social Responsibility
Risk Report
Board of Directors
The Team
12
14
18
20
28
30
34
36
38
40
42
50
56
60
10
GLOBALWORTH ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
GLOBALWORTH ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
11
cHAiRmAn’s sTATemenT
anotHer SUcceSSfUl SteP in oUr
evolUtion marKeD BY roBUSt
Performance, imProveD governance
anD Stronger caPital BaSe
2016 was a busy and successful year for us.
We continued to grow our asset base, achieved strong
operating and financial performance, raised a total of
€380 million through two high-profile transactions in
the debt and equity capital markets, and welcomed a
new cornerstone shareholder to the Company.
Geoff Miller
chairman
This level of investment has been made possible through
the support of our shareholders, our debt finance
providers and the use of our own resources. i would like
to highlight that, in 2016, we successfully completed two
corporate transactions, which in our opinion should be
included in the list of the most notable ones for the year
in the region:
¡ The €180 million bond transaction concluded in June
2016 with the canada pension plan investment Board
(cppiB) and cairn capital
¡ The €200 million equity capital raise concluded in
december 2016, fully subscribed by Growthpoint
properties Ltd. and Oak Hill Advisors1
We are proud and grateful for the validation and support
of international investors of cppiB and Growthpoint’s size
and reputation.
We are also pleased to be paying a dividend for the first
time since the company’s inception. As declared in
december 2016, we will be distributing €40 million
(€0.44 per share) to our shareholders in two tranches for
2017 and have committed to distribute the equivalent of
90% of our funds from Operations (ffO) in the future.
Shareholder Base
We are delighted to have Growthpoint properties Ltd.
(GRT) as the new principal shareholder in Globalworth.
GRT is south Africa’s largest ReiT, with assets of over
€7.5 billion, and a top-5 constituent of the fTse epRA/
nAReiT emerging markets index. GRT became the
largest shareholder in the company following its
participation in the €200 million equity capital raise in
december 2016, in which it invested c.€186 million.
Performance
Over the course of the year we made good progress
with our development programme for office and light-
industrial/warehouse space in Romania while adding to
our footprint of class “A" offices in Bucharest with two new
properties, one of which was the landmark Globalworth
Tower. We continued to actively manage our portfolio to
best position our properties in the market and deliver
sustainable growth for the company, our shareholders
and the wider community in which we operate.
since Globalworth’s inception in february 2013 we have
invested c.€860 million in Romania’s real estate market,
ranking us as one of the most active investors in the
country over this period, and assembled a portfolio of
15 high-quality investments valued at €977.5 million as
at 31 december 2016.
GRT’s interest in further investing in the central and
south eastern european region is aligned with that of the
company and we will be looking to leverage its support
and best-in-class practices of operation and governance.
Board Operation/Memberships
We believe that a close relationship and open
communication between the non-executive and
executive directors is critical for the smooth operation
of the Board and to provide the right guidance for
the company.
This level of close cooperation, intensified by the key
bond and equity transactions contemplated and finally
executed in 2016, was evidenced by our Board convening
18 times over the course of the year to ensure that all
appropriate actions and decisions were taken.
1. includes certain funds and/or accounts managed by Oak Hill Advisors
(europe), LLp and its affiliates.
overview
Strategic review
Portfolio review
governance
financial StatementS
We are pleased to welcome four new members to our
Board of directors, which as of february 2017 comprised
12 participants, and thank the existing directors for their
ongoing cooperation and support. norbert sasse (ceO
of GRT) and George muchanya of Growthpoint, peter
fechter and Richard van Vliet have joined the Board as
non-executive directors. We believe that their extensive
experience and business acumen will help us
to steer Globalworth to new levels of success.
Corporate Governance
The benefits of GRT’s involvement with the company
have become immediately apparent as we have already
adopted some of the practices of our new principal
shareholder. We believe that these will further improve
the way that we operate.
As our business grows in scale and to increase the efficiency
of our operations and our Board, we have introduced a
newly formed investment committee. This committee has
been established to consider and approve or recommend
to the Board (in accordance with a specified delegated
authority framework) proposed investments or divestments,
financing arrangements, investment policies and strategy.
it comprises five members, these being eli Alroy
(chairperson), norbert sasse, George muchanya, ioannis
papalekas and dimitris Raptis.
The Board has also resolved to make certain changes to
its committee memberships:
¡ peter fechter has joined the Remuneration committee
and John Whittle has stepped down as chairperson and
member, with myself succeeding him as chairperson
¡ Richard van Vliet has joined the Audit committee,
replacing myself in the role
i would like to thank John for his service on the
Remuneration committee and wish my fellow members
every success with their new roles and responsibilities.
We are also very proud to be able to give back to the
community. Globalworth has directly or indirectly
supported numerous local communities, charities and
hospitals in Romania over the years, predominantly
focused on young children, single mothers and those
in need of palliative care.
Health and Safety
The health and safety of the people working or visiting
our properties, our employees and our partners is of
paramount importance to us. With over 420k sqm of
standing GLA in our property portfolio and an additional
79k sqm under construction at the end of 2016, and
thousands of people working on or visiting our sites on
a daily basis, we work hard together with our partners
to ensure that our safety record remains intact.
On our construction sites we monitor our contractors
closely to ensure that proper safety measures are being
applied to the workforce and, in the case of visitors, that
the proper health and safety training is being performed.
At our completed properties we conduct health and
safety training for our tenants and undertake regular
scenario exercises in order to secure the safety of
employees and visitors in the event of an emergency.
With a portfolio of high-class assets, a new cornerstone
investor and a robust balance sheet, Globalworth is in a
strong position to pursue further asset growth through
acquisitions. We already announced in february 2017
our acquisition of dacia’s main distribution centre facility
in Romania and we have a strong pipeline of potential
investments that we are pursuing. We also aim to simplify
our debt capital structure and reduce our average cost of
debt and to that end are exploring a benchmark size
eurobond issue. We are also considering means to broaden
our shareholder base and enhance trading in our equity
including the possibility of an additional listing.
Sustainability/Social Responsibility
At Globalworth we aim to do business while adhering to
strict business ethics and corporate social responsibility,
which we believe adds and sustains long-term value for
the company, our shareholders, the community and the
environment.
Geoff Miller
chairman
3 April 2017
We continue to focus on investing in environmentally
friendly properties, having added two green certified
buildings to our portfolio in 2016 and now having the
first property in Bucharest and the broader see region
to be awarded Leed platinum. Of our commercial
standing investments, 8 out of 11 have received green
accreditation of BReeAm excellent/Leed Gold or
higher, and we are exploring the potential for similar
accreditations for other properties in our portfolio.
Upground Towers
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overview
Strategic review
Portfolio review
governance
financial StatementS
OuR mARKeT
gloBalwortH focUSeS PrimarilY
on romania’S commercial
real eState marKet
Since its inception, the Company has invested exclusively in
Romania, with over 90% of the c.€850 million of capital that
it has deployed, targeted at Class “A” office properties in
Bucharest and a light-industrial park in Timisoara.
The commercial real estate market is cyclical and in
Romania fell to its lowest point in 2009. since then, the
market has been gradually recovering and, supported
by a strong and expanding economy, this recovery has
gained pace since 2012.
Romania is one of the few european economies that has
expanded consistently over the past six years, outpacing
eu average growth. its attractive macro-fundamentals
resulted in real Gdp rising by 4.7% in 2016, the second
highest growth rate in europe, and the economy is
forecast to continue to expand in the medium term.
Growth is also underpinned by european union grants
and subsidies, which have been made available to the
country since its accession to the eu in 2007. Romania is
currently on the second phase of its european funding
programme, which runs from 2014 to 2020, with c.€43
billion of approved eu funds expected to flow into the
country over that period.
The national Bank of Romania has maintained its
monetary policy rate, with the base rate remaining
unchanged at a record low of 1.75%, supporting the
momentum in the economy and taking a cautious stance
on the uncertainty in europe caused by the Brexit vote.
mandatory reserve ratios for banks have also remained
flat for both local and foreign liabilities at 8% and 10%
respectively, providing further support to the well-
capitalised banking sector. Real estate financing
continues to be available for good-quality projects, with
increasing competition among financial providers (both
local and international) leading to improved pricing and
LTV terms for borrowers.
investment activity in commercial real estate in Romania
remained strong at c.€0.8 billion in 2016, with a number
of both existing and new international investors entering
and/or increasing their exposure to the market directly
or indirectly.
interest from investors such as Growthpoint properties
(Globalworth), cppiB (Globalworth), Gic (p3 Logistics
parks), Blackstone/Logicor (immofinanz’s industrial assets)
and ppf, has been added to that of the likes of nepi, cTp,
Lonestar/GTc immofinanz, skanska and, of course,
Globalworth and we believe this will help the Romanian
real estate market to develop further.
prime yields for office properties stabilised at 7.5% in
2016, but contracted further for logistics properties,
where yields fell to 8.5% from 9.0% the previous year.
current prime yields in Romania are still higher than in
most other prime markets in the cee and see region,
despite contraction and favourable market conditions,
having fallen c.100-150bps from their peak level in 2007
thus allowing for potential further yield compression as
the real estate market continues to evolve.
Approximately 81% of our portfolio value is in offices
(standing and development), with the majority of our
properties having been built since 2011, and four having
been completed in the past two years. Over the past
three years, we have extensively modernised the three
office properties in our portfolio constructed prior to
2011 and made them more environmentally friendly.
¡ BOB (2008): partial refurbishment (2014-16 in stages)
and recipient green accreditation in 2014
¡ BOc (2009) partial refurbishment (2012-16 in stages)
and recipient of green accreditation in 2014
¡ GW plaza (2010): under partial refurbishment 2016-17.
Our modern office stock competes directly with the
current supply in the market, which in Bucharest has
increased by over 50% since 2010 to reach 2.6 million sqm
in Q4-16.
The average office vacancy rate in Bucharest decreased
marginally in 2016 to 11.7%, although vacancy rates
continue to vary between sub-markets and this was also
reflected in rents.
due to the cyclical nature of the real estate markets,
the timing at which investments are made is critical to
their long-term success and the impact they can have
on shareholder returns. At Globalworth, we have been
addressing this risk by investing in high-quality real
estate properties at relatively early stages of the cycle,
maintaining a moderate level of debt and focusing on
signing long-term, triple net leases with a diversified
pool of multinational tenants. We thus aim to be in a
position to generate attractive risk-adjusted returns for
our shareholders.
We believe that strong macro fundamentals will
continue to benefit Romania’s real estate market for the
foreseeable future. The new schemes projected to be
completed over the next two years are spread around
Bucharest and, given the demand for good-quality space,
we anticipate that rental levels will remain stable.
Yields on new, prime real estate product are expected
to contract further, supported by investors interested in
acquiring quality stock at a discount to other cee real
estate markets.
Overall supply of class “A" office space is estimated to
increase by 300k to 500k sqm over the next two years,
including 88k sqm developed at Globalworth campus
by the company.
demand for top-quality office space continued to be
strong in 2016, running at almost 40% higher to the level
of new supply. demand was driven by companies in the
iT&c, production/energy and financial sectors, with a
number of multinational corporates consolidating their
positions and expanding their operations in Romania.
This trend was reflected in the leases signed by
Globalworth during the year through tenants which
included Huawei, deutsche Bank, Honeywell, patria Bank,
Hp and Wipro.
class A energy-efficient office properties, which are
easily accessible by public and private transport and
combine high-quality space with other amenities, are in
firm demand and maintain low vacancy rates and stable
rents. properties matching this profile in Globalworth’s
portfolio, such as BOB, BOc, and Green court “A" and
“B", have occupancy rates of over 97%. As of march 2017
the recently completed Globalworth Tower and Gara
Herastrau office properties have occupancy rates in
excess of 90%.
The light-industrial/warehouse sector in Romania was
one of the most actively sought-after in 2016, driven by
growth in retail consumption and industrial production.
Rents and vacancy rates in this sector vary significantly
depending on quality, the location of the facility and
the lease duration. Rents for high-quality space in prime
sub-markets have stabilised, however, and vacancy
remains low, below 3.0% at national level. most new
light-industrial properties are pre-let and built-to-suit
to the specifications of the tenants, as has been the case
at our TAp complex where we have 97% occupancy.
following the completion of the new facilities under
construction and leased to Valeo and Litens Automotive,
occupancy in the park will rise to 98%.
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15
overview
Strategic review
Portfolio review
governance
financial StatementS
OuR mARKeT
cOnTinued
marKet review
2016 Romania Country Performance
Real Gross domestic product growth (Gdp):
private consumption growth:
current account % of Gdp:
Budget deficit % of Gdp:
public debt % of Gdp:
inflation %:
unemployment %:
4.7%
7.7%
- 2.4%
- 1.5%
37.1%
-0.5%
6.0%
Strong Macroeconomic Fundamentals
full membership of the eu since 2007
Local currency: Romanian Leu
Transactions typically completed in euros
7th largest country in the eu by population
strategic location allowing access to the Black sea and
central europe
excellent iT infrastructure with one of the fastest internet
networks in the World
continued Real Gdp growth since 2011
Low public debt to Gdp
significant national and eu funding available until 2020,
supporting investment and further infrastructure
improvements
stable tax system with corporate and personal income tax
at 16%
Highly skilled workforce sustaining growth and attracting
multinational corporates to Romania
One of the lowest costs of labour in the eu
increasing private consumption
Real Estate Highlights
Office demand consistently exceeding supply since 2011
modern office stock in Bucharest of c.2.6 million sqm
demand driven by iT&c and production sectors
investment yields continued to contract in 2015, but remain
higher than most cee and see sub-markets
Office prime yields at 7.5%
Logistics prime yields at 8.5%
Rents stabilised, with positive outlook
source: ministry of public finance Romania, national Bank of Romania, cBRe,
national institute of statistics, Jones Lang Lasalle, colliers and the company
Based on march 2017 (estimates)
Investment Volume – Romania
investment Volume - Romania
investment Volume - Romania
Yield evolution
Yield evolution
Yield Evolution
m
€
1600
1400
1200
1000
800
600
400
200
0
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
Year
14.00%
12.00%
10.00%
8.00%
%
6.00%
4.00%
2.00%
0.00%
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
Year
Industrial
Retail
Office
source: cBRe, JLL
Structural supply/demand imbalance
demand exceeding supply in the office market
for commercial space in Bucharest...
since 2011
Bucharest continues to have one of the most
attractive return profiles in the region
m
q
S
0
0
0
’
400
350
300
250
200
150
100
50
0
'06
'07
'08
'09
'10
'13
'14
'15
'16
'12
'11
Year
12%
11%
10%
%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
ROM
CZR
HUN
POL
Capital City
BUL
SLO
Supply
Demand
Industrial
Office
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overview
Strategic review
Portfolio review
governance
financial StatementS
Business mOdeL
clear anD
Proven moDel
Our business model, built upon our sources of competitive advantage,
delivers sustainable growth and value to our stakeholders. We offer turnkey
commercial real estate solutions and our leasing policy is to rent our office
and other space to multinational corporate groups and financial institution
tenants on long-term, triple net, annually indexed, euro-denominated leases.
comPetitive aDvantageS
Proven inveStment StrategY
BenefitS anD oUtcomeS
STRONG MANAGEMENT TEAM
¡ proven track record
¡ market knowledge
¡ size and scale in core market
HIGH QUALITY PORTFOLIO
¡ strong macro environment
¡ diverse and international tenant base
¡ Long-term contracted cash flow
streams
¡ financial strength
¡ Robust euro-denominated
rental income
¡ strong corporate governance
¡ integrated operating platform
¡ Turnkey solutions offered to tenants
¡ Ability to structure complex asset
acquisitions (distress, restructuring,
repositioning)
¡ Raising of equity and debt
capital and successful
deployment on multiple
investments
¡ Attractive, risk-adjusted
returns, through yield
and capital appreciation
nAV
€715.4m
+43%
epRA nAV
€783.8m
+38%
normalised eBiTdA
€36.3m
+62%
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ASSETS ¡Existing or to be developed, undervalued or underperforming properties with transformation potential into performing and marketable assets with long / stable cash flowTENANTS AND LEASE TERMS ¡Multinational corporates and financial institutions ¡Long-term, euro-denominated, triple net, inflation linked ¡Focus on quality, predictable, inflation protected cash flows, with very high NOI to EBITDA conversion, at attractive yieldsREGION ¡CEE and SEE region ¡Romania (primary market of focus) ¡Deep market knowledge with local presence in Romania for 15 years ¡Contrarian play that allowed securing investments at discount to market value, offering capital appreciation potentialSECTOR ¡Acquisition, development and management of commercial assets ¡Active management of underperforming / mispriced assets ¡High-quality portfolio with modern Class “A” assets sTRATeGY in AcTiOn
GLOBALWORTH TOWeR
BUcHareSt’S lanDmarK
office tower
The idea for the development of Globalworth Tower, was conceived at
the same time as when Globalworth (the Company) was in the process
of being established.
The Idea
We believed that the city was missing a new modern, high-rise landmark, class “A”
office building which would demonstrate the same characteristics found in Western
europe. mainly a multi-floor, high-rise, energy-efficient, class “A” office property,
with a large floor plate and a high utilisation coefficient, that would be easily
accessible by both public and private transportation.
We believed that this product would be very attractive to large multinational tenants
operating in Romania, who were looking to replicate international trends and
practices for their activities in the country. At the same time, offering a high quality
work space, which is easily accessible to employees, further incentivises
performance and work ethic.
A building demonstrating all the aforementioned characteristics did not exist in
Bucharest and as such we decided to develop it ourselves as Globalworth!
The Implementation
Key in every real estate investment is the location of the property to be acquired /
developed and when the site on 201 Barbu Vacarescu street became available we
acted quickly to secure it. The property displays all the key characteristics we were
looking for:
¡ Accessibility: located next to the metro station (max 5min walk to all other public
transport)
¡ Visibility: the site is located at the corner of three main road arteries
¡ shape: the site has a rectangle shape
¡ Building coefficient: allowing the development of a c.54,700sqm GLA above
ground
¡ Height coefficient: allowing the development of a 120 meter tower
As we secured the site to be developed, we initiated the design and permitting
process for the project. considering the overall size of the development, we were
looking to have mainly restaurants and commercial uses on the ground floor and
offer premium class “A” office space on all other floors above ground.
The restaurants and coffee shops, together with the development of the
mega image concept store offer multiple options for the people working at
Globalworth Tower, and allow them to socialise, have business meetings and find
alternative culinary options.
On the 26 floors above ground, we offer premium class “A” office space, with above
average height (2.85m) and great views to our tenants.
development completed in
23 months
Average number of floors per
month delivered
2.5
overview
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Development Timeline
feB 2016
property formally delivered
nov 2015
façade completed
aUg 2015
construction reached floor 26
JUl 2015
construction reached floor 20
mar 2015
construction reached floor 10
oct 2014
construction reached Ground level
aPr 2014
construction commenced
mar 2014
Building permit issued
Dec 2013
Acquisition of the site completed
JUl 2013
Agreement to acquire the site
to be developed
– 1st LEED Platinum Class “A” office in the SEE
– 2nd tallest office in Romania
– 2nd largest single asset office in Romania
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sTRATeGY in AcTiOn
cOnTinued
Area & Access
Globalworth Tower is centrally located in one of Bucharest’s
most “dynamic” business hubs to the north of the city. The
northern part of the city, due to its excellent infrastructure,
close proximity to the airport and availability of land plots
has attracted significant investment by both landlords and
(mainly international) occupiers in recent time, and has
evolved to become the new cBd of Bucharest.
The property is strategically positioned at the entrance of
the new cBd and enjoys a direct opening to three main
streets (Barbu Vacarescu street, pipera Road and calea
floreasca Road), which in conjunction with its great height
(c.120m), results in a high level of visibility.
Globalworth Tower is easily accessible by public transport
as the Aurel Vlaicu square subway station, three bus stops
and two tram stations are located within a 5 minutes’ walk
from the property. in addition Globalworth Tower is also
accessible by car from the three aforementioned streets,
namely Barbu Vacarescu street, pipera Road and calea
floreasca Road.
Globalworth Tower
Average number of builders
on site per day
c.550
shifts working at the peak
of the construction
3
On site builders at the height
of the construction process
1,050
overview
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KeY factS
location:
north Bucharest (new cBd)
aDDreSS:
201 Barbu Vacarescu street, sector 2, 020276,
Bucharest, Romania
tYPe:
class “A” Office
Year of comPletion:
2016
groSS BUilD area:
78,173sqm
groSS leaSaBle area: 54,686sqm – 2nd largest single office in
Romania
green certification: Leed platinum – 1st building in Romania and
the see to receive this green accreditation
arcHitect:
Architect service lead by costantin ciurea
lanDlorD
/ DeveloPer:
Globalworth Real estate investments Ltd
contractor:
Bog’ Art
ProJect manager:
Globalworth Asset managers sRL
ProPertY manager: Globalworth Building managers sRL
aSSet manager:
Globalworth Asset managers sRL
tenantS (SelecteD):
Vodafone (telecoms), Huawei (telecoms),
nndKp (law), Wipro (iT), delhaize /
mega image (retail-fmcG), Bunge (services),
ferrero (confectionery), Anritsu solutions
(services) and Globalworth (real estate)
awarDS:
Best Big Office development of 2016
(ciJ Awards 2016 – Romania)
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sTRATeGY in AcTiOn
cOnTinued
GLOBALWORTH cAmpus
Delivering a new claSS “a”
office comPleX wHere BUSineSS
can Be innovative anD floUriSH
A state-of-the-art development, balancing office, retail and other supporting
amenities over 88.6k sqm. It combines high technical and environmentally
friendly specifications of three Class “A” office towers, with green areas and a
dedicated commercial component. In addition a running track, electric vehicle
charging station, bicycle racks, coffee shops and restaurants promoting
healthy lifestyle. The project will be complemented by one of
Bucharest’s largest conference centres, providing
the infrastructure for a continuous learning
process for companies and
employees alike.
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High-quality space
88.6k sqm
No other office development
in Bucharest will exemplify the
work–life balance so clearly as
Globalworth Campus.
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25
sTRATeGY in AcTiOn
cOnTinued
Globalworth campus will blend office, retail and other
functions in an 88k sqm GLA development. The project
built in two phases, will incorporate the latest
technologies and high functionality, in order to deliver
the very best of office experiences.
phase A – comprising two towers, each with Gf + 12
floors above ground, is currently under construction
and will offer total GLA of 56.9k sqm upon completion
in Q1-18.
With a 2,300 sqm floor plate, the two towers will have a
320 employee floor efficiency and a 1 to 80 parking ratio.
The overall project will be anchored by a 3,000 sqm retail
gallery and a 720 seat conference centre, which combined
with its unique running track, will make it the focal point
of Bucharest’s new cBd.
class “A" energy-efficient office properties, which are
easily accessible by public and private transport and
combine high-quality space with other amenities,
are in firm demand and maintain low vacancy rates
and stable rents.
DEVELOPMENT SNAPSHOT
¡ 88.6k sqm of
high-quality space
¡ Three office towers
developed in two phases
¡ Retail and leisure area
¡ conference centre
¡ unique running track
¡ 2.3k sqm office floor plate
¡ 320 employee
floor efficiency
¡ Two underground levels
¡ 1 to 80 parking ratio
¡ Aiming for BReeAm
excellent
ACCESS
¡ excellent access by public
and private transport
¡ metro station directly in
front of the property
• 10 minutes to the
city centre
¡ 20 minutes’ drive to the
airport
¡ Bus and tram stops
within 5 minutes’ walk
overview
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Globalworth Campus is the latest project
to be developed by Globalworth and
upon its completion will be the pivotal
element of the Dimitrie Pompeiu
sub-market in Bucharest’s New CBD.
Site map
Technical specifications
Building management system
with full control of the equipment
and billing system for utilities,
parking with controlled access
interior hydrants and
sprinkler system
Green certification targeted
Open space area per floor
efficiently organised areas with
very few lost common spaces
ACCESS
CONFERENCE
"
HALL
TOWER
2S + P + 12E + Th
3
FIRE TRUCK
ACCESS
UNDERGROUND
CAR ACCESS
UNDERGROUND
CAR ACCESS
ACCESS
TOWER 2
2S + P + 12E + Th
FIRE TRUCK
ACCESS
UNDERGROUND
CAR ACCESS
ACCESS
ACCESS
ACCESS
FIRE TRUCK
ACCESS
TOWER 1
2S + P + 12E + Th
FIRE TRUCK
ACCESS
DIMITRIE POMPEIU BLVD.
PIPERA
PUBLIC
ACCESS
PUBLIC
ACCESS
public announcement system
The central lobbies and staircases
four pipes independent HVAc
system with fan-coils mounted
on the ceiling
2.8m clear height with built-in
HVAc systems, lighting and fire
detection and alarm
emergency generator for the vital
systems and common areas of
the building
Telecom and internet services
High-efficiency chillers
energy-saving heating plant
(boilers with condensation)
energy-saving air handling units
with heat recovery and free
cooling
dedicated chiller backed up by
generator for server rooms
24h/7 days security and safety
sprinkler system on all common
and office areas
controlled access and video
surveillance system
smoke detectors and fire
alarm system
easy orientation by proper
signs for parking,
entrances, lobbies, common
spaces, elevators and exits
efficiently placed on the floor
area, facilitate the partitioning
and the decorating of the rented
space depending on the specific
requirements of each tenant
each floor benefits from
natural light
High-performance solar control
glass with advanced thermal
insulation properties (sGG cool-
Lite sT 120)
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cHief eXecuTiVe’s sTATemenT
Delivering Strong reSUltS
anD PreParing for tHe
neXt Stage of growtH
Over the past three-and-a-half years, Globalworth has
become the largest owner of Class “A” office property
in Romania and one of the leading investors in the
country’s commercial real estate market.
Ioannis Papalekas
chief executive Officer
We have put together what we believe to be a high-
quality and resilient portfolio in our principal market
of Romania, assembled through disciplined buying,
development and active management of space.
We are proud to see that our hard work to-date has
been validated by interest in the company from highly
reputable international institutional investors. The
transactions closed in 2016 with investors of cppiB and
Growthpoint’s calibre mark a considerable endorsement
of Globalworth and its position in the market. This has
further incentivised us to continue on our growth path.
essential to the success of the company is the environment
in which we operate. Romania remains our primary focus
and its real estate market continues to provide the right
foundations for us to implement our strategy. We will,
however, also be looking to diversify our portfolio through
acquisitions in the wider cee and see regions.
increased private consumption is expected to support
further growth. The banking sector remains well-
capitalised and competition between banks to deploy
capital for good-quality real estate projects has resulted
in a further improvement in financing terms. eu and
national funds continue to be available to the country
(more than €43 billion to be provided over a seven
year period from 2014-2020), with the absorption rate
expected to pick up in 2017, further incentivising
investment in Romania and underpinning its growth
in the short to medium term.
The strength of the macro-economic environment has
been reflected in the performance of Romania’s real
estate sector, with demand for office and industrial estate
space reaching historically high levels and significantly
outweighing supply.
investment yields in the office market were stable at 7.5%
in 2016, mainly due to a limited number of transactions
being completed during the year, while yields for
industrial properties narrowed by an additional 50 basis
points to 8.5% by year end. With a view to achieving
attractive, risk-adjusted returns for our shareholders,
we have invested in both standing, income-generating
properties as well as properties to be developed by the
company. Our blended, stabilised nOi yield on capital
invested is estimated at c.10%.
in 2016 we made good progress with our development
programme for office and light-industrial/warehouse
space in Romania, investing c.€39 million in six projects
and an additional c.€4 million in other standing properties
in our portfolio.
We completed two properties located in the new central
Business district (cBd) of Bucharest offering a total of
66.7k sqm of class A office space, thus increasing our
total footprint of standing properties to 420k sqm at
the end of 2016. in addition, four other properties were
under construction. Three are expected to be finalised
in 2017 and one at the beginning of 2018 which, upon
completion, will add a further 78.4k sqm of high-quality
office and industrial space to our portfolio.
We are particularly proud that our flagship development
project Globalworth Tower was delivered in Q1-16.
Globalworth Tower is a landmark class “A" office
property located at the heart of Bucharest’s new cBd.
At c.120 metres high and with GLA of 54.7k sqm, this is the
second tallest tower and the second largest single office
building in Romania. in addition, in 2017 the property was
awarded a Leed platinum rating, thus becoming the first
building in Romania and the broader see region to have
received the highest available Green accreditation.
in 2016, the Romanian macro environment was again
positive, resulting in real Gdp expanding by 4.7%, one of
the highest growth rates in europe. in addition, Romania
continued to have one of the lowest public debt to Gdp
ratios and, with disposable income remaining strong,
in addition to Globalworth Tower, in 2016 we received
Green accreditation for two other properties in our
portfolio. Our commitment to investing in environmentally
friendly properties is further demonstrated by the fact
that over the past three-and-a-half years we have either
overview
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acquired (3), developed (3) or improved the efficiency (2) of our office
properties and currently 8 out of 10 of these hold Green accreditation
of BReeAm excellent/Leed Gold or higher. We are exploring the
potential for similar accreditation for other properties in our portfolio,
both standing and development projects.
The portfolio value at the end of year was 5% higher at €977.5 million
as compared to 31 december 2015, principally due to the completion
of the two development projects and to further investment made on
projects under construction. On delivery, these developments
(including Globalworth campus phase B) will add an additional c.€115
million to our portfolio (“On completion” valuation of c.€1.1 billion).
Total revenue generated by our portfolio increased to €68.2 million
(€44.8 million in 2015) following the acquisition of income-generating
assets in 2014 and 2015, the completion of own-developments, and
as a result of active asset management. 2016 was a record year for
leasing for us, as we let or renegotiated c.98k sqm of commercial GLA
in our properties. Our tenant base remains diversified in terms of
both origin and sector and comprises more than 90 different national
and multinational corporates, including some of the best-known blue-
chip corporates from over 19 different countries and 27 sectors.
As at 31 december 2016, our standing portfolio (excluding the upground
Towers residential complex) offered GLA of 370k sqm and had an
occupancy rate of 83.1%. As of year end, Globalworth had a combined
total of c.330k sqm of GLA leased in our standing and development
projects, while since the beginning of 2017 we have leased further
space, thus increasing the overall occupancy of our portfolio.
The rise in the company’s revenues was reflected in our normalised
eBiTdA from ongoing operating activities increasing to €36.3 million
in 2016, up 62.4% compared to 2015 (€22.4 million), and our
underlying epRA eps of €13.33 (negative in 2015).
The company’s overall leverage remained at a moderate level, with
LTV of 43.4% at 31 december 2016, marginally lower than the previous
year (43.9% in 2015). We managed, however, to significantly improve
our financing position through the issue of a €180 million bond, which
was directly negotiated/subscribed to by the canada pension plan
investment Board (cppiB) and cairn capital. As a result of this
landmark transaction and other bank financings completed during
the year, we de-risked our balance sheet by replacing short-term
liabilities with longer-term ones and reduced our weighted average
cost of debt by 0.9% to c.5.3% (as at 31 december 2016).
At the end of 2016, we completed our largest and most successful
equity capital issue to date in a transaction resulting in the company
raising €200 million new capital at €8.0 per share. The transaction was
93% subscribed by Growthpoint properties, which is now the largest
shareholder in Globalworth, with the remaining equity being
provided by Oak Hill.
Although completed at a 13% discount to the latest (september 2016)
epRA nAV, the capital raise was priced:
¡ at a 58% premium to the closing share price prior to the
announcement; and
¡ at a 33% premium to the previous capital raise completed in
October 2015.
At this point i would like to welcome Growthpoint to the Globalworth
family. l look forward to working closely with them and together
steering the company to new levels of success.
Our epRA nAV increased by 38% to €783.8 million as of 31 december
2016, mainly as a result of the €200 million equity capital raise
concluded in december 2016. The revaluation of development
projects, which were either delivered or whose construction made
further progress in 2016 also contributed to the increase. epRA nAV
per share, however, decreased by 6% to €8.57 as a result of the
dilutive effect of the cash raised in december 2016 from the equity
capital raise. We believe, however, that as we invest the equity raised
in new, exciting opportunities and return capital through dividends,
both our existing and our new shareholders will benefit from
significant value creation in the near term.
Working towards this goal, in december 2016 we announced that we will
be distributing €40 million (€0.44 per share, assuming no further issue
of shares except for the shares issued or to be issued as part of the
december 2016 capital raise) to our shareholders in 2017. A dividend of
€0.22 per share, will be distributed in respect of the six-month financial
period ending on 30 June 2017, marking the first time that Globalworth
will be distributing dividends since it was established in february 2013.
We are committed to continue paying dividends in the future on a
semi-annual basis and, following the already announced distributions
for the year, we will be paying dividends equal to not less than 90% of
the company’s ffO to our shareholders.
Globalworth’s continued growth could not have been achieved
without its people. i would like to thank our team of 66 professionals
for their consistent and continuous efforts over the years. in order
to continue to progress it is important that we keep attracting,
developing and supporting talent, as well as constantly improving
the efficiency and effectiveness of our operations. To that end we
have over the past one-and-a-half years been investing in developing
our in-house eRp software. This has already improved our overall
operational effectiveness and efficiency and is expected to yield
further benefits in the future.
The delivery of the landmark Globalworth Tower development
marks the completion of a major chapter for the company, as all the
investments identified at the time of the company’s ipO of July 2013
have now materialised. Looking at what we were hoping to realise
back then and what we have actually to-date achieved, i cannot be
anything but proud.
With a new cornerstone investor, a company with a solid portfolio,
sound operations, a robust balance sheet, and an improving
real estate market, i am excited about the next chapter in
Globalworth’s evolution.
Ioannis Papalekas
chief executive Office
3 April 2017
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mAnAGemenT ReVieW
reaDY to taKe aDvantage
of eXiSting anD
UPcoming oPPortUnitieS
2016 was a year in which management focused on
improving the fundamentals of the business and better
positioning Globalworth as it implements its strategy
of becoming one of the leading real estate players in
Romania and the wider CEE and SEE regions.
Dimitris Raptis
deputy chief executive Officer, chief investment Officer
efforts were concentrated on making significant progress
with our development programme, actively managing
our portfolio of real estate assets, strengthening the
company’s balance sheet and continuing to optimise
the way in which Globalworth operates.
As a result, no new third-party real estate acquisitions were
completed during the year, although we remained active
in sourcing a pipeline of exciting opportunities, one of
which has already been announced in Q1-17 and more are
expected to be concluded during the course of the year.
Progress with Globalworth’s
Development Programme
Globalworth has a very active development programme.
The company was engaged with projects involving six
new buildings in 2016 which, upon completion, will offer
c.200k sqm of Gross Build Area (GBA) and c.145k sqm of
Gross Leasable Area (GLA).
Bucharest. Our development programme expanded further
in 2016 following agreements signed with Valeo Lighting
and Litens Automotive, which will result in further growth
at our TAp light-industrial complex in Timisoara, with two
new facilities currently under construction.
One of our primary targets for 2016 was to deliver to
market two class “A" offices, our flagship Globalworth
Tower and the smaller Gara Herastrau office property,
thus increasing our total footprint of standing office GLA
by c.66.7k sqm. We are very proud to have met this target,
with Globalworth Tower opening its doors to tenants in
february and the Gara Herastrau office property in June.
Our footprint of standing properties is expected to
increase further in 2017/18 as we currently have two active
projects at different stages of development which, upon
completion, will offer total GLA of 78.4k sqm.
in Bucharest, phase A of our Globalworth campus project
is under construction (total GLA 56.9k sqm), with Tower i
expected to be completed in 2017 and Tower ii at the
beginning of 2018. in Timisoara we completed a facility
let to Valeo Lighting in Q1-17 and a second pre-let to
Litens Automotive is scheduled for delivery in 2017,
adding c.21.5k sqm of GLA to our TAp complex.
in 2016 we invested c.€42.7 million in the development and
extraordinary maintenance of our real estate portfolio,
c.90% of which was in 6 projects under development.
Overall, we are very pleased to have been able to deliver
according to plan in 2016 and to have done so within
the scheduled delivery dates and budget, as well as to
be on track for the projects currently under construction.
completing real estate projects on time and within
budget is key to the success of our business and our
ability to do so is a reflection of the capabilities of our
internal project management team, in conjunction with
those of our partners, and has been key to our successful
track record to-date.
Investment in Standing Portfolio
in 2016, Globalworth maintained its commitment
of having a modern portfolio of high-quality and
environmentally friendly real estate properties, with
the company receiving Green accreditation for two
properties - Green court “B" (Leed Gold) and Gara
Herastrau (BReeAm excellent), raising the number of
Green-certified properties in our portfolio to seven.
We remain committed to investing in environmentally
friendly schemes and aim to further increase our number
of such properties in the short to medium term, with five
other properties currently at various stages of Green
accreditation, the first of which was Globalworth Tower
that has received Leed platinum accreditation in 2017.
At the beginning of the year, the company was in the
process of finalising its flagship class “A" Globalworth
Tower office property and had three other office buildings
under construction, all located in the new cBd of
in addition, as part of our efforts to maintain and
improve the marketability of our portfolio, we initiated
a renovation and repair programme involving four of
our portfolio properties.
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The first project involved the common areas (indoor and
outdoor) of the cluster of properties formed by BOB (office),
BOc (office) and upground Towers (residential), with works
including landscaping, general repair works, the upgrade
of light features and the repainting of selected areas.
The second project involved the re-introduction to the
market of the property now branded as Globalworth plaza
(formerly nusco Tower) and the renovation/modernisation
of the lobby, conversion of the first floor terrace to a roof
garden and upgrade of the building’s façade.
We are currently reviewing alternative solutions for
other properties in our portfolio as we are committed to
providing our tenants and their employees with the best
possible product.
Optimising Capital Efficiency
efficiently managing our combination of equity and debt
financing is key in order to achieve a balance that allows
for the rapid growth of the company, enhances
shareholder returns in the medium-term, and controls the
inherent risk associated with third-party debt.
during the year we completed a number of debt and equity
transactions that have allowed us to de-risk our balance
sheet and provide us with funds that will facilitate further
investment in our development projects and new pipeline
opportunities, and thus the growth of the company.
in 2016 we successfully raised c.€224 million from debt
financing providers at an average cost of 6.5% and
€200 million from equity investors at an average share
price of €8.0 per share.
Debt transactions
during the year, three new facilities were completed
involving either the refinancing of existing facilities at
improved terms or the raising of new debt against
unencumbered properties.
The most notable transaction was the €180 million senior
secured real estate bond, which was directly negotiated and
subscribed to by the cppiB and cairn capital and
completed in may 2016. part of the proceeds were used to
repay a €100 million short-term corporate level facility
expiring in 2016. Other transactions completed during the
period included the re-financing of the TAp investment by
BcR and the financing of the Gara Herastrau office
building by Garanti Bank.
The new facilities agreed in 2016 resulted in the reduction
of Globalworth’s weighted average cost of debt from
approximately 6.2% as at 31 december 2015 to
approximately 5.3% at 31 december 2016. in addition,
the consolidated LTV ratio has remained at the moderate
level of approximately 43.4% as at 31 december 2016
(approximately 43.9% at 31 december 2015), well
below the 60% level which Globalworth is committed
to maintaining at all times.
equity transactions
in december 2016 we successfully completed a
€200 million new equity capital raise at €8.0 per share.
The transaction, which is transformational for the
company, was subscribed to by Growthpoint properties
Limited (GRT) and certain funds and/or accounts
managed by Oak Hill Advisors (europe), LLp and its
affiliates (Oak Hill).
As a result of this transaction, GRT became the principal
shareholder of Globalworth with a 26.9% stake and the
company further strengthened its shareholder base with
the addition of one of south Africa’s leading ReiTs as one
of its anchor investors.
Portfolio High Occupancy Rate supported
by High-Quality Long-Term Leases
Our ability to achieve high occupancy rates in our
properties remains one of the key strengths of our
company. 2016 was our best year so far, having
successfully negotiated the take-up or extension of
98k sqm of commercial GLA, increasing our overall total
since 2014 to c.238.1k sqm and confirming the company’s
position as one of the most successful investors and
developers in the Romanian real estate market and the
wider cee/see region.
new commercial leases signed in 2016 more than
doubled on the previous year and accounted for c.71%
of the overall total space signed. These agreements
included some of Romania’s best-known national and
multinational corporates and were signed at a WALL of
c.7.0 years, in line with the company’s strategy of
agreeing long-term lease contracts.
We are pleased to see demand for office and light-
industrial space increasing as the performance of tenants
continues to improve. demand in our properties has
originated from:
¡ existing tenants expanding their occupancy as a
result of growth in their respective business activities
(e.g., Valeo, Huawei and deutsche Bank);
¡ existing tenants seeking to maintain stability and run
their operations without interruption and, as such,
renegotiating their leases by removing break options
and/or extending the term of the contracts (Hewlett
packard enterprises, Honeywell and cegeca); and
¡ new tenants wishing to take up space in high-quality
properties owned and managed by Globalworth
(e.g. Litens Automotive, patria Bank, WipRO, Anritsu,
Bunge and ferrero).
At the end of december 2016, the average occupancy
rate of the standing commercial portfolio was c.83.1%,
while the WALL of our commercial leases was c.6.5 years.
The portfolio is occupied by a diversified, high-quality
tenant mix, comprising some 90 national and multinational
corporates from more than 19 different countries.
30
GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
31
mAnAGemenT ReVieW
cOnTinued
High-Quality Team of Professionals Based
in Bucharest & Improved Infrastructure
in 2016, we continued to invest in our team of skilled
professionals through selected hires in our core and
support teams and to upgrade our infrastructure
through the implementation of our new eRp system.
This investment was considered necessary as
Globalworth now has more than 420.0k sqm of GLA
under management in its real estate portfolio and
this is expected to increase in the future.
Our talent pool now totals 66 professionals, the majority
located in Bucharest. Our local presence in our core
Romanian market has allowed us to develop a broad
network of relationships over the years among owners,
occupiers, property specialists and community
representatives, as well as domestic and international
investors and capital providers.
These relationships and our local market knowledge have
given us an advantage in identifying and investing in
opportunities as and when they become available, either
publicly or off-market.
furthermore, investment in skilled professionals and
high-quality and customised technology has allowed us
to service our business partners and service providers
more effectively, as well as improving our economies of
scale and the overall efficiency of our operations.
Pipeline of Investment to
Facilitate Further Growth
management continued to work intensively to source
new opportunities and facilitate further growth in the
company. Opportunities under consideration are
located both in our core Romanian market as well as in
the broader cee/see regions, where Globalworth will
be seeking to invest in the future.
We are pleased to have been able to announce our first
transaction for 2017 in february, involving the acquisition
of a modern warehouse leased solely to Automobile
dacia, Romania’s largest corporate, on a long-term
basis. The facility, which offers total GLA of c.68.4k, was
acquired for a total of €42.5 million reflecting an attractive
nOi yield of c.9.6%.
We look forward to announcing more exciting
transactions in 2017.
Dimitris Raptis
deputy chief executive Officer, chief investment Officer
3 April 2017
overview
Strategic review
Portfolio review
governance
financial StatementS
caSe StUDY
€200 miLLiOn eQuiTY
cApiTAL RAise
in december 2016 Globalworth successfully
completed a €200 million new equity capital raise at
€8.0 per share. The transaction was subscribed to by
Growthpoint properties Limited (GRT) and certain
funds and/or accounts managed by Oak Hill Advisors
(europe), LLp and its affiliates (Oak Hill).
The issue price represented a:
¡ 58.4% premium to the closing share price
on the date prior to the announcement of
the transaction; and
¡ 12.6% discount to the 30 september 2016
period-end epRA nAV of €9.15 (unaudited).
GRT subscribed to 23.3 million shares (c.93%) and
Oak Hill the remaining 1.7 million shares. in addition,
and as part of the overall transaction, Globalworth
issued an initial tranche of 1.1 million fee shares to
GRT and Oak Hill, with a further tranche of an
additional 1.1 million fee shares to be issued to GRT
and Oak Hill by no later than 31 december 2017.
This milestone transaction was completed on
20 december and, as of that date, the number
of Globalworth’s total shares in issue increased to
90.4 million. All shares in issue have been
admitted for trading on Aim.
The proceeds raised from the offering will be used:
¡ to develop the Globalworth campus project;
¡ to pursue attractive, pre-identified investment
opportunities in line with the company’s
investing policy; and
¡ for other general corporate purposes.
Resulting from the transaction, Globalworth’s main shareholders are:
name
GRT
i. papalekas
York
Oak Hill
Gordel Hold. Ltd
Other
number of shares held immediately
following the subscription*
percentage interest in issued share capital
immediately following the subscription*
24,300,000
23,247,028
16,770,113
10,169,574
3,835,141
12,075,092
26.88
25.72
18.55
11.25
4.24
13.36
note:
* including the initial tranche of fee shares but excluding the second tranche of fee shares.
GRT is the largest listed south African ReiT with assets in excess of €7.5 billion in south
Africa and Australia (through its 64.3% owned AsX listed Growthpoint properties
Australia) commercial (offices)
GRT is the 26th largest company on the Johannesburg stock exchange and a top 5
constituent of the fTse epRA/nAReiT emerging index and has been included in the
fTse/Jse Responsible investment index for seven years running
– GRT has a market capitalisation of approximately €5 billion
The company owns and manages a diversified portfolio of 533 property assets
spanning approximately 6.7 million square meters
– The south Africa portfolio comprises 473 properties and a 50% interest in the
properties at V&A Waterfront (cape Town), with a total 5.7 million square meters of
retail, office and industrial properties
– GRT’s Australian subsidiary owns a portfolio 59 properties
constrained by south Africa’s sovereign rating, GRT has a moody’s Global scale rating
of Baa2/p-2 (same as the sovereign rating) and is the only non-financial south African
corporate with a moody’s national scale Rating of Aaa.za
GRT is the largest shareholder of Globalworth Real estate investments Ltd with a 26.9%
stake following its €186 million investment in december 2016
– its strategy is to invest in the central and eastern european region, with Globalworth
identified as its corporate partner
32
GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
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33
inVesTmenT ReVieW
Delivering BeSt-in-claSS
office ProPertieS
In 2016 we invested €42.7 million in our portfolio, raising our total investment
in real estate since the Company was established to c.€860 million. We
delivered two Class “A” office properties in Bucharest, further progressed
with the development of four other high-quality buildings in Romania,
and initiated a renovation and repair programme for selected assets.
Globalworth’s development programme was our principal
focus in 2016, with the company developing six new
buildings during the course of year which, upon completion,
will offer GBA of c.200.0k sqm and GLA of c.145k sqm.
Overall, we invested €42.7 million in 14 properties within our
portfolio, the majority of which are in four developments –
Globalworth Tower, Gara Herastrau, Globalworth campus
phase A and TAp – accounting for 90% of the total.
New Deliveries
¡ Globalworth Tower: in february 2016 we delivered
Globalworth Tower to market, a landmark class “A”
office property which extends over 26 floors above
ground and three levels underground offering total GBA
of 78.2k sqm. The project was finalised 23 months after
the commencement of construction works.
¡ Gara Herastrau: in June 2016 we delivered our second
project under development, the Gara Herastrau office
property, a class “A” office which extends over 12
floors above ground and with three underground levels,
offering total GBA of 16.9k sqm. The property is adjacent
to our Green court “A” and Green court “B” office
buildings and was constructed in 17 months.
Under Development
in addition to the projects delivered, in 2016 we progressed
with the development/construction of four other buildings,
two class “A” offices in Bucharest and two high-quality,
light-industrial facilities in Timisoara. in total, as of year-end
2016 we had four buildings with c.78.4k sqm of GLA under
construction, due for completion in 2017 and 2018.
Renovation and Repair Programme
of Standing Properties
As part of our ongoing strategy to offer best-in-class
real estate space to our business partners, the company
selected four properties for further improvement works.
As part of this renovation and repair programme we
invested a total of €2.2 million in 2016, principally on the
cluster of properties formed by BOB (office), BOc (office)
and upground Towers (residential), all situated in the
same block, with works involving primarily the upgrade of
common areas (indoor and outdoor) and the creation of
more uniform surroundings.
furthermore, in 2016 we completed the necessary design/
preparatory activities for Globalworth plaza (formerly nusco
Tower), which involved the renovation and modernisation
of the lobby, conversion of the first floor terrace to a roof
garden, and upgrade of the building’s façade. All works are
expected to be completed in 2017.
2017 Investments
in 2017 Globalworth announced the €42.5 million acquisition
of a modern warehouse facility, leased on a long-term basis
to Automobile dacia, Romania’s largest corporate.
The facility benefits from being situated in a prime location,
c.100km west of Bucharest near the Bucharest-pitesti
motorway, one of Romania’s principal warehouse and
industrial corridors and 28km from dacia’s main plant in
mioveni, Arges county.
The property offers c.68.4k sqm of GLA, and is one of
the Renault Group’s largest spare parts and accessories
distribution centres worldwide.
Q4 2016 “On completion”
Valuation
Like for Like increase
in “As is” Valuation
€1,092.4m
5.0%
overview
Strategic review
Portfolio review
governance
financial StatementS
evolution of portfolio
“As Is” Valuation
“Completion” Valuation
m
€
1100
1000
900
800
700
600
500
400
300
200
100
0
4
15
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15
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11
8
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16
14
12
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8
6
4
2
0
m
€
1100
1000
900
800
700
600
500
400
300
200
100
0
4
15
15
15
14
11
8
Q4/
2013
Q2/
2014
Q4/
2014
Q2/
2015
Q4/
2015
Q2/
2016
Q4/
2016
Q4/2013
Q2/2014
Q4/2014
Q2/2015
Q4/2015
Q2/2016
Q4/2016
note: individual investments in TAp and Globalworth campus have been consolidated in the graph.
s
t
n
e
m
t
s
e
v
n
I
f
o
r
e
b
m
u
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16
14
12
10
8
6
4
2
0
34
GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
35
Amounts invested in 2016:Developments – DeliveredDevelopments – Under ConstructionPortfolio –ImprovementsGlobalworth TowerGara HerastrauGW Campus Phase A (two towers)TAP – ValeoTAP – Litens AutomotiveOther c.€24.8mc.€13.8mc.€4.1m
overview
Strategic review
Portfolio review
governance
financial StatementS
LeAsinG ReVieW
a recorD Year in leaSing
Over the past three years, Globalworth has successfully
negotiated the take-up or extension of c.238k sqm of
commercial GLA within its property portfolio, confirming the
Company’s position as one of the most successful investors
and developers in the Romanian real estate market.
in leasing terms, 2016 was a record year for Globalworth
with a total of c.98k sqm of commercial GLA takenup or
extended. new leases signed (c.69.2k sqm GLA) during
the year were more than double (c.145%) those of 2015,
and were agreed at a WALL of c.7.0 years. in line with
our strategy, these new leases were typically agreed with
multinational corporate groups and financial institutions
on long-term, euro-denominated, inflation-linked,
triple net leases.
Our Green court Building "B" is now 100.0% leased
(c.82.1% at year-end 2015), and significant progress in
lettings was made in the Globalworth Tower and Gara
Herastrau office properties (both completed in 2016), which
respectively had year-end occupancy of c.83.2% (c.51.0% at
year-end 2015) and c.68.9% (vacant at year-end 2015).
in addition, at our TAp light-industrial complex we signed
new leases with Valeo Lighting and Litens Automotive for a
total of c.21.5k sqm, which will result in two facilities being
developed in 2017, with the one for Valeo already delivered
in Q1-17.
furthermore, the company has continued to improve the
risk profile of its portfolio through the extension and/or
expansion of leases with some of its prime tenants.
new contracts in 2016 included signings with well-known
national and multinational corporates such as Valeo (TAp
c.13.5k sqm), Litens (TAp c.8.0k sqm), Huawei (Globalworth
Tower c.6.8k sqm), deutsche Bank (BOB c.6.2k sqm), Adp
(Gara Herastrau c.6.1k sqm), Honeywell (BOc c.3.8k sqm),
patria Bank (Globalworth plaza c.3.0k sqm), Hewlett packard
enterprises (BOc c.2.5k sqm), Vodafone (Globalworth
Tower c.2.0k sqm), Wipro (Globalworth Tower c.1.98k sqm),
ericsson (Green court B c.1.9k sqm), Bunge (Globalworth
Tower c.1.8k sqm), Tripsta and saipem (Gara Herastrau
c.2.2k sqm), ferrero and Anritsu (Globalworth Tower
c.1.8k sqm).
in Tci, the company signed expansion contracts with
existing tenants cegeka, Hidroelectrica and eY for a
total of c.3.1k sqm. in addition, Globalworth successfully
renegotiated its leases with Honeywell (BOc), Hp (BOc)
and cegeca (Tci) for a total of c.28.9k sqm.
The average occupancy rate of the company’s standing
commercial portfolio at 31 december 2016 was 83.1%,
with tenancies signed with 90 national and multinational
corporates from 19 countries, including some of the most
recognisable corporates from their respective industries.
The WALL remaining on the commercial lease space in the
company’s portfolio is approximately 6.3 years.
Tenant contribution by Origin –
commercial contracted Rent
Tenant contribution by Origin –
commercial contracted Areas (sqm)
commercial contracted Rent expiration profile –
(% of total)
46.3m
5.6%
5.5%
48.0m
5.8%
8.2%
88.9%
86.0%
32.7m
7.9%
2.2%
89.9%
m
€
50
40
30
20
10
0
310,732 sqm
3.7%
4.5%
329,184 sqm
3.7%
6.1%
272,037 sqm
4.2%
1.5%
91.8%
90.2%
94.3%
m
€
350
280
210
140
70
0
30
24
l
a
t
o
t
f
o
%
18
12
6
0
2.1m
4.5%
0.6m
1.3%
0.8m
1.7%
11.5m
24.0%
8.5m
17.8%
8.3m
17.2%
8.3m
17.4%
3.9m
8.2%
3.8m
7.9%
2014
2015
2016
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
≥2025
multi
national
state Owned
multi
national
state Owned
36
GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
37
Selected Tenants of our PortfolioTenant Origin:% of Contracted RentSelected Tenants of Commercial PortfolioMultinational86.0%Abbott Laboratories, Adecco, ADP, Anritsu Solutions, Bayer, Billa, BRD, Bunge, Carrefour, Cegeka, Clearanswer, Colgate-Palmolive, Continental, Credit Agricole Bank, Delhaize Group, Deutsche Telekom, EADS, Elster Rometrics, Ericsson, EY, Ferrero, GfK, Honeywell, Hewlett Packard Enterprise, Huawei, Intel, Litens Automotive, Mood Media, NBG Group, Nestle, Orange, Piraeus Bank, ProCredit Bank, Saipem, Sanofi, Schneider Electric, Skanska, Starbucks, Stefanini, Subway, Telekom, Tripsta, UniCredit, Valeo, Vodafone, Wipro, WorldclassNational8.2%CITR, Creative Media, GlobalVision, NNDKP, NX Data, Patria Bank, RINFState Owned Entities5.8%Hidroelectrica, Ministry of European Funds
finAnciAL ReVieW
imPreSSive financial reSUltS
overview
Strategic review
Portfolio review
governance
financial StatementS
2016 was an outstanding year for Globalworth in terms
of growth in revenues and operational profitability
2016 evolution of nOi and revenue – cumulative data by quarter
Highlights
¡ significant growth in revenues and nOi by 52.4%,
and 53.5%, respectively, resulting mainly from the
acquisition of four rented office buildings in Bucharest
during 2015;
¡ significant growth in normalised eBiTdA by 62.4%,
compared to 2015;
Portfolio Valuation, Shareholders Equity,
Total Assets and NAV
¡ The significant level of development activity in
2016 (c.€44.7 million of investments on standing and
under development properties together) influenced
the value of our portfolio positively, leading to an
(unrealised) gain in OmV of €46.4 million;
¡ epRA earnings for 2016 increased by €13.9 million
¡ equity share capital increased to c.90.4 million shares
compared to 2015, and ifRs earnings per share for
2016 amounted to 17.57 cents, as compared to
92.01 cents in 2015;
¡ Overall uplift in the OmV of the assets portfolio
by €46.4 million;
¡ epRA nAV as at 31 december 2016 increased by
37.9% from 31 december 2015; and
¡ significant level of cash and cash equivalents of
€221.3 million at 31 december 2016.
Revenues and Profitability
¡ Total revenue reached €68.2 million in 2016 (52.4%
or €23.5 million higher than in 2015), €18.4 million
of which was derived from new investments made
in 2015;
¡ nOi also increased significantly in 2016, following
the increase in total revenues and reaching a total
of €43.6 million (2015: €28.4 million), a significant
improvement of 53.5% or €15.2 million over 2015
figures, €14.1 million of which was generated by
the new investments made in 2015;
¡ eBiTdA1 amounted to €43.8 million (2015: €66.3 million),
however, the decrease from 2015 is due to the
significant (unrealised) fair value gain on investment
property recorded in 2015 (€49.4 million), as in 2016
this gain was much lower (€6.7 million);
¡ normalised eBiTdA2 amounted to €36.3 million
(2015: €22.4 million) and increased in line with
the revenues and nOi increase in 2016 by a very
significant 62.4%;
¡ epRA earnings amounted to €8.6 million in 2016
(2015: -€5.3 million), representing an increase of
€13.9 million over 2015;
¡ increased finance costs during 2016 by 49.2% resulted
from the costs associated with the restructuring of
the €100 million short-term company level mezzanine
facility using part of the proceeds of the Bond; and
¡ earnings before tax of €12.2 million decreased as
compared to 2015 (€62.5 million) mainly as a result of
the fair value gain on investment property recorded in
2015 (€49.4 million), as in 2016 this gain was much lower
(€6.7 million).
1 earnings before finance cost, tax, depreciation, amortisation
of other non-current assets and purchase gain on acquisition
of subsidiaries.
2 eBiTdA less: fair value gain on investment property
(2016: € 6.7 million; 2015: €49.4 million), non-recurring income
(2016: 3.4 million; 2015: nil); plus non-recurring administration
and other expense items (2016: 2.6 million; 2015: 5.5 million).
following the issuance c.27.1 million new shares
(including 1.07 million share to be issued in 2017)
at an issue price of €8.00 per share in december 2016,
as part of the successful €200 million equity raise;
¡ Total assets at 31 december 2016 exceeded €1.2 billion
and increased by 20.7% from 31 december 2015; and
¡ epRA nAV at 31 december 2016 (€783.8 million)
increased by 37.9% from 31 december 2015
(€568.3 million), however, epRA nAV per share was
impacted following the latest capital raise and as
at 31 december 2016 amounted to €8.57 per share,
down by c.5.6% compared to 31 december 2015
(€9.08 per share).
Cash Flows
¡ cash and cash equivalents at 31 december 2016
(€221.3 million) increased by c.500% compared to
31 december 2015 (€37.0 million), influenced mainly
by the c.€200 million equity raise;
¡ cash used on properties under development and
the overall upgrade of our real estate portfolio of
€51.7 million; and
¡ cash generated from operating activities during
the year amounted to €19.9 million, representing an
outstanding increase of 559% as compared to 2015.
Total revenue in 2016
€68.2m
cash and cash equivalents
€221.3m
80
60
m
€
40
20
0
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
Q3 16
Q4 16
2016 evolution of nAV/share and OmV by quarter
1200
1000
800
m
€
600
400
200
0
Revenue
N0I
9.0
8.5
8.0
m
€
7.5
7.0
OMV
EPRA NAV
EPRA NAV per share
NAV – Basic per share
NAV – Diluted per share
Dec 14
Mar 15
Jun 15
Sep 15
Dec 15
Mar 16
Jun 16
Sep 16
Dec 16
2016 evolution of equity and shares in issue – cumulative data by quarter
800
700
600
500
400
300
m
€
0.19
0.22
0.24
0.27
155
158
160
165
2.67
0.31
2.1
2.1
104
114
138
137
342
344
350
350
10.7
167
538
200
289
289
289
289
100
0
54
54
54
54
63
63
64
64
90.4
Share Capital (€)
Other Reserves (€)
Retained Earnings (€)
Number of Ordinary Shares (m)
Dec 14
Mar 15
Jun 15
Sep 15
Dec 15
Mar 16
Jun 16
Sep 16
Dec 16
38
GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
39
overview
Strategic review
Portfolio review
governance
financial StatementS
finAncinG And LiQuidiTY ReVieW
roBUSt liQUiDitY anD
caPital BaSe
Financing Achievements During 2016
2016 was a record year in terms of financing achievements as we
managed to successfully secure a total of c.€426.1 million debt
(including the refinancing of existing loan facilities) and equity,
leading to a significant decrease in the weighted average interest rate
on debt financing and the participation of Growthpoint properties
Limited ('GRT') into our Group.
The most significant achievements in this area during 2016 were
as follows:
Debt financing/refinancing:
¡ in march 2016 the Group signed a c.€29.1 million long-term debt
facility agreement with Banca comerciala Romana ('BcR') in
Romania (erste Bank Group) in order to refinance the existing
secured loan facilities related to the TAp light-industrial park in
Timisoara, and to fund the development of an extension to this
property. These facilities are secured on the TAp property and
mature in 2031 (refinancing loan), 2032 (development loan) and
2018 (VAT loan). The first drawdown under the development and
VAT loans occurred in december 2016;
¡ At the end of may 2016 the Group secured a €180 million three-
year bond (the 'Bond'). The Bond was provided by matisse
financing B.V. (an orphan spV) which issued €180 million of senior
secured notes to institutional investors. The proceeds of such
issuance was on-lent to the Group in order to refinance the
€100 million short-term corporate level facility obtained in 2015
from funds managed by York capital and Oak Hill and three
secured debt facilities at the level of three of its Romanian
subsidiaries. The Bond is secured, among others, on the
properties of four Romanian subsidiaries as well as the shares
of their holding companies. drawdown under the Bond was
concluded in June 2016;
¡ in may 2016 the Group signed a c.€10.3 million long-term debt
facility agreement with Garanti Bank in Romania in order to
refinance equity and to fund the remaining development costs
of the Gara Herastrau office building. This facility is secured on
the land and completed building and matures in the first quarter
of 2026. in december 2016, the above mentioned facility was
supplemented with an additional €2.2 million;
¡ during August 2016 the Group signed and drew down a
c.€1.5 million top-up of the medium-term loan facility with
Libra internet Bank in Romania, secured on the Luterana and
Herastrau One land plots; and
¡ in september 2016 the Group signed and utilised a €3 million
equity raising:
in december 2016 we successfully raised €200 million, diversifying
our equity investor base following the participation of GRT into our
Group.
Servicing of Debt During 2016
in 2016 we have repaid in total c.€12.3 million loan capital (excluding
the refinancing of existing facilities), and c.€24.8 million of accrued
interest on the Group’s drawn debt facilities.
Liquidity
The Group seeks to maintain, at all times, sufficient liquidity to enable it
to finance its ongoing, planned property investments and completion of
properties under development, while maintaining flexibility to capture
quickly attractive new investment opportunities.
during 2016 a total of c.€200 million additional equity and c.€31.1 million
additional debt financing (excluding c.€195 million refinancing of existing
facilities) was secured, leading to a significant increase in available cash
resources at year end.
moreover, during the year the Group maintained a healthy balance
of available cash and cash equivalents ranging from c.€31 million to
c.€38 million at each quarter end, except at 31 december 2016 when
available cash and cash equivalents amounted to c.€221.3 million as a result
of the equity raise which was completed at the end of december 2016.
undrawn loan facilities at 31 december 2016 amounted to c.€2.5 million.
Loan Structure as at 31 December 2016
Short-term and long-term debt structure mix
Loan structure
2016
2015
0%
20%
40%
60%
80%
100%
top-up of the long-term facility from BcR signed in september 2014,
secured on the Tci property.
Short Term
Long Term
The total debt portfolio of the Group ranges between short-and-
medium to long-term debt, denominated mostly in euR, with a small
portion denominated in Romanian Leu ('ROn'). These are secured
with real estate mortgages, pledges on shares, receivables and loan
subordination agreements in favour of the financing parties.
in terms of applicable financial covenants observed, the most notable
are the debt service cover Ratio ('dscR'), with values ranging from
100% to 125%, and the LTV ratio, with values ranging from 50% up to
83% (versus the significantly lower overall LTV of the Group at
31 december 2016 of 43.4%), with no actual deviations occurring
during the period from the aforementioned values.
The Group’s credit facilities concluded with local banks in Romania
are secured with real estate mortgages, pledges on shares,
receivables and loan subordination agreements in favor of the
financing banks. further details on the Group’s debt financing
facilities are provided in note 15 of the consolidated financial
statements. The Bond is secured, among others, with mortgages
on the properties of four Romanian subsidiaries as well as pledges
on the shares of their respective holding companies.
unicredit HQ
Loan Covenants
in terms of applicable financial covenants observed, the most notable
are the dscR with values ranging from 100% to 125%, and the LTV
ratio, with values ranging from 50% up to 83%. The Group’s policy is
to maintain an LTV ratio of up to 60%. As at 31 december 2016 the
LTV ratio amounts to 43.4% (31 december 2015: 43.9%).
Loan Maturity
At 31 december 2016, the weighted average remaining duration of
the Group’s debt is 4.2 years (2015: 5 years).
maturity by year of the principal balance outstanding
at 31 december 2016.
200.0
150.0
m
€
100.0
50.0
0
2017
2018
2019
2020
2021
2022-2035
Dec 2016
Loan Denomination Currency and Interest Rate Risk
Our long-term loan facilities are almost entirely euro-denominated
and either bear interest based on three-months euribor plus a margin
or bear a fixed interest rate. This ensures a natural hedging linked to
the euro, original currency denomination of the most significant part
of our liquid assets (cash and cash equivalents and rental receivables)
and reporting currency for the fair market value of our investment
property. This is depicted by the low level of overall net foreign
exchange loss reported for the year 2016.
The weighted average cost of servicing debt as at 31 december 2016
amounted to 5.25% compared to 6.18% at 31 december 2015. The
decrease is due to the repayment of the short-term corporate Loan
facility and other financing granted to the Group’s subsidiaries using
the proceeds of the Bond.
The Group’s policy is to borrow funds at a competitive cost and to
limit its exposure to upward interest rate fluctuations through
employing appropriate hedging instruments on new long-term loans
secured. examples are the interest rate cap agreements concluded
with BcR (to cover 50% of the outstanding facilities) as part of the
Tci and TAp financings.
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41
cORpORATe sOciAL RespOnsiBiLiTY
reSPecting oUr Social anD
environmental oBJectiveS
Social focUS
positively impacting and improving the future prospects of
our local community, by the way we approach our business
is a key driver for Globalworth.
The Globalworth family, and its founder in particular, have,
directly or indirectly, supported numerous local
communities, charities and hospitals in Romania over the
past 10 years. We have predominantly focused on those in
need, with particular attention given to young children,
orphanages, underprivileged families, single mothers and
those in need of palliative care at the initiative of Hospices
of Hope.
Our intention is for every year to be able to give more to
those in need and 2016 was no exception. We are very
proud that our founder, the companies under his control
and Globalworth (since its inception) have donated more
than €1.5m in charitable contributions since 2011. in
addition, many of our people have been contributing to
several charities in Romania by diverting part of their state
income tax deductions to charitable service.
Our involvement in causes goes over and beyond financial
contributions, as we actively invest our personal time and
effort to support those who need it the most. Being able to
be actively involved and showing that they are not alone in
their battles is equally important for us as the financial
contribution we are committed of making. With this in mind
we organised a number of events and visited selected
charities throughout the year.
in 2016, these included distributing thousands of gifts to
children between the ages of 1 and 18 over the christmas
period, the organisation of our annual 2016 children’s
events and the Globalworth camp day at Adunatii
copaceni (Hospice of Hope). in addition we gave school
scholarships for children, provided space in one of our
properties to host a charity shop and hosted a number of
local and international university gatherings at our
development sites as well as our standing properties.
At Globalworth we believe that it is our duty to be aware
of, and manage responsibly, the social, environmental
and economic impacts of the way in which we conduct
our business and to make a positive contribution to the
community in which we live and work.
Globalworth’s key objective is to create value for its
shareholders by acting consistently in an ethical and
socially responsible manner. We aim to do so, by building
a sustainable business and managing our financial goals
and shareholder returns while respecting our social and
environmental objectives.
We are very pleased that in 2016 we have been able to
continue to promote and foster a sustainable and
ecologically-responsible approach as well as supporting
a number of social and charitable initiatives.
Overview
Selected Charities / Donations
¡ education/social
Assistance and
child care
¡ Health-related
(Hospitals, Hospices etc)
¡ Health-related
operations for various
individual cases
¡ foundation Hospice
“casa sperantei” Bucharest
¡ "make a Wish" foundation
¡ foundation for the
Hearing impairment
(Asociatia procultura surzilor)
¡ foundation Together We are
Overcoming Autism
¡ Association for child and family
protection “Ana and the children”
¡ Association for equal
opportunities (“un strop
de fericire”)
¡ special school no9 for children
(scoala Gimnaziala speciala nr. 9)
¡ “sf dimitrie” foundation
¡ metropolis foundation
for children
overview
Strategic review
Portfolio review
governance
financial StatementS
suppORTinG
HoSPice caSa SPerantei
HOspice casa sperantei (member of the
Hospices of Hope network) is the largest non-
profit organisation in Romania, established 1992,
providing free specialist palliative care services.
since its inception, more than 20,000 patients and
their families have received support at HOspice
and found out that they are not alone in their battle.
its work means that people no longer have to face
their illness without support.
palliative care aims to improve the quality of life
of patients and their families when faced with
problems of an incurable illness, through medical
care for patients and social support, psycho-
emotional and spiritual counselling for patients and
their families.
www.hospice.ro
Total investment
€5.7m
consultations in the
outpatient clinic/year
8,000
day centre
attendances/year
5,000
patients cared
for/year
2,000
Admissions/year
patients cared for/year
700
11,000
Globalworth & Hospice -
Casa Sperantei Foundation
¡ Globalworth is hosting a charity shop in our upground
complex with a share of the proceeds going directly to
the hospice.
¡ The company was the principal sponsor for two
fundraising events organised by the hospice in June and
november 2016.
¡ Globalworth was honored to receive the HOspice
champion Award for its support of the foundation.
Globalworth in action.
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43
cORpORATe sOciAL RespOnsiBiLiTY
cOnTinued
overview
Strategic review
Portfolio review
governance
financial StatementS
The Hospice Centre at Adunatii-Copaceni
Hospice achievements
The therapy centre for children with rare or life-limiting illnesses
and their families.
Located 15km from Bucharest, in Adunatii copaceni, Hospice is
developing a centre for children affected by rare and life-limiting
illnesses and their families.
The land and buildings to be used for development of the centre,
were donated by the florescu family to Hospice in 2012.
The cost of the restoration work is estimated at €1.5m and once
completed the centre will be used for medical respite care,
therapeutic sessions for families as well as training courses in
paediatric palliative care for medical professionals.
during the last few years, Hospice casa sperantei has organised
residential summer trips at Adunatii copaceni for children and
teenagers suffering from life-limiting illnesses, recent bereavement or
needing respite. Hospice is renovating several buildings at Adunatii
copaceni to create clinical areas, family accommodation and
recreational areas.
The Hospice centre will include a day centre (educational-therapeutic
activities for children), a respite centre for palliative care, shelter for
families in crisis situations and an educational centre (for parents and
palliative care specialists).
¡ The land was donated to HOspice casa sperantei by the
florescu family, in 2012.
¡ The HOspice centre will include a day centre (educational-
therapeutic activities for children), a respite centre for
palliative care (12 beds), a shelter for families in crisis situations
(5 apartments) and an educational centre (for parents and
palliative care specialists).
3,498
Children and adults diagnosed with incurable
illnesses who received free-of-charge HOSPICE
services in 2015.
physiotherapy treatment
palliative care at home
2,916
sessions
17,531
Visits
HOspice inpatient
unit admission
consultations in the
outpatient clinic
849
Admissions
4,867
consultations
current investment
Total estimated investment
€5.7m
€1.5m
psycho-emotional
counselling
1,572
sessions
spiritual
counselling
1,277
sessions
Going about our business in a
way that positively impacts and
improves the outlook for our
local community is a key driver
of Globalworth.
Educational programmes
in 2015, the main beneficiaries of the educational programmes have
been doctors, nurses and also the patients and their families.
276
111 Doctors received the
palliative care certificate,
165 Doctors began the
certification courses
488
attendances by nurses to
introductory and advanced
palliative care courses
45
Volunteer coordinators
trained within the volunteer
management in palliative
care services programme
81
professionals from all
over the country, involved
in teaching palliative care in
nursing schools, attended
an intensive palliative
care course
522
Medical/Healthcare
students and medical post
secondary school students
attended palliative care
sessions taught by
HOSPICE professionals
75
professionals from Romania
and many countries across
Europe participated in
the training courses for
professionals in palliative care
35
doctors participated in the
online courses of HOSPICE
45
nurses became trainers
Globalworth Camp Day at
Adunatii Copaceni:
in June 2016, Globalworth organised the “Globalworth
camp day” at Adunatii-copaceni. for this full day event
we invited our friends and partners to work with us to
support the hospice’s initiative at the Adunatii-copaceni
Patients
social and medical centre.
17,500
Over 100 volunteers responded to our call and we
would like to thank every single one of them for their
contribution to the cause.
in addition, we invited more than 300 children from
eight foundations to spend a day of fun with us
outdoors, playing, creating and learning. We were very
pleased to be able to welcome children from Hospice
social
– casa sperantei, as well as the make-A-Wish, Ana and
services
the children, metropolis, Together we are Overcoming
Autism, Hearing impaired, sf. dimitrie and A drop of
Happiness foundations.
16,507
The volunteers contributed by painting structures on
interventions
the premises, assembling kitchens and other indoor
furniture to be used by residents in the future, planting,
landscaping, and preparing and serving lunch for our
guests.
2,909
day centre activities
The most important part of the day, however, was
spending time with the children and playing games, as
well as participating in painting and art workshops,
first-aid training seminars and sports activities. We are
very pleased that our young friends also had the
Attendances
opportunity to spend time and interact with well-
known athletes and actors from Romania, who were
kind enough to share their experiences with them.
At Globalworth we are committed to continue to
actively support Hospice - casa sperantei and the
counselling in
Adunatii-copaceni initiative, and we hope to be able to
organise other camp days in the future.
partner hospitals
2,054
patients
44
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45
cORpORATe sOciAL RespOnsiBiLiTY
cOnTinued
overview
Strategic review
Portfolio review
governance
financial StatementS
environmental focUS
creating an environment in which people want to work
and be associated with is a key objective for Globalworth,
and for us there is no better way to achieve this than by
building a “greener” and more environmentally-friendly
portfolio.
in 2016, our efforts were dedicated to designing and
building new developments with the aim of achieving
Leed Gold, BReeAm Very Good, or higher accreditations
and to ongoing investment in our properties to ensure
further improvement in our sustainability performance.
investment in energy efficient properties allows us to give
back to local communities, our investors, our tenants, our
partners and the people who work in or live nearby our
buildings:
¡ local communities benefit from reduced carbon
emissions generated from the use of the property;
¡ our tenants benefit from lower energy costs, positively
impacting the profitability of their operations;
¡ those working in our buildings benefit from improved
conditions thanks to temperature control and better
flow and quality of air (which can also lead to improved
productivity);
¡ our partners benefit by assisting us to develop,
maintain and operate a green portfolio according to
the respective specifications of each property; and
¡ our investors benefit through the creation of long term
sustainable value in the portfolio.
We are pleased to report that over the course of the year
we received green accreditation for two new properties.
Green court "B", which was acquired by the company in
2015, received Leed Gold accreditation in february 2016,
while the Gara Herastrau office property, developed by
Globalworth and completed in June 2016, received
BReeAm excellent accreditation in november.
in addition, our flagship Globalworth Tower, which was
developed by the company and completed in february
2016, was awarded a Leed platinum rating in 2017. it is the
first building in Romania and the broader see region to
have received the highest available green accreditation,
an achievement of which we are particularly proud.
The majority of the standing office properties in our
portfolio are now green accredited, with eight currently
holding green accreditation of BReeAm excellent/Leed
Gold or higher. We are exploring the potential for similar
accreditation for other properties in our portfolio, both
standing and development projects.
Existing Properties
Developments / New Investments
¡ Our portfolio includes 8 class A
¡ Globalworth is designing its
office properties with Leed Gold
or BReeAm Very Good (or
higher) certifications
¡ We are in the process of
certifying additional properties
owned by Globalworth
¡ Green court B was awarded
Leed Gold in 2016
¡ Gara Herastrau was awarded
BReeAm excellent in 2016
¡ Globalworth Tower was awarded
Leed platinum in 2017
development projects to be energy
efficient and sustainable, aiming to
achieve Leed Gold or BReeAm Very
Good or higher accreditations
¡ When considering new investments,
Globalworth is looking, insofar as is
possible, for green buildings or
properties which have the potential to
achieve a green classification
How we achieve an environmental-friendly portfolio
globalworthTM
inveStment in
“green” certifieD
real eState
inveStment in non-
green certifieD real
eState witH
environmentallY
frienDlY Potential
¡ standing properties
¡ development
¡ investment in real estate which meets the
requirements of tenants, the wider community
and our shareholders. focus on investments
that either have received green accreditation
or have the potential to receive it in the future.
¡ focus on investments that either have received
green accreditation or have the potential to
receive in the future.
¡ developments are designed to be energy
efficient and sustainable aiming to achieve
Leed Gold or BReeAm Very Good or
higher accreditations.
active management
EXPLORE AND IMPLEMENT ALTERNATIVES TO IMPROVE THE
ENVIRONMENTAL FOOTPRINT OF PROPERTIES
GIVE BACK TO COMMUNITY, PARTNERS AND SHAREHOLDERS
¡ Active management of our properties
to ensure that they operate according to
their specifications.
¡ We actively work together with our tenants,
partners and the community to identify ways
to improve the effectiveness and efficiency
of our properties.
¡ constantly improving the workspace and
the environmental footprint of our properties
aims at maintaining the marketability of
our properties.
¡ Our goal is to create long term sustainable
value, and we aim to do so by creating an
environment in which tenants want to work in,
and the overall community benefits from.
46
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47
cORpORATe sOciAL RespOnsiBiLiTY
cOnTinued
overview
Strategic review
Portfolio review
governance
financial StatementS
Building a sustainable portfolio
is also a commitment to our
partners and our shareholders to
create value for the long term.
Our awards
(Leed)
Green Court “A”
STANDING
Green Court “B”
STANDING
BOB
STANDING
BOC
STANDING
Unicredit HQ
STANDING
TCI
STANDING
GREEN COURT BUCHAREST
BUILDING A
Bucuresti, Romania
HAS FULFILLED THE REQUIREMENTS OF THE FOLLOWING LEVEL OF CERTIFICATION ESTABLISHED BY THE U.S. GREEN BUILDING COUNCIL
IN THE LEED GREEN BUILDING RATING SYSTEMTM AND VERIFIED BY THE GREEN BUILDING CERTIFICATION INSTITUTE.
GREEN COURT BUCHAREST II
Bucharest, Romania
LEED FOR CORE & SHELL
LEED FOR CORE & SHELL
S. RICHARD FEDRIZZI, PRESIDENT & CEO
U.S. GREEN BUILDING COUNCIL
MAHESH RAMANUJAM, PRESIDENT
GREEN BUILDING CERTIFICATION INSTITUTE
S. RICHARD FEDRIZZI, CEO & FOUNDING CHAIRMAN
U.S. GREEN BUILDING COUNCIL
MAHESH RAMANUJAM, PRESIDENT
GREEN BUILDING CERTIFICATION INSTITUTE
March 2015
February 2016
Very Good / excellent
under certification
City Offices
STANDING
Globalworth Tower
STANDING
Globalworth Plaza
STANDING
Gara Herastrau
STANDING
Globalworth Campus
DEVELOPMENT
Upground Towers
STANDING
CITY OFFICES
Bucharest, Romania
HAS FULFILLED THE REQUIREMENTS OF THE FOLLOWING LEVEL OF CERTIFICATION ESTABLISHED BY THE U.S. GREEN BUILDING COUNCIL
IN THE LEED GREEN BUILDING RATING SYSTEMTM AND VERIFIED BY THE GREEN BUILDING CERTIFICATION INSTITUTE.
LEED FOR CORE & SHELL
S. RICHARD FEDRIZZI, PRESIDENT & CEO
U.S. GREEN BUILDING COUNCIL
MAHESH RAMANUJAM, PRESIDENT
GREEN BUILDING CERTIFICATION INSTITUTE
October 2015
GLOBALWORTH TOWER
Bucharest, Romania
LEED 2009
CORE AND SHELL DEVELOPMENT
January 2017
Very Good / excellent
under certification
Very Good / excellent
under certification
Very Good / excellent
under certification
48
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49
RisK RepORT
pRincipAL RisKs & unceRTAinTies
The Board is responsible for establishing and maintaining the
Company’s system of internal control and for maintaining and
reviewing its effectiveness.
Risk oversight
BUSINESS ENVIRONMENT
ORGANISATION
CULTURE, POLICIES AND PROCEDURES
SENIOR MANAGEMENT TEAM
AUDIT
COMMITTEE
BOARD
OVERSIGHT
The system of internal control is designed to manage rather than to
eliminate the risk of failure to achieve business objectives and, as
such, can only provide reasonable, but not absolute, assurance
against material misstatement or loss.
The Group has a conservative risk philosophy as it only accepts risks
associated with the nature of its business activities.
The Group’s approach to internal control and for monitoring and
reviewing its effectiveness is set out within the Audit committee
Report, see pages 109 and 110 of the Annual Report.
since admission to Aim the Group has made suitable appointments in
the area of financial management and supervision over internal
control in order to strengthen the internal controls over financial
reporting and other significant processes of the Group. despite the
existence of an effective internal control system, these risks can only
be managed as they cannot be eliminated completely.
identify
evaluate
RISK
IDENTIFICATION
& MANAGEMENT
PROCESS
respond
report
monitor
identify
The Board and the Audit committee identify risks with input
from the key management of the Group. The Group follows an
objectives-based risk identification strategy to identify key principal
risks for each reporting period. Any event or factor that may
endanger the achievement of the short and long-term goals partly
or completely is identified as a risk.
evaluate
Once risks have been identified, they are assessed as to their
potential severity of impact on the Group’s performance (a negative
impact on financial results) and to the probability of occurrence, that
is risk indexation.
respond
Once risks have been identified and evaluated, one or a
combination of the following techniques are used to manage each
particular risk:
¡ avoid (eliminate, withdraw from, or not become involved);
¡ control (optimise – mitigate);
¡ sharing (outsource or insure); and
¡ retention (accept and budget).
The selection of a particular response strategy depends upon the
magnitude of the impact, probability of occurrence, existing internal
and external controls.
monitor
The initial risk management strategy may not address all issues
as expected. Therefore, the Board will reassess, at each quarterly
meeting, whether the previously selected controls are still
applicable and effective, and the possible risk level changes in the
business environment.
report
The Group presents the principal risks profile on pages 51-54 of the
Annual Report.
overview
Strategic review
Portfolio review
governance
financial StatementS
The diagram below portrays our current principal risks assessment in
terms of their individual impact on the Group’s future results and the
probability of occurrence. The probability of risk occurrence is an
estimate, since the past data on frequencies is not readily available.
After all, probability does not imply certainty.
The probability of risk occurrence is, by nature, difficult to estimate.
Likewise, the impact of the risk, in isolation, is estimated based on the
management’s past experience in the real estate industry. further,
both the above factors can change in magnitude depending on the
adequacy of risk avoidance and prevention measures taken and due
to changes in the external business environment. Hence the Board
intends to continue the process of quarterly examination and
evaluation of identified significant risks faced by the Group, as well
as the controls in place to manage or mitigate those risks.
indexation of principal Risks
Internal control
10
1
6
7
13
h
g
H
i
t
c
a
p
m
I
4
2
11
12
8
9
5
3
w
o
L
Less
Probability
more
e
r
u
s
o
p
x
E
50
GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
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51
overview
Strategic review
Portfolio review
governance
financial StatementS
RisK RepORT
pRincipAL RisKs & unceRTAinTies
cOnTinued
The following key is used in the table below to highlight the changes in risk exposures during the year ended 31 december 2016:
Risk exposure has increased in the current year
Risk exposure has reduced in the current year
no significant change in risk exposure since prior year
in addition, the risks marked with have been considered relevant for the Viability statement analysis.
Risk
Impact
Mitigation
Change from
prior year
Risk
Impact
Mitigation
1
2
Business Risks
exposure to
the economic
environment in
romania
changes in the
Political or
regulatory
framework in
romania or the
european Union
Property Risks
3
acquisition of
Properties
A negative trend in the
economic activity in
Romania may affect the
Group’s tenants and
potential new tenants and
in turn can exert downward
pressure on rent rates.
A significant number of the Group’s tenants are subsidiaries of
multinational groups with either insignificant exposure to developments
in the Romanian economy and/or very sound financial standing. The
Group also ensures that long-term leases are signed with new tenants
and that current leases are renewed prior to their expiry for a longer term
and at index-linked rental rates, so as to minimise the risk of possible
negative variations in rent rates over the short and medium term.
The Group was set up to
carry out investments in the
central and south-eastern
europe region, focusing
first on property
investments in Romania.
it is therefore exposed to
political and regulatory
framework changes that
may occur in this region.
even though the Group is currently focusing on investments in Romania
(independent eu bodies place it among the most rapidly growing
economies in central and south-eastern europe), the Group is
considering diversifying its property portfolio with investments in other
countries in the central and south-eastern europe region.
The Group’s executives frequently monitor political or regulatory
developments in the Romanian market through their own observation
and also by frequent reviews of available third-party reports on the
developments in Romania. in cases when changes in regulations occur,
appropriate action is taken so as to maintain compliance with
applicable regulations in Romania.
inability to execute the
Group’s plan of investing
in high-quality assets
would affect the Group’s
objectives of maximisation
in nAV and eps.
The Group’s management team have a proven track record of acquiring
high quality assets, most of them at a discount to their fair market
values. The team remains in close contact with leading european real
estate agents with presence in Romania so as to get spontaneous
access to potential sellers. The team takes the lead in negotiations with
sellers of properties and puts in place safeguards (involvement of legal,
financial, tax and technical third-party reputable and experienced due
diligence advisers) and ensures the related agreements are concluded
within a short period of time.
4
5
counterparty
credit risk
Loss of income may result
from the possible default
of tenants.
The vast majority of tenants are reputable, blue-chip multinational and
local groups of very good to excellent credit standing. Guarantee cash
deposits or bank guarantee letters are received from all tenants for the
credit period agreed in lease agreements.
changes in
interest rates
Additional financing costs
may be incurred as a result
of interest rate increases.
The Group monitors on a regular basis the cost of its debt financing and
considers the use of suitable hedging instruments (such as variable-
fixed rate swaps, interest caps) to minimise the potential increase of the
cost of debt above acceptable levels. As of 31 december 2016, the
Group’s weighted average debt financing costs amounted to 5.25%,
representing a significant decrease as compared to 31 december
2015 (6.18%) as a result of the refinancing of a significant portion of the
Group’s debt during 2016. The Group explores on a continuous basis
new refinancing options so as to maintain its average debt financing
costs at competitive levels.
Change from
prior year
6
valuation
of Portfolio
Any error or negative trend
in valuations of properties
would significantly impact
the results (nAV and eps)
of the Group.
The Group involves reputable third-party valuation specialists to measure
the fair value of the investment property portfolio at least twice a year.
management closely monitors the valuation approach for each class of
investment property and estimates and assumptions about key inputs
used in the valuation.
periodically, the Group also obtains second valuations from other
reputable and experienced third-party valuations specialists, other than
those used for financial reporting purposes, as an additional safety
measure in this area.
The Group is also striving to maximise property values by employing an
effective development strategy and/or a property management and
leasing strategy.
The Group has proven ability to attract tenants to its properties
even before the inauguration of the construction works for properties
under development.
The Group maintains a low level of vacant space for its completed
properties (which decreased further during 2016, a record year in terms of
leasing), through the effective management of vacant space by its very
experienced marketing and leasing team based in Romania.
in addition, the leasing team cooperates closely with leading estate
agents in the local market to tap all emerging opportunities.
Risks for delay in completion of properties under development are passed
on to the main contractors with whom fixed-cost turnkey contracts are
signed and from which good execution guarantees are received. A portion
of amounts payable to them, ranging from 5% to 15% of contracted value,
are retained from the contractor’s monthly certified works until after the
successful completion of the construction works.
Only experienced, reputable and financially sound contractors are selected
for the construction of properties under development, which are supervised
on a daily basis by the project management team in Romania.
further, significant penalties are stipulated in the related construction
contracts to minimise any loss due to the delayed completion of the
development works.
7
inability to
lease Space
potential loss of revenues
leading to inability to
maximise the eps and ffO
available for distribution of
dividends to shareholders.
8
inability to
complete
Projects Under
Development
on time
inability to deliver to tenants
the pre-leased office
space by the agreed dates
due to delays caused by
contractors or their possible
default, leading to potential
costs overruns, penalties
and loss of revenues.
Financial, Financing & Liquidity Risks
9
lack of
available
financing
This would negatively
affect the Group’s ability to
execute, to the full extent,
its investment plan.
The Group’s management team hold frequent meetings with current and
potential equity investors as well as continuous discussions with leading
global and Romanian financing institutions in connection with its
financing requirements.
since admission, the Group has raised over €1.1bn in equity and debt
(including new loan facilities and rolled-over loan facilities on the
acquisition of subsidiaries) to meet its financing requirements.
The Group monitors on a regular basis its compliance with loan
covenants and has increased its resources on monitoring in the area of
loan contractual terms (including covenants) compliance.
10 Breach of loan
covenants
may negatively affect the
Group’s relationship with
financing banks, may have
going concern implications,
and affect, negatively, its
ability to raise further debt
financing at competitive
interest rates.
52
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53
RisK RepORT
pRincipAL RisKs & unceRTAinTies
cOnTinued
ViABiLiTY sTATemenT
overview
Strategic review
Portfolio review
governance
financial StatementS
Financial, Financing & Liquidity Risks continued
Risk
Impact
Mitigation
11 foreign
exchange risk
significant fluctuations,
especially in the Romanian
Leu to euro exchange rate
in the direction of the
depreciation of the Romanian
Leu against the euro, may
lead to significant realised
foreign exchange losses.
The Group’s exposure to negative realised foreign exchange
fluctuations is limited to cases where the date invoices are issued to
tenants or received from contractors and suppliers and the date of their
settlement differ significantly. The limited exposure to foreign exchange
fluctuations is due to the fact that the pricing in all major contracts
entered into (with tenants and contractors/suppliers) is agreed in euro,
hence providing for a natural cash flow hedge to a large extent.
The Group actively monitors, on a daily basis, the fluctuations in
Romanian Leu to euro exchange rate and strives to minimise the period
between the issuance and settlement of invoices to tenants and by its
contractors/suppliers and the potential related, realised foreign
exchange losses that may result.
it also enters frequently into transactions with financial institutions for
the purchase or sale of Romanian Leu at favourable exchange rates
against the euro, compared to the market average, due to the relatively
high value of such transactions as a result of a batch settlement process
followed for invoices received from contractors/suppliers.
Change from
prior year
Regulatory Risks
12 change in fiscal
and tax
regulations
Adverse changes in
favourable taxation
provisions in the
jurisdictions the Group’s
legal entities operate in
would negatively affect
its net results.
13 compliance with
fire, Structural
or other Health
and Safety
regulations
non-compliance with related
regulations in Romania may
affect our reputation with
existing and potential new
tenants. it may also lead
to loss of right to operate
our properties, and may
also lead to severe legal
implications for the Romanian
subsidiaries’ directors.
The Group, through engaging professional tax advisers on a regular
basis in all the jurisdictions where its legal entities operate, monitors
very closely the upcoming changes in taxation legislation and ensures
that all steps are taken for compliance and optimisation of the tax
efficiency of its structure over time.
Through regular tax compliance monitoring and conservative policies in
this area the Group ensures that the risks associated with potential
additional, unexpected tax assessments is minimised.
moreover, the Group is closely monitoring its compliance with changes
in eu member states legislation (mainly for Romania and cyprus) in
relation to Oecd/Beps recommendations.
The Group has a specialised department dealing on a daily basis with
matters related to compliance with such regulations in Romania, where
the Group’s properties are located. Apart from in-house expertise, the
Group also engages external consultants, when required, on specialised
matters related to its compliance with these regulations.
Appropriate actions are taken as soon as a potential threat for non-
compliance with such regulations is identified.
in accordance with provision c2:2 of the 2014 revision of the
uK corporate Governance code, the Board has considered the
company’s viability over the next three years. As a result of the
long-term nature of the Group’s commitments from its tenants for its
properties in Romania, as well as the long-term nature of the Group’s
assets (properties), the Board is confident over the long-term viability
of the Group’s business; however, it is difficult to assess the long-
terms trends in the real estate market in Romania, the long-term
availability of funds in the european and global capital markets,
and the european central Bank’s long-term policies over the
provision of liquidity to banks operating in the eurozone, the largest
of which have subsidiaries in Romania. in addition, it is difficult to
assess the regulatory, tax and political environment in which the Group
operates on a basis longer than a three-year period. Therefore, the
Board considered that a three-year period is an appropriate period to
perform its viability analysis, as also supported by the following factors:
¡ three years is the period over which the Group performs its cash
flow projections and business plans due to the Group’s dynamic
growth plan. it would be very difficult to extend the Group’s
strategic planning period beyond a three-year period and still
maintain its accuracy to an acceptable level;
¡ part of the Group’s financing facilities mature within the next three
years; and
¡ three years is the average period over which the Group carries out
its major development projects, starting from the date of purchase
of land to the completion of the properties.
in 2016, the viability assessment process comprised the following
key steps:
1. A review and assessment by the Audit committee of the principal
risks facing the company. An outline of the identified principal
risks, including changes in the assessed risk level from the prior
year, is presented on pages 50-54.
2. identification of those principal risks that are more likely to have a
potential impact on the company’s viability over the next
three-year period, namely:
¡ counterparty credit risk;
¡ changes in interest rates;
¡ valuation of portfolio;
¡ inability to lease space;
¡ lack of available financing; and
¡ breach of loan covenants.
3. Analysis of the potential quantitative impact of the principal risks
identified under step 2 above, should these occur in isolation or
under certain possible combinations. it should be emphasised
that, based on the assessment performed, a number of the
above-mentioned risks may have direct and indirect impact on the
Group’s property portfolio values and/or nAV, but have been
assessed as having very low probability of affecting the Group’s
viability over the next three years.
4. Assessment of the possible, available strategies to minimise the
potential impact of these principal risks over the next three years.
such mitigation strategies include the possibility to raise
additional equity capital, or refinance/reschedule existing debt
facilities, or to dispose of properties.
5. following the completion of the viability assessment, this has
been presented and approved by the Board.
Based on the assessment performed, the Board concluded that it
has a reasonable expectation that the company will be able to
continue in operation and meet all its liabilities as they fall due up
to march 2020.
it should be noted that this assessment is based on the following
assumptions which are not within the company’s control:
¡ no unanticipated changes in laws and regulations affecting the
company, including the value of its investments, operating
performance and cash flows; and
¡ continued stability and availability of sufficient capital and market
liquidity so as to enable the raising of additional equity, as well as
the refinancing/rescheduling of the Group’s debt facilities which
mature within the next three years.
54
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55
BOARd Of diRecTORs
overview
Strategic review
Portfolio review
governance
financial StatementS
Geoff Miller
non-executive director,
chairman of the Board
and the Remuneration
committee
Ioannis Papalekas
founder & chief
executive Officer
Dimitris Raptis
deputy chief executive
Officer and chief
investment Officer
Eli Alroy
non-executive director
and senior independent
director
John Whittle
non-executive director,
chairman of the Audit
committee
Akbar Rafiq
non-executive
director
Geoff miller spent over 20 years in research
and fund management in the uK, specialising
in the finance sector, before moving offshore,
firstly to moscow and then to singapore
before becoming a Guernsey resident in
2011. He was formerly a number one rated uK
mid and small cap financials analyst covering
investment banks, asset managers, insurance
vehicles, investment companies and real
estate companies.
Geoff is chief executive Officer and
co-founder of Afaafa, a business which
provides investment and consultancy services
to early stage companies focused in the
financials and technology sectors. He is also a
director for a number of private companies.
The founder of Globalworth, ioannis
papalekas has over 18 years of real estate
investment and development experience,
16 of which were in Romania, having created
one of the most successful real estate
development and investment groups
in the Romanian real estate market.
He is experienced in the acquisition, master
planning, development, reconstruction,
refurbishment, operation and asset
management of land and buildings across all
major asset classes in Romania. ioannis has
been responsible for the development of
more than 400k sqm of commercial (office,
retail and logistics) space and 1,000
residential units in Romania, realising an iRR
of 175% and an equity multiple of 4.7x on
invested capital.
dimitris Raptis joined Globalworth in
november 2012, following 16 years of
experience in the financial services and real
estate investment management industries
with deutsche Bank, the last 12 years
as a senior member of the real estate
investment management group of deutsche
Bank’s Asset and Wealth management
division ('RReef').
from 2008 to 2012, dimitris was managing
director and european Head of portfolio
management for RReef Opportunistic
investments ('ROi'). in this role he was
responsible for overseeing ROi’s acquisitions
across europe as well as managing ROi’s
pan-european real estate investment
portfolio consisting of 40 investments with a
gross asset value in excess of €6bn.
from 2000 to 2008, dimitris was a senior
member of the team responsible for
originating, structuring and executing real
estate investments, with a main focus on the
french, italian and south-eastern european
markets with an enterprise value in excess of
€5.5bn across all major asset classes.
Akbar Rafiq serves as a partner, portfolio
manager and Head of europe credit at York
capital management. Akbar joined York
capital management in June 2011 and is a
partner of York capital management europe
(uK) Advisors LLp. Akbar is a co-portfolio
manager of the York european distressed
credit funds.
from 2007 to 2011, Akbar worked as a Vice
president and senior distressed debt Analyst
at deutsche Bank AG, London. previously,
Akbar held various positions in the
investment banking division at Bear, stearns
and co. inc. from 2000 to 2003, Akbar
worked as an Associate for a private equity
firm, Alta communications.
eli Alroy has extensive international
experience in real estate investment and
project management. from 1994 to 2012 eli
was chairman of the supervisory Board of
Globe Trade centre s.A. ('GTc'), traded on
the Warsaw stock exchange. during part of
this period (from 1994 to 1997) eli also served
as the ceO of Kardan Real estate.
eli received a Bsc in civil engineering from
the Technion in israel and an msc from
stanford university in the usA.
in 2010 eli was honoured with the prestigious
ceeQA Real estate Lifetime Achievement
award, sponsored by the financial Times, for
his commitment to the real estate industry in
central and eastern europe.
John Whittle is a resident of Guernsey. He is
a chartered Accountant and holds the iod
diploma in company direction. He is a
non-executive director of international public
partnerships Ltd2 (fTse 250), starwood
european Real estate finance Ltd1 (Lse),
Toro Ltd1 (sfm), india capital Growth fund Ltd,
Globalworth Real estate investments Ltd1
and Aberdeen frontier markets investment
company Ltd3 (Aim) and GLi finance Ltd (Aim)1.
He also acts as non-executive director to
several other, mainly pe, Guernsey
investment funds and B&Q channel islands.
immediately before choosing to become
non-executive he was finance director of
close fund services, a large independent
fund administrator, where he successfully
initiated a restructuring of client financial
reporting services and was a key member
of the business transition team.
prior to moving to Guernsey he was at
pricewaterhouse in London before
embarking on a career in business services,
predominantly retail and telecoms. He co-led
the business turnaround of Talkland
international (now Vodafone Retail) and was
directly responsible for the strategic shift
into retail distribution and its subsequent
implementation; he subsequently worked
on the £20 million private equity acquisition
of Ora Telecom. He was previously at
John Lewis and was cfO of Windsmoor
(London Lse).
56
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57
1. Audit committee chair
2. Audit committee chair and senior independent director
3. chairman
BOARd Of diRecTORs
cOnTinued
overview
Strategic review
Portfolio review
governance
financial StatementS
Alexis Atteslis
non-executive director
Andreea Petreanu
non-executive director
Norbert Sasse
non-executive director
Peter Fechter
non-executive director
George Muchanya
non-executive director
Richard van Vliet
non-executive director
Alexis Atteslis serves as a managing director
at Oak Hill Advisors with senior responsibility
for european investments. He has more than
12 years of experience in the finance industry,
having previously worked at deutsche Bank
and pricewaterhousecoopers.
He received an mA from the university of
cambridge and has earned a chartered
Accountant qualification with the institute
of chartered Accountants in england
and Wales.
Andreea petreanu is currently Head of credit
Risk management at mizuho international in
London. Over the past 16 years, Andreea has
had various risk management roles with
global investment banks such as morgan
stanley, HsBc, merrill Lynch, Bank of America
and VTB capital.
Andreea’s educational background includes
an executive mBA from the university of
cambridge, Judge Business school and an
msc in insurance and Risk management from
city university, cAss Business school. she is
also an Associate of the chartered insurance
institute in London.
norbert sasse is chief executive Officer
of Growthpoint.
He has 10 years’ experience in corporate
finance with ernst & Young corporate
Advisory (in south Africa and London) and
investec corporate finance (in south Africa).
norbert was instrumental in growing
Growthpoint from a listed property fund
having assets of ZAR 100 million and a market
capitalisation of ZAR 30 million in 2001 to
being south Africa’s largest listed property
company with assets of over ZAR 112 billion
and a market capitalisation of ZAR 73 billion
as at January 2017.
norbert led Growthpoint’s first offshore
investment in Australia in 2009 by investing
Aud200 million in Orchard industrial fund,
and subsequently renamed Growthpoint
properties Australia, ('GOZ') a property
company that was facing foreclosure. With a
market capitalisation of Aud250 million
following the recapitalisation of the company
by Growthpoint, GOZ has now grown to a
market cap of Aud2 billion.
norbert was involved in establishing the
Association of property Loan stock
companies (pLs Association) which has
subsequently been renamed sAReiT (south
African Real estate Association).
norbert holds a Bcom and Honours degree
in Accounting from Rand Afrikaans university
and is a chartered Accountant.
peter fechter has deeply embedded
entrepreneurial experiences of all aspects of
the property space. After graduating as civil
engineer in 1968, he worked in south Africa
as a site agent and tendering estimator,
becoming ceO of large private construction
company in 1978. He formed his own business
in 1980 which successfully engaged in
general contracting and doing its own
property developments for sale and selective
own investment.
After 20 years, peter’s business was
voluntarily closed, with the property portfolio
being sold to an ipO company. When this
company merged with Growthpoint
properties in 2003, he was appointed as
non-executive director of Growthpoint,
serving on the Audit and Risk committees
and as chairman of the property investment
committee, all resulting in regular and close
involvement in merger, acquisition
and investment deals in south Africa
and Australia.
George muchanya is responsible for
corporate strategy at Growthpoint and is a
member of the executive committee.
After spending his initial career years as an
engineer, George made a career change into
banking in 2000 where he worked in retail
product development, treasury and
investment banking both in south Africa and
the uK. This was followed by a brief period at
a global management consulting firm.
George joined Growthpoint in 2005, where
he focuses largely on mergers and
acquisitions. The period since he joined saw
Growthpoint concluding transformational
transactions including the expansion of
Growthpoint into Australia, the acquisition of
the iconic V&A in cape Town, single and
large property portfolio acquisitions, and the
consolidation, through mergers and
acquisitions, by Growthpoint of the south
African listed property sector. George played
an integral part in this transformation and
was part of the frontline deal negotiation and
execution team.
Richard van Vliet is a qualified as a chartered
Accountant in south Africa and england and
Wales. On leaving pricewaterhouse in south
Africa he became the sole proprietor of an
audit practice in Johannesburg, with work
biased towards international mergers and
acquisitions, taxation and financial structures.
from 1995 until mid-1997 he also represented
the Jersey General Group, an offshore
investment group of companies, in
Johannesburg. He relocated to Guernsey in
August 1997 as a founding member of
cannon Asset management Limited and is
now the managing director. He currently
holds the chairmanship of The cubic
property fund, a channel islands securities
exchange listed fund, and a number of Board
positions on companies and investment
funds exposed to property, equity and
alternative investments. He also held the
position of a main board member of Thames
River capital Holdings Limited, a fund
management company with usd 9billion
prior to its disposal.
George holds a Bsc in engineering from the
university of natal, mBA from Wales
university, a certificate in corporate finance
from the London Business school as well as
a leadership certificate from Harvard
Business school.
58
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59
THe TeAm
toP management witH a
Strong tracK recorD in
tHe real eState Sector
Ioannis Papalekas
founder & ceO
¡ 18 yrs (16 yrs in Romania) real estate
track record
¡ multi-sector real estate experience in
Romania and see
¡ Realised return on investments of (“iRR”)
of 175% and an equity multiple of 4.7
Andreas Papadopoulos
cfO
Dimitris Raptis
deputy ceO/ciO
Adrian Danoiu
cOO
¡ chartered Accountant with c.24 yrs of
¡ 20 yrs of experience in financial services
experience in audit and transactions
advisory
¡ 16 yrs with big 4 audit firms (eY and pwc)
¡ Joined Globalworth in 2014
and real estate
¡ former md and european Head of
portfolio management for deutsche Bank’s
RReef Opportunistic investments
¡ managed a portfolio of 40 investments
(GAV >€6 billion)
¡ Joined Globalworth in 2012
¡ +20 yrs of experience in accounting,
finance and business administration
¡ part of the founder’s team since 2002
Stan Andre
deputy ciO
Stamatis Sapkas
deputy ciO
¡ 9 yrs of experience with uBs (6 yrs), BAmL
and credit Agricole in Leveraged capital
markets, special situations Group,
emerging markets Lending and dcm
¡ 14 yrs of experience in emeA real estate
and lodging including 10 yrs with citigroup
investment Banking (7 yrs) and eurobank
properties
¡ Joined Globalworth in 2014
¡ Joined Globalworth in 2013
Construction and
Development
Property
Compliance
Asset
Management
Leasing
Investments and
Capital Markets
Legal
Accounting
and Finance
Operations and
Administrations
Ô
Ô
Ô
Ô
D. Pergamalis
(Group Head)
(+ 9 people)
G. Udroiu
(Group Head)
(+ 4 people)
C. Kolonias (Group
Head)
(+ 4 people)
E. Iftimie
(Group Head)
(+ 4 people)
Ô
S. Andre
(D.CIO)/
S. Sapkas
(D.CIO)
(+ 5 people)
Ô
Ô
Ô
C. Tirziu
(Group Head)
(+ 1 person)
A. Papadopoulos
(CFO)
(+ 15 people)
A. Danoiu
(COO)
(+ 14 people)
Platform of 66 professionals highly skilled in their respective fields
overview
Strategic review
Portfolio review
governance
financial StatementS
Diversity
The Group maintains a policy of employing the best candidates available in every position,
regardless of gender, ethnic group or background. information about the diversity of the Group’s
directors and employees is set out below:
Gender diversity
Gender diversity
Male
Female
Age
Age
Under 25
41 – 50
25 – 40
Over 50
Length of service
Length of service*
Up to 3 years
3 – 6 years
6 – 10 years
Over 10 years
2016
54%
2015
47%
2016
1
7
46%
53%
34
32
Board
Management
2015
1
7
33
32
Board
Management
60%
68%
9%
29%
62%
11%
29%
11%
21%
100
25%
50%
25%
80
60
40
20
0
100
80
60
40
20
0
Board
Management
25%
25%
50%
9%
20%
71%
Board
Management
17%
6%
29%
16%
7%
30%
50%
50%
49%
47%
18%
6%
27%
48%
Board
Management
18%
8%
28%
46%
50%
50%
Board
Management
100
80
60
40
20
0
100
80
60
40
20
0
60
GLOBALWORTH AnnuAL RepORT And finAnci AL sTATemenTs 2016
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61
THe TeAm
cOnTinued
overview
Strategic review
Portfolio review
governance
financial StatementS
62
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63
OvERvIEW
STRATEGIC REvIEW
PORTFOLIO REvIEW
GOvERNANCE
FINANCIAL STATEMENTS
PORTFOLIO
REVIEW Portfolio review
– BOC
– BOB
– Globalworth Tower
66
72
74
76
78
80
82
84
86
88
90
92
94
96
98
– Green Court Building “A”
– Green Court Building “B”
– Globalworth Plaza
– Unicredit HQ
– TCI
– City Offices
– Gara Herastrau
– Upground Towers
– TAP
– Globalworth Campus
– Dacia Warehouse
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GLOBALWORTH ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
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65
pORTfOLiO ReVieW
BeSt-in-claSS real eState Portfolio
Over the past three-and-a-half years, Globalworth
has been investing exclusively in Romanian real
estate, its principal market, assembling a portfolio of
best-in-class properties in prime locations within their
respective sub-markets.
By the end of 2016 the company had 15 investments with a total of
20 assets, all of which were located in two Romanian cities, the capital
Bucharest and Timisoara, one of the largest logistics hubs in the country.
since the turn of the year we have continued to expand our footprint,
having announced the acquisition of a standing warehouse leased to
Automobile dacia in pitesti (central Romania) and formed a partnership
for the development of a new class “A” office complex in the western
part of Bucharest. These initiatives have increased our total number of
investments and assets to 17 and 22 respectively.
Globalworth’s main focus is to invest in standing or development office
properties, which are subsequently actively managed by the company.
such properties accounted for c.81.4% of our portfolio value as of year
end 2016.
in addition, our exposure to the industrial sector has been increasing
in the past couple of years, initially driven by demand from tenants
interested in taking up space in what has become one of our most
successful investments, the TAp light-industrial complex in Timisoara.
This complex consisted initially of a facility leased to Valeo Lighting and
was expanded in 2015 following the development of two facilities let
to continental and elster. A new facility leased to Valeo Lighting was
delivered in Q1-17 and a second facility pre-let to Litens Automotive is
scheduled for delivery in Q3-17.
Total portfolio value upon
completion
c.€1.1bn
overview
Strategic review
Portfolio review
governance
financial StatementS
“As is” Value (€m)
“As is” Value (€m)
Value upon “Completion” (€m)
Value upon “Completion” (€m)
evolution of portfolio
“As Is” Value (€m)
€977.5m
€977.5m
€1,092.4m
€1,092.4m
Value upon “Completion” (€m)
“As is” Value (€m)
“As is” Value (€m)
Value upon “Completion” (€m)
Value upon “Completion” (€m)
€977.5m
€977.5m
Land for Future Development / 1.8%
Land for Future Development / 1.8%
€1,092.4m
€1,092.4m
Developments / 8.0%
Developments / 8.0%
Land for Future Development / 1.7%
Land for Future Development / 1.7%
Standing Properties / 90.2%
Standing Properties / 90.2%
Standing Properties / 98.3%
Standing Properties / 98.3%
Standing Properties / 90.2%
Standing Properties / 90.2%
note: data based on 31 december 2015 appraisals.
Developments / 8.0%
Developments / 8.0%
Standing Properties / 98.3%
Standing Properties / 98.3%
Land for Future Development / 1.7%
Land for Future Development / 1.7%
Land for Future Development / 1.8%
Land for Future Development / 1.8%
please see page 84
please see page 78-81
please see page 72
please see page 76
please see page 92
please see page 96
please see page 86
please see page 90
please see page 82
please see page 96
please see page 88
please see page 74
please see page 96
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BOCSTANDINGGLOBALWORTH PLAZASTANDINGBOBSTANDINGUPGROUND TOWERSSTANDINGGWI CAMPUS – TOWER IDEVELOPMENTGWI CAMPUS – TOWER IIDEVELOPMENTGWI CAMPUS – TOWER IIIDEVELOPMENTUNICREDIT HQSTANDINGGLOBALWORTH TOWERSTANDINGGREEN COURT “A” AND “B” STANDINGTCISTANDINGGARA HERASTRAUSTANDINGCITY OFFICESSTANDING pORTfOLiO ReVieW
cOnTinued
in february 2017, Globalworth announced the acquisition of a
68.4k sqm modern warehouse facility 100% leased to dacia in pitesti.
including the addition of the three new facilities under construction
or being acquired, our total footprint in the light-industrial /
warehouse sector will grow to 171.0k sqm of GLA (c.27.0k sqm year
end 2014).
Key investments in the new cBd include the class “A" flagship office
Globalworth Tower, offering GLA of 54.7k sqm (delivered in 2016),
two class “A" offices which form part of the Green court complex,
the class A BOc office property and, finally, our Globalworth campus
development which, upon completion, will offer 88.6k sqm of class
“A" office space supported by retail shops and other amenities.
The highest concentration of our portfolio, however, remains in the new
cBd of Bucharest where we have eight standing properties and one
development project, accounting for 73.4% of the value of our portfolio
and representing 214.8k sqm of standing commercial GLA and 421
residential units as of 31 december 2016.
The remainder of our Bucharest portfolio comprises class “A" offices
offering total GLA of 73.9k sqm and two land plots held for future
development. These properties are spread across the capital (centre,
north and south), with each property occupying a prime location
within its respective sub-market.
The new cBd is in the northern part of Bucharest, clustered around
the dimitrie pompeiu, calea floreasca and Barbu Vacarescu
Boulevards, and has seen the highest level of office investment in
recent years as a result of its excellent accessibility and infrastructure
(metro, tram, bus, road), its proximity to the Henri coanda
international Airport, and the availability of sizeable land plots.
We are very pleased that Globalworth, following the delivery of our
Globalworth Tower in Q1-16, now owns the second, third and
fifth-tallest office towers in Bucharest and the two single largest office
buildings (held by an institutional investor) in Romania.
property
“As is” Value
(€ m)
capex
(€ m)
mark to
market uplift
(€ m)
GW Tower
BOB
BOc
Green court "A"
Green court "B"
GW plaza
unicredit HQ
Tci
city Offices
Gara Herastrau
upG
TAp
GWi campus
Herastrau One
Luterana
Total
162.5
50.3
143.7
51.3
53.2
56.5
52.5
76.7
62.0
28.8
101.2
50.4
70.4
5.8
12.3
-
-
-
-
-
-
-
-
-
-
-
12.0
84.5
-
-
-
-
-
-
-
-
-
-
-
-
-
2.4
16.0
-
-
Value upon
“completion”
(€ m)
162.5
50.3
143.7
51.3
53.2
56.5
52.5
76.7
62.0
28.8
101.2
64.8
170.9
5.8
12.3
977.5m
96.5m
18.4m
1,092.4m
overview
Strategic review
Portfolio review
governance
financial StatementS
Standing Properties
Globalworth’s portfolio of standing assets increased in 2016 with the
addition of the flagship Globalworth Tower and the smaller Gara Herastrau
office property, which were delivered in Q1-16 and Q2-16 respectively.
Our standing portfolio increased to 14 assets, comprising 10 class A
office properties and a residential complex located in Bucharest, while
in Timisoara we own a light-industrial park comprising three facilities.
Globalworth’s total standing GLA at the end of 2016 had increased
by c.18.1% to 420k sqm, of which 370.0k sqm was commercial space,
while the appraised value of our standing investment properties rose
to c.€881.5 million (as at 31 december 2016), representing a c.26.8%
increase on the previous year.
Globalworth Tower is a landmark office property located in the
heart of the new cBd of Bucharest. At a height of approximately
120 metres it is the second-tallest office property in Romania and
one of the biggest in terms of office space in the cee/see region.
Globalworth Tower offers approximately 54.7k sqm of class “A" office
space and is approximately 83.2% let to high-quality national and
international tenants including Vodafone (telecoms), nestor nestor
diculescu Kingston petersen (law), Huawei (telecoms), delhaize/mega
image (retail-fmcG), Wipro (iT), Bunge (services), ferrero
(confectionery), Anritsu solutions (services) and Globalworth (real
estate). Globalworth Tower recently received the award for the
“Best Big Office development of the Year” for 2016 in the prestigious
ciJ Awards. Occupancy in the property increased in 2017 to 90.4%
following the signing of new leases with new and existing tenants.
Gara Herastrau was the second of Globalworth’s projects delivered
in 2016. This class “A" office property is also situated in the
new cBd and is adjacent to the Green court Building complex and
approximately 200 metres from Globalworth plaza and Globalworth
Tower. it extends over 12 floors (with an additional technical floor)
and offers approximately 12.0k sqm of GLA. The Gara Herastrau
office building was delivered in June 2016 and has an occupancy of
approximately 68.9%. The property is anchored by Adp, the leading
global provider of human capital management solutions, with
other tenants including saipem (oil and gas) and Tripsta (services).
Occupancy in the property has further increased in 2017, rising to
75.4% following a new lease signed with Baker Tilly (accounting, audit
and tax advisory). All standing properties in the portfolio have been
completed or refurbished since 2008, with Globalworth continuously
investing in its properties in order to maintain them as both modern
and in line with tenant demand.
The number of ‘green’ properties owned by the company has also
increased since the beginning of 2016, with Green court B receiving
Leed Gold in february and the Gara Herastrau office property
receiving BReeAm excellent accreditation in november. in addition,
we are very proud that our landmark Globalworth Tower property was
officially awarded Green certification of Leed platinum (January 2017),
becoming the first building in Romania and the broader see region to
have received the highest available Green accreditation.
The portfolio currently comprises eight Green accredited properties,
with four others currently under various stages of Green certification.
The company expects to complete the Green certification process in
the next 12 months.
At 83.1% as of 31 december 2016, occupancy of our standing portfolio
remains high, with 307.7k sqm leased to top-quality tenants. nine of
our commercial properties had an occupancy rate in excess of 90%
and we are in active discussions with a number of tenants for the
remaining vacant space in our portfolio.
since the beginning of 2017, as a result of the ongoing efforts of our
leasing team and the acquisition of the 100% let dacia warehouse,
the total commercial space leased in our standing portfolio has
increased to 383.7k sqm and the average occupancy rate has reached
87.5%. in addition to its commercial portfolio, Globalworth owns 421
apartments in upground Towers (upground), a modern two-tower
residential complex ideally situated in the new cBd, with a total of
571 apartments.
The property benefits from fine views of the nearby Tei lake and is
located close to our commercial portfolio, thus allowing us to
leverage its use and provide a complete package to our many
international tenants looking for turnkey solutions when relocating
their operations to the area.
in upground Towers we own a range of different apartments, varying
in size (80 to 440sqm) and number of bedrooms (1 to 5). These are
available for rental or sale and are targeted at residents interested in
living in a complex offering top-end space combined with other
amenities (gym, supermarket, restaurants and coffee shops etc.),
while also being easily accessible by both public and private transport.
in 2016 we continued to market units for sale, and as a result we sold
14 apartments. in addition, at the end of the year 205 apartments
were leased, generating c.€1.6 million of annual rental income.
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Green Certified PropertiesGlobalworth Tower: LEED PlatinumBOB:BREEAM In-use/Excellent and LEED Gold certifications (for part of the property)BOC:BREEAM In-use/Excellent certificationUniCredit HQ:BREEAM Very Good certificationCity Offices:LEED Gold certificationGreen Court “A”:LEED Gold certificationGreen Court “B”:LEED Gold certificationGara Herastrau: BREEAM ExcellentProperties Under Green Certification ProcessTCI:BREEAM Very Good/ExcellentGlobalworth Plaza:BREEAM Very Good/ExcellentGlobalworth Campus:BREEAM Very Good/ExcellentUpground Towers:BREEAM Very Good/Excellent (ongoing) overview
Strategic review
Portfolio review
governance
financial StatementS
Land for Future Development
Globalworth owns land plots in two prime locations in Bucharest (Herastrau Lake
and the historical cBd) for future development. These plots represent further
opportunities for office or mixed-use developments, which the company intends
to take advantage of in the future in order to further grow its real estate portfolio.
The total land size for future development in these two locations is approximately
9.8k sqm, with an appraised value of approximately €18.1 million.
pORTfOLiO ReVieW
cOnTinued
commercial properties
number of investments
number of Assets
GLA (sqm)
“As is” Valuation:
Occupancy
contracted Rent
WALL
Q4-15
9
11
303,155
595.6
85.1%
36.3
6.0
Q4-16
Total standing properties
number of investments
number of Assets
GLA (sqm)
“As is” Valuation:
contracted Rent
11
13
370,033
788.6
83.1%
46.9
6.4
Q4-15
10
12
355,513
695.1
37.8
Q4-16
12
14
419,986
881.5
48.5
Developments
We continued with our active development programme in 2016,
delivering to market two class “A" office properties with 66.7k sqm
of GLA. As at the end of the year we had four other properties under
construction which, upon completion, will further increase our
footprint of high-quality office and light-industrial standing GLA
by 78.4k sqm.
Developments in Bucharest
The Globalworth campus project is a large-scale development
situated in the new cBd of Bucharest, which upon completion will
offer three class “A" office towers, retail spaces and other supporting
amenities (including a conference centre). phase A, currently under
construction, will comprise two side towers facing dimitrie pompeiu
street (main street) with total GLA of approximately 56.9k sqm on
completion, while phase B will comprise one middle tower, which on
completion will contribute additional GLA of approximately 31.7k sqm.
Developments in timisoara
The TAp project has proven to be a location much sought-after by
high-quality multinational tenants and a very successful investment
for Globalworth. since its acquisition in July 2014 the park has been
continuously expanded, initially with new facilities developed for
continental and elster Rometrics (part of the Honeywell Group),
who moved into TAp in 2015. in 2016 the company signed new
leases for the development of two facilities leased to Valeo Lighting
(expansion) which was delivered in Q1-17 and Litens Automotive
(new tenant) which is currently under construction and scheduled
for delivery in Q3-17.
in february 2016, Valeo exercised its option to take more space in the
TAp complex, with the development of a new light-industrial facility
of 13.5k sqm. The delivery of the new facility in Q2-17 marked the
second time that Valeo has expanded in the park since its arrival in 2011.
The development of phase A is progressing in line with the estimated
timeline. in Tower i the structural concrete works have been
completed and the façade is currently being fitted out with a glazed
surface, which is approximately 95% complete. for Tower ii, the
necessary preparatory activities have been completed, including
excavations, and construction of the structure has now commenced.
We expect to deliver Tower i in Q2-17, followed by Tower ii in Q1-18.
in november 2016 the company signed a 10-year unbreakable lease
with Litens Automotive for the development of a 8.0k sqm new
light-industrial facility in the park. The new facility is to be developed
on available land in TAp and is expected to be delivered in Q3-17.
The German Litens Automotive Group is a leading global designer
and manufacturer of engineered power transmission systems and
components, with more than 35 years of experience in the market.
Globalworth is currently in negotiations with a number of tenants
for the take-up of space in both towers.
The company has adopted a number of environmentally friendly
principles for both office buildings under development and, as such,
anticipates being able to achieve Green certifications of BReeAm
Very Good or excellent.
TAp offered a total of 81.3k sqm of GLA and was c.97.3% occupied
at the end of 2016. GLA in the complex is expected to increase to
102.9k sqm by Q3-17, and has the potential for further development
reaching a total GLA of 131.4k sqm as a result of the extension options
currently available to the existing tenants of the park.
The “As is” value of the development projects as of 31 december
2016 was approximately €77.9 million. On completion, the projects
are expected to deliver approximately 138.7k sqm of new office and
light-industrial space, with an appraised value of c.€192.8 million.
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Development Projects – Breakdown by Status Q4-16Under Construction(1)Future Development(2)Total DevelopmentNumber of Investments222 investments developed in stagesNumber of Assets to be Developed426GLA (sqm)78,44460,229138,673“As is” Valuation €58.7m€19.3m€77.9m“Completion” Valuation €118.7m€74.1m€192.8mNotes:1 “Under Construction” comprises Globalworth Campus Phase I, TAP Valeo (expansion) and TAP Litens (new facility).2 “Future Development” comprises Globalworth Campus Phase II and other expansion options available at TAP. overview
Strategic review
Portfolio review
governance
financial StatementS
gloBalwortH tower
‘Globalworth Tower’ is a landmark Class “A” office
building located in the northern part of Bucharest on
the junction of three main streets: Barbu Vacarescu
Street, Pipera Road and Calea Floreasca.
Globalworth Tower is the second-tallest office property in Bucharest
with a height of 120m, extending over 26 floors above ground and
three underground levels.
The project was acquired in december 2013 and subsequently
developed by Globalworth and following its delivery it offers
c.54.7k sqm of GLA and 638 parking spaces. Globalworth Tower is the
first building in Romania and the broader see region having received
Leed platinum accreditation which is the highest available Green
accreditation.
location:
Status:
Description:
ownership:
Year of completion:
Bucharest/new cBd
standing property
class “A” multi-tenanted
office building
100%
2016
appraised value “as is”:
€162.5 million
gla:
occupancy:
contracted rent:
54,686 sqm
83.2% (90.4% as of 27 mar. ‘17)
€9.5 million (€10.3 million as of
27 mar. ‘17)
wall:
8.8 years
Selected tenants:
Vodafone, Huawei, delhaize Group,
nndKp, Globalworth, Wipro,
Bunge
note: All data as of 31 december 2016.
1st LEED Platinum Office
in the SEE region.
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overview
Strategic review
Portfolio review
governance
financial StatementS
BoB
BOB is a modern Class “A” multi-tenanted office
building located in the Northern part of Bucharest on
Dimitrie Pompeiu Boulevard.
The property was delivered in 2008 and received both BReeAm
in-use/excellent and Leed Gold certifications (for part of the
property) in 2014.
BOB was acquired by Globalworth in march 2014 and offers
22.4k sqm of GLA over seven floors above ground and 157 parking
spaces.
The property is part of a wider building complex developed between
2006 and 2011, which includes BOc and upground Towers.
location:
Status:
Description:
ownership:
Year of completion:
Bucharest/new cBd
standing property
class “A” multi-tenanted
office building
100.0%
2008
appraised value “as is”:
€50.3 million
gla:
occupancy:
contracted rent:
wall:
Selected tenants:
note: All data as of 31 december 2016.
22,391 sqm
97.3%
€3.6 million
5.5 years
deutsche Bank, stefanini, nX data,
nBG Group, clearanswer europe
Dual Green Accreditation –
BREEAM Excellent
and LEED Platinum
for DB’s space.
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overview
Strategic review
Portfolio review
governance
financial StatementS
pORTfOLiO ReVieW – sTAndinG
cOnTinued
Boc
BOC is a modern Class “A” multi-tenanted office
building located in the northern part of Bucharest on
George Constantinescu Street.
The property was delivered in 2009 and received BReeAm in-use/
excellent Green certification in 2014. it was nominated in the category
for the best Green “Office: in-use” property in the 2015 BReeAm
awards. it was the first property in Romania to be rated “excellent”
for Asset performance (part 1) and Building management (part 2).
BOc was acquired by Globalworth in march 2014 offering 57.0k sqm
of GLA and 895 parking spaces. The property extends over eight
floors above ground and has three underground levels.
The property is part of a wider building complex developed between
2006 and 2011, which includes BOB and upground Towers.
location:
Status:
Description:
ownership:
Year of completion:
Bucharest / new cBd
standing property
class “A” multi-tenanted
office building
100.0%
2009
appraised value “as is”:
€143.7 million
gla:
occupancy:
contracted rent:
wall:
Selected tenants:
56,962 sqm
97.3%
€9.5 million
5.8 years
Honeywell, nBG Group, Hp, GfK,
nestle, eAds, deutsche Telekom,
mood media, stefanini
note: All data as of 31 december 2016.
Largest office floor and
largest single office building
in Romania.
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overview
Strategic review
Portfolio review
governance
financial StatementS
pORTfOLiO ReVieW – sTAndinG
cOnTinued
green coUrt
BuiLdinG “A”
Green Court Building “A” is a Class “A” multi-tenanted
office building located in the northern part of
Bucharest on Gara Herastrau Street.
The property, which was developed by skanska, was completed in
2014 and received Leed Gold certification in 2015.
Green court Building “A” was acquired by Globalworth in June 2015,
and is offering 19.6k sqm of GLA and 262 parking spaces. The property
extends over 12 floors above ground and has three underground
levels.
The property is part of the wider Green court Building complex
developed by skanska which upon completion will comprise three
office towers (Globalworth currently owns two of the three office
buildings).
location:
Status:
Description:
ownership:
Year of completion:
Bucharest/new cBd
standing property
class “A” multi-tenanted
office building
100.0%
2014
appraised value “as is”:
€51.3 million
gla:
occupancy:
contracted rent:
wall:
Selected tenants:
19,589 sqm
100.0%
€3.4 million
5.3 years
Orange, schneider electric,
ciTR, skanska
note: All data as of 31 december 2016.
100% leased since
acquisition in 2015.
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pORTfOLiO ReVieW – sTAndinG
cOnTinued
green coUrt
BuiLdinG “B”
Green Court Building “B” is a Class “A” multi-tenanted
office building located in the northern part of
Bucharest on Gara Herastrau Street.
location:
Status:
The property, which was developed by skanska, was completed in
2015 and received Leed Gold certification in 2016.
Green court Building “B” was acquired by Globalworth in
december 2015, and is offering 18.4k sqm of GLA and 328 parking
spaces. The property extends over 12 floors above ground and has
three underground levels.
The property is part of the wider Green court Building complex
developed by skanska which upon completion will comprise
three office towers (Globalworth currently owns two of the three
office buildings).
Description:
ownership:
Year of completion:
overview
Strategic review
Portfolio review
governance
financial StatementS
Bucharest/new cBd
standing property
class “A” multi-tenanted
office building
100.0%
2015
appraised value “as is”:
€53.2 million
gla:
occupancy:
contracted rent:
wall:
Selected tenants:
note: All data as of 31 december 2016.
18,369 sqm
100.0%
€3.5 million
4.2 years
carrefour, sanofi, colgate, ericsson,
Adecco, Abbott
Second building of the
Green Court complex
acquired by Globalworth
in 2015.
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pORTfOLiO ReVieW – sTAndinG
cOnTinued
gloBalwortH PlaZa
“Globalworth Plaza” is a Class “A” multi-tenanted
office building located in the northern part of
Bucharest on the junction of Pipera Road and Gara
Herastrau Street.
location:
Status:
Description:
The property was delivered in 2010 and was partially refurbished
during 2014/15.
ownership:
Globalworth plaza was acquired by Globalworth in march 2015,
and is offering 24.0k sqm of GLA and 336 parking spaces.
The property extends over 21 floors above ground and has
three underground levels.
Year of completion:
overview
Strategic review
Portfolio review
governance
financial StatementS
Bucharest/new cBd
standing property
class “A” multi-tenanted
office building
100.0%
2010
appraised value “as is”:
€56.5 million
gla:
occupancy:
contracted rent:
24,020 sqm
29.7% (41.6% as of 27 mar. ’17)
€1.3 million
(€1.8 million as of 27 mar. ’17)
wall:
4.7 years
Selected tenants:
patria Bank, Bayer, Anima, printec,
coface
note: All data as of 31 december 2016.
Third tallest Class “A”
office tower located at
the entrance of the
New CBD.
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pORTfOLiO ReVieW – sTAndinG
cOnTinued
UnicreDit HQ
“Unicredit HQ” is a landmark Class “A” single-tenanted
office building located in the northern
part of Bucharest on Expozitiei Boulevard,
off Presei Libere Square.
location:
Status:
Description:
Bucharest/north
standing property
class “A” single-tenanted
office building
The property was delivered in 2012 and has received BReeAm
in-use/Very Good Green certification.
unicredit HQ is the headquarters of the unicredit Bank and
was ranked 17th on the list of the 30th most architecturally impressive
banks in the world in 2013.
Globalworth acquired the unicredit HQ in march 2015 and is offering
c.15.5k sqm of GLA and 146 parking spaces. The property extends
over 16 floors above ground and has two underground levels.
ownership:
Year of completion:
100.0%
2012
appraised value “as is”:
€52.5 million
gla:
occupancy:
contracted rent:
wall:
15,500 sqm
100.0%
€3.8 million
5.4 years
Selected tenants:
unicredit Bank
note: All data as of 31 december 2016.
overview
Strategic review
Portfolio review
governance
financial StatementS
Ranked 17th in the 2013
global list of the most
architecturally impressive
bank headquarters.
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pORTfOLiO ReVieW – sTAndinG
cOnTinued
tci
“TCI” is a landmark modern Class “A” multi-tenanted
office building located in Bucharest’s historical CBD,
at Victoriei Square.
The property was delivered in 2012 and acquired by Globalworth
in february 2014.
location:
Status:
Description:
ownership:
Tci consists of two interconnected buildings and, at 106 metres
high, is currently the third-tallest office property in Bucharest.
Year of completion:
Bucharest/Historical cBd
standing property
class “A” multi-tenanted
office building
100.0%
2012
The property offers c.22.4k sqm of GLA and 202 parking spaces,
extending over 26 floors above ground and four
underground levels.
appraised value “as is”:
€76.7 million
gla:
occupancy:
contracted rent:
wall:
Selected tenants:
22,453 sqm
99.7%
€5.0 million
4.1 years
ministry of european funds,
ernst & Young, Hidroelectrica,
cegeka, deutsche Bank
note: All data as of 31 december 2016.
overview
Strategic review
Portfolio review
governance
financial StatementS
Tallest office tower
in Bucharest’s CBD
with c.106 metres.
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pORTfOLiO ReVieW – sTAndinG
cOnTinued
citY officeS
“City Offices” is a mixed-use property comprising two
connected buildings, a commercial building and
multi-level parking. The property is located at the
southern part of Bucharest in the densely populated
area of Eroii Revolutiei.
location:
Status:
Description:
Bucharest/south
standing property
mixed-use property comprising a
commercial building and
multi-level parking
The commercial building was entirely refurbished by Globalworth,
with works completed in Q4-14, and received Leed Gold accreditation
in October 2016.
ownership:
Year of completion:
100.0%
2014
city Offices was acquired by Globalworth in september 2013 and
offers 36.0k sqm of commercial GLA over six floors above ground
and 1,019 parking spaces.
appraised value “as is”:
€62.0 million
gla:
occupancy:
contracted rent:
35,968 sqm
21.8% (25.3% as of 27 mar. ‘17)
€1.4 million (€1.5 million as of
27 mar. ‘17)
wall:
4.5 years
Selected tenants:
Vodafone, delhaize Group, max
Bet, Billa, piraeus Bank, credit
Agricole Bank, procredit Bank
note: All data as of 31 december 2016.
overview
Strategic review
Portfolio review
governance
financial StatementS
Fully refurbished Class “A”
back-office building.
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overview
Strategic review
Portfolio review
governance
financial StatementS
pORTfOLiO ReVieW – sTAndinG
cOnTinued
gara HeraStraU
“Gara Herastrau” is a Class “A” office building located
in the northern part of Bucharest on Gara Herastrau
street. It is adjacent to Green Court Building “A” and
is c.200 meters away from Globalworth Tower.
The land was acquired in december 2014 and subsequently the
project was developed by Globalworth, and delivered to the market
in Q2-16.
Gara Herastrau offers c.12.0k sqm of GLA and 157 parking spaces.
The property extends over 12 floors above ground and will have
three underground levels.
The property received BReeAm excellent accreditation in
november 2016.
location:
Status:
Description:
ownership:
Year of completion:
Bucharest/new cBd
standing property
class “A” office building
100.0%
2016
appraised value “as is”:
€28.8 million
gla:
occupancy:
contracted rent:
12,037 sqm
68.9% (75.4% as of 27 mar. ’17)
€1.4 million (€1.6 million as of
27 mar. ’17)
wall:
6.3 years
Selected tenants:
Adp, saipem, Baker Tilly, Tripsta
note: All data as of 31 december 2016.
Newly completed
Class “A” office property.
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overview
Strategic review
Portfolio review
governance
financial StatementS
pORTfOLiO ReVieW – sTAndinG
cOnTinued
UPgroUnD towerS
“Upground Towers” is a modern residential complex
located in the northern part of Bucharest on Fabrica
de Glucoza Street.
The property was delivered in 2011 and comprises two buildings
with a total GBA of 101.4k sqm. in total upground Towers offers 571
residential units, of which Globalworth (as of 31 december 2016)
owns 421. Globalworth owns in addition 25 retail units and 580
parking spaces in the complex.
upground Towers is part of a wider building complex developed
between 2006 and 2011, which includes BOB and BOc.
location:
Status:
Description:
ownership:
Year of completion:
Bucharest / new cBs
standing property
Residential complex comprising
two towers
100%
2011
appraised value “as is”:
€101.2 million
gla:
occupancy:
contracted rent:
wall:
Selected tenants:
56,662 sqm
commercial: 99.3%/Residential:
47.8%
€2.4 million
7.4/1.9 years
Worldclass, delhaize Group, marfin
Bank, subway, starbucks, sensiblue
note: All data as of 31 december 2016.
Modern two-tower
residential complex, offering
high quality residential units
and supporting amenities.
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overview
Strategic review
Portfolio review
governance
financial StatementS
pORTfOLiO ReVieW – sTAndinG/undeR deVeLOpmenT
cOnTinued
taP
The Timisoara Airport Park (‘TAP’), is a light-industrial
complex located in the North-East of Timisoara.
The property is in close vicinity to the international
airport and benefits from easy access to the fourth
European Corridor.
location:
Status:
Description:
ownership:
Timisoara (Western Romania)
standing/under development
property
Light-industrial complex
100%
The complex has been developed in phases and offered total GLA
of 81.3k sqm at the end of 2016. in Q1-17 total GLA reached 94.9k sqm
following the delivery of a new facility leased to Valeo Lighting, and is
expected to increase further to c.102.9k sqm by Q3-17 following the
delivery of the facility under development for Litens Automotive.
Year of completion:
2011 – 2017e
appraised value “as is”:
€50.4 million
appraised value “completion”: €64.8 million
TAp is almost exclusively let to Valeo Lighting, continental,
elster Rometrics and Litens Automotive.
gla:
81,349 sqm (Q1-17: 94,877 sqm +
8,000 sqm under construction)
The complex has maximum capacity of total GLA of c.131.4k sqm.
occupancy:
97.3%
contracted rent:
€4.4 million (incl. pre-lettings
under construction)
wall:
11.1 years
Selected tenants:
continental, Valeo, elster, Litens
note: All data as of 31 december 2016.
High quality and fast
growing light-industrial
and logistics complex.
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95
overview
Strategic review
Portfolio review
governance
financial StatementS
pORTfOLiO ReVieW – deVeLOpmenTs
cOnTinued
gloBalwortH camPUS
“Globalworth Campus” is a Class “A” office
development located in the northern part of Bucharest
on Dimitrie Pompeiu street.
location:
Status:
The site for the development of Globalworth campus was acquired in
2013 and 2014 and is subsequently being developed by Globalworth.
Description:
Bucharest/new cBd
development/under construction
class “A” multi-tenanted
office complex
phase “A”, currently under construction, will comprise two (side)
towers facing dimitrie pompeiu street (main street) offering upon
completion a total GLA of c.56.9k sqm. The two towers are expected
to be delivered in Q2-17 and Q1-18 respectively and will extend over
12 floors (each) above ground and will have two underground levels.
phase “B” will comprise of a third tower offering an additional GLA
of c.31.7k sqm.
ownership:
100.0%
Year of completion:
2017e / 2018e
appraised value “as is”:
€70.4 million
appraised value “completion”: €170.9 million
gla:
88,650 sqm (phase “A”: 56,900 sqm)
The development is expected to received BReeAm Very Good/
excellent certification following its completion.
note: All data as of 31 december 2016.
Class “A” office complex
development of three
towers located in the
New CBD.
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overview
Strategic review
Portfolio review
governance
financial StatementS
pORTfOLiO ReVieW – 2017 AnnOunced AcQuisiTiOns
cOnTinued
Dacia wareHoUSe
The “Dacia Warehouse”, is a modern warehouse
located in Pitesti (central Romania), 100km west
of Bucharest near the Bucharest-Pitesti motorway,
one of the country’s principal warehouse and
industrial corridors.
The property is leased solely to Automobile dacia, offering c.68.4k
sqm of GLA, and is one of the Renault Group’s largest spare parts
and accessories distribution centres outside of france.
Globalworth announced the acquisition of “dacia Warehouse”
in february 2017.
location:
Status:
Description:
ownership:
Year of completion:
pitesti (central Romania)
standing property
modern Warehouse
100%
2010
appraised value “as is”:
€42.5m (transaction value)
gla:
occupancy:
68,412 sqm
100.0%
contracted rent:
€4.1 million
wall:
8.3 years (as of 27 mar. ‘17)
Selected tenants:
Automobile dacia
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99
OvERvIEW
STRATEGIC REvIEW
PORTFOLIO REvIEW
GOvERNANCE
FINANCIAL STATEMENTS
GOVERNANCECorporate Governance Report
Directors’ Report
Remuneration Committee Report
102
104
107
Audit Committee Report
109
100
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101
cORpORATe GOVeRnAnce RepORT
Introduction
The Board of directors is committed to high standards of corporate governance and has put in place a framework for corporate governance
which it believes is appropriate considering its type of activities and size.
Corporate Governance Principles
The company has continued to comply voluntarily with the main principles of good governance set out in the uK corporate Governance code
(the ‘uK code’). The Board believes that the company has complied throughout the year ended 31 december 2016 with the provisions set out
in the uK code, subject to the statements made below in this section.
Board of Directors
introduction
during the year ended 31 december 2016 the Board comprised the chairman, who is a non-executive director, two executive directors and
five other non-executive directors. On 27 february 2017, an additional four non-executive directors were appointed as members of the
Board.
The Articles of incorporation of the investment Adviser (Globalworth investment Advisers Limited, a direct wholly owned subsidiary of the
Group) provide that the Board of directors of the investment Adviser comprises two executive directors (ioannis papalekas and dimitris
Raptis) and two non-executive directors (Geoff miller and John Whittle).
As at 31 december 2016, with the exception of the company and the investment Adviser, there are no common directorships between
members of the Board.
Chairman
The chairman of the Board is Geoff miller. in considering the independence of the chairman, the Board has taken note of the provisions of the
uK code relating to independence and, at the quarterly Board meeting held in december 2016, it has appointed eli Alroy as the senior
independent director of the company.
Directors
Directors’ Duties and responsibilities
The directors are responsible for the determination and oversight of the company’s investing policy and strategy and have overall
responsibility for the company’s activities, including the review of its investment activity and performance, and the activities and performance
of the management Team.
details on the profile, experience and date of appointment of the executive and non-executive directors are set out on pages 56-59 of the
Annual Report.
Committees of the Board
The committees of the Board comprise the Remuneration committee, the Audit committee and the investment committee, with terms of
reference briefly summarised below. further details about the Remuneration committee and the Audit committee and on their work during
the year are provided in the Remuneration committee Report and the Audit committee Report on pages 107-108 and pages 109-111,
respectively, of the Annual Report.
The investment committee was formed in february 2017. The committee consists of eli Alroy (chairman of the committee), ioannis papalekas,
dimitris Raptis, norbert sasse and George muchanya. The investment committee was formed primarily for the purpose of considering:
¡ all acquisitions, disposals and developments or redevelopments of physical property assets and letting enterprises in accordance with the
thresholds set out in the delegated authority framework;
¡ capital expenditure, including refurbishments and developments or redevelopments of physical property assets and letting enterprises in
accordance with the thresholds set out in the delegated authority framework;
¡ periodic review of systems and processes for due diligence reviews relative to acquisitions of physical property assets and letting
enterprises;
¡ annual budgets for capital expenditure;
¡ annual valuations of physical property assets and letting enterprises;
¡ philosophy, policies and strategy in respect of investment in physical property assets and letting enterprises;
¡ loan and debt securitisation within the thresholds set out in the delegated authority framework; and
¡ lease agreements and amendments thereto within the thresholds set out in the delegated authority framework, and making
recommendations in respect thereof to the Board or any appropriate committee of the Board of the company.
during the year, we appointed a compliance Officer in the uK whose responsibilities include providing the Group with guidance and advice
on regulatory and compliance matters, as well as company secretarial support.
overview
Strategic review
Portfolio review
governance
financial StatementS
Shareholder Communications
A report on shareholder communications is considered at each Board meeting. A quarterly announcement is published on the company’s
website, reporting the quarter-end net asset value. Regular trading updates are also posted on the company’s website with commentary on
significant events in the evolution of the company’s portfolio and performance.
The company’s senior management and its brokers maintain regular dialogue with institutional shareholders, feedback from which is reported
to the Board. in addition, Board members are available to answer shareholders’ questions at any time, and specifically at the Annual General
meeting (‘AGm'). The company secretary is available to answer general shareholder queries at any time during the year. The Board monitors
activity in the company’s shares and the discount or premium to net asset value at which the shares trade both in absolute terms and relative
to the company’s peers.
Board Meetings, Committee Meetings and Directors’ Attendance
The number of meetings of the Board of directors, the Audit committee and the Remuneration committee attended by each director, as
applicable, during the year ended 31 december 2016 is set out below.
Quarterly Board
Meetings
Ad-hoc
Board Meetings
Board Committee
Meetings
Board Meetings
(Total)
Audit
Committee
Remuneration
Committee
eligible to
eligible to
eligible to
eligible to
eligible to
eligible to
Attend Attended
Attend Attended
Attend Attended
Attend Attended
Attend Attended
Attend Attended
ioannis papalekas
dimitris Raptis
Geoff miller
eli Alroy
John Whittle
Akbar Rafiq
Alexis Atteslis
Andreea petreanu
4
4
4
4
4
4
4
4
4
4
4
4
3
3
4
4
14
14
15
15
15
9
6
15
10
14
14
12
11
3
2
12
–
1
1
–
1
–
–
–
–
1
1
–
1
–
–
–
18
19
20
19
20
13
10
19
14
19
19
16
15
6
6
16
–
–
3
–
3
–
–
3
–
–
3
–
3
–
–
3
–
–
4
4
4
–
–
–
–
–
2
3
4
–
–
–
Nomination Committee
The Board as a whole fulfils the function of a nomination committee. The size and independence of the Board is such that it is considered that
the function of such a committee is best carried out by the Board as a whole. Any proposal for a new director will be discussed and approved
by the Board, however, significant shareholders (ioannis papalekas and Growthpoint properties Ltd) have the power to appoint additional
directors.
in accordance with the company’s Articles of incorporation, each of Growthpoint and Zakiano Holdings Limited may nominate and appoint
one non-executive director for every eight per cent. of the issued shares in the share capital in the company which it holds. Growthpoint and
Zakiono enterprises Limited are also each entitled to nominate one of the Guernsey resident directors (a minimum of two Guernsey resident
directors are required pursuant to the Articles).
Management Engagement Committee
no separate management engagement committee has been constituted to date as the monitoring of management is considered a primary
function of the Board.
Performance evaluation
The Board formally considers on an annual basis its effectiveness as a Board, the balance of skills represented and the composition and
performance of its committees. The Board considers that it has an appropriate balance of skills and experience in relation to the activities of
the company. The chairman evaluates the performance of each of the directors on an annual basis, taking into account the effectiveness of
their contributions and their commitment to the role. The performance and contribution of the chairman is reviewed by the other directors
under the leadership of the chairman of the Remuneration committee.
An evaluation of the performance of the Board members who served during the entire year ended 31 december 2016 has been undertaken.
The performance of the chairman of the Board was also evaluated by the other directors under the leadership of the chairman of the
Remuneration committee. The result of the evaluation carried out was that all directors’ performance is in line with the expectations set out at
the point of their appointment to the Board.
independence evaluation
The Board will consider the independence of each member of the Board at the next quarterly Board meeting, within June 2017.
tenure and re-election of Directors
in accordance with the company’s Articles of incorporation, the company’s non-executive directors, except Akbar Rafiq and Alexis Atteslis
(nominated and appointed by York capital and Oak Hill Advisors, respectively), as well as norbert sasse, George muchanya, peter Henry
fechter and Richard van Vliet (nominated and appointed by Growthpoint properties Ltd), shall retire from office annually and may offer
themselves for re-election by the members. At the next AGm Geoff miller, John Whittle, eli Alroy, and Andreea petreanu are required to retire
from office and offer themselves for re-election. Geoff miller, John Whittle, eli Alroy, and Andreea petreanu will stand for re-election at the
forthcoming AGm. The Board has reviewed their skills and experience and is recommending their re-election to shareholders.
moreover, ioannis papalekas and dimitris Raptis are not required to submit themselves for re-election, unless required to do so by a two-thirds
vote of the company.
Diversity
The details are provided on page 61 of the Annual Report.
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diRecTORs’ RepORT
The directors present their Annual Report and the audited consolidated financial statements of the Group for the year ended
31 december 2016.
Directors’ Indemnities
The company maintains qualifying third-party indemnity provisions in the form of a directors’ and Officers’ insurance policy for the benefit of
its directors, which were made during the year and remain in force at the date of this report.
Investment Policy
The Group’s investment strategy focuses on generating attractive risk-adjusted returns, made up of a combination of yield and capital
appreciation, by investing in a diversified portfolio of properties. Key highlights of the company’s investment policy are presented below:
Profile of Underlying investments
¡ focus on commercial assets (existing or to be developed);
¡ Geographically located in south-eastern europe/central and eastern europe with a primary focus on Romania;
¡ most of the income to be derived from multinational corporates and financial institutions; and
¡ euro-denominated, long-term, triple net and annually indexed leases, with corporate guarantees where possible.
investment themes
¡ distressed investments
¡ Acquisition of unfinished or partially let commercial buildings at prices below replacement cost;
¡ Restructuring;
¡ Acquisition of real estate owned by financial institutions or others seeking to restructure their balance sheets through monetisation; and
¡ developments with pre-lettings from high-quality tenants.
The complete investment policy of the company can be found on its website under investor Relations/Aim Rule 26 disclosures and on page
149 of the Annual Report.
Results and Dividends
The results for the year are set out in the consolidated statement of comprehensive income on page 114 of the Annual Report.
The company has announced its intention to distribute a dividend of €0.22 per share, payable in respect of the six-month financial period
ending on 30 June 2017, to holders of shares at that time and a dividend of €0.22 per share, payable in respect of the six-month financial
period ending on 31 december 2017. for subsequent years, the intention of the company is to distribute the equivalent of 90% of the
company’s funds from Operations (ffO).
Going Concern
As disclosed in note 1 of the consolidated financial statements, the directors believe that it is appropriate to continue to adopt the going
concern basis in preparing the consolidated financial statements as the company expects to have access to adequate financial resources to
continue in operational existence for the foreseeable future.
Ongoing Charges
in accordance with the recommended methodology set out by the Aic, the ongoing charges ratio of the Group for the year ended
31 december 2016 was 0.87% (2015: 0.98%), excluding exceptional costs. no performance fees were charged during the year.
Supply of Information to the Board
The Board meetings are the principal source of regular information for the Board, enabling it to determine policy and to monitor performance
and compliance. A representative of the investment Adviser attends each Board meeting, thus enabling the Board to discuss fully and review
the company’s operations and performance. each director has direct access to the company secretary and may, at the expense of the
company, seek independent professional advice on any matter that concerns them in the furtherance of their duties.
Delegation of Functions
The Board has contractually delegated to external agencies the custodial services and the accounting and company secretarial requirements
of the company and some of its subsidiaries. each of these contracts were entered into after full and proper consideration of the quality and
cost of services offered.
Investment Adviser
under the investment Advisory Agreement, the company has appointed the investment Adviser, a wholly owned subsidiary of the Group,
subject to the overall control and supervision of the Board of the company, to act as investment Adviser.
The investment Adviser has no authority to act for or represent the company (or any other member of the Group) in any other capacity.
The appointment is on an exclusive basis.
The investment Adviser is obliged to advise in respect of potential and actual investments of the company in pursuit of the company’s
investing policy, subject to any applicable investment restrictions and having regard to any investment guidelines.
subject to any applicable law, the investment Adviser complies with all reasonable instructions issued by the Board (so long as these are not
outside the investing policy as recorded in the admission document or contrary to the exclusivity of the investment Adviser in relation to the
company’s investment activities).
overview
Strategic review
Portfolio review
governance
financial StatementS
The investment Adviser is entitled to fees as approved by the Board, following recommendation by the Remuneration committee of the
Board. At quarterly Board meetings the investment Adviser summarises its activities, proposals and achievements and the independent
directors review the performance of the investment Adviser and the executive directors in relation thereto. Having considered the portfolio
performance and investment strategy, the Board has agreed that the interests of the shareholders as a whole are best served by the
continuing appointment of the investment Adviser on the terms agreed.
Substantial Interests
At 31 december 2016, the following shareholders had substantial interests (more than 3%) in the issued share capital of the company:
Growthpoint properties Ltd
ioannis papalekas
York capital
Oak Hill Advisors
Gordel Holdings Limited
% of issued
share capital
of the
Company
26.9%
25.7%
18.8%
11.2%
4.2%
number of
shares
24,300,000
23,277,101
17,020,326
10,169,574
3,835,141
Directors’ Interests
At 31 december 2016 and 2015, directors held (either directly or through companies controlled by them) the following declarable interests in
the company:
Number of shares held
Number of warrants held
ioannis papalekas
dimitris Raptis
Geoff miller
eli Alroy
John Whittle
Akbar Rafiq
Alexis Atteslis
Andreea petreanu
2016
2015
2016
2015
23,277,101 22,603,792 4,245,030
110,000
11,000
260,000
9,000
–
–
–
352,407
11,000
398,814
9,000
–
–
–
193,348
11,000
358,814
9,000
–
–
–
4,245,030
110,000
11,000
260,000
9,000
–
–
–
The Group has granted a number of warrants to ioannis papalekas (‘the founder’), dimitris Raptis, Geoff miller, eli Alroy and John Whittle.
pursuant to the warrant agreements, the warrants confer the right to subscribe, at the placing price, for a specific number of Ordinary shares.
The warrants will vest and become exercisable when the market price of an Ordinary share, on a weighted average basis over 60 consecutive
days, exceeds a specific target price. The warrants, subject to vesting, are exercisable in whole or in part during the period commencing on
Admission and ending on the date falling 10 years from the date of Admission.
founder warrant agreement
On 24 July 2013 the company entered into a warrant agreement with ioannis papalekas and Zorviani Limited under which the company
agreed to issue at, and subject to, Admission to Zorviani Limited three tranches of warrants, each representing 5% of the aggregate of the
placing shares and the Ordinary shares subscribed by Zorviani Limited (or other founder companies), pursuant to the founder Admission
subscription and the founder equity for Assets subscriptions, subject to the market price per Ordinary share being at least €7.50, €10.00 and
€12.50 (respectively) as a weighted average over a period of 60 consecutive days (each a ‘market price Vesting Threshold’). in each case, the
subscription price will be €5.00.
Director warrant agreement
On 24 July 2013 the company entered into a warrant agreement with dimitris Raptis, eli Alroy, Geoff miller and John Whittle under which the
company agreed to issue to such persons at, and subject to, Admission, warrants over 110,000, 260,000, 11,000 and 9,000 (respectively)
Ordinary shares, subject to the market price per Ordinary share being at least €7.50 as a weighted average over a period of 60 consecutive
days (the ‘market price Vesting Threshold’). in each case, the subscription price will be €5.00.
Auditors
The auditors, ernst & Young LLp, have indicated their willingness to continue in office. Accordingly, a resolution for their reappointment will be
proposed at the forthcoming AGm.
Power to Buy Back Shares
The company has the power to buy back shares in the market, the renewal of which power is sought from shareholders on an annual basis at
the AGm, and the Board considers on a regular basis the exercise of those powers. The Board did not consider it appropriate to exercise such
powers during the year ended 31 december 2016.
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diRecTORs’ RepORT
cOnTinued
RemuneRATiOn cOmmiTTee RepORT
overview
Strategic review
Portfolio review
governance
financial StatementS
Annual General Meeting
The AGm of the company will be held on 19 June 2017 at 10am British summer Time at Ground floor, dorey court, Admiral park,
st peter port, Guernsey.
Statement of Directors’ Responsibilities
The directors are responsible for preparing the directors’ Report and the consolidated financial statements in accordance with applicable
law and regulations.
The directors are required to prepare consolidated financial statements for each financial year in accordance with international financial
Reporting standards (‘ifRs'), as adopted by the european union (‘eu'), and applicable law.
The consolidated financial statements are required by law to give a true and fair view of the state of affairs at the end of the year and of the
profit or loss for that year.
in preparing these consolidated financial statements, the directors are required to:
¡ select suitable accounting policies and then apply them consistently;
¡ make judgements and estimates that are reasonable and prudent;
¡ state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the
consolidated financial statements; and
¡ prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the company will
continue in business.
The directors are responsible for ensuring that the company maintains proper accounting records which disclose, with reasonable accuracy
at any time, the financial position of the company and to enable them to ensure that the consolidated financial statements comply with the
companies (Guernsey) Law 2008, as amended. They have general responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the company and to prevent and detect fraud and other irregularities.
The directors confirm to the best of their knowledge that:
¡ so far as each of the directors is aware, there is no relevant audit information of which the company’s auditor is unaware, and each has
taken all the steps he or she ought to have taken as a director to make himself or herself aware of any relevant information and to establish
that the company’s auditor is aware of that information;
¡ these consolidated financial statements have been prepared in conformity with ifRs, as adopted by the eu, and give a true and fair view
of the financial position of the Group; and
¡ this Annual Report and consolidated financial statements, taken as a whole, are fair, balanced and understandable and provide the
information necessary for the shareholders to assess the company’s performance, business model and strategy.
Approved by the Board of directors and signed on behalf of the Board on 3 April 2017.
John Whittle
director
Composition of the Committee
Throughout the year ended 31 december 2016, the Remuneration committee comprised three independent non-executive directors:
John Whittle (chairman of the Remuneration committee), Geoff miller and eli Alroy. On 27 february 2017 the composition of the
Remuneration committee changed pursuant to the new Articles of Association of the company. John Whittle stepped down as
chairman of the Remuneration committee and Geoff miller was appointed as its chairman. At the same time peter fechter joined the
Remuneration committee.
The Remuneration committee has as its remit, amongst other matters, the determination and review of the fees payable to Globalworth
investment Adviser (‘GiAL'), the company’s subsidiary, and the related emoluments of the executive directors and other senior executives
of the company who are preference shareholders of GiAL and the terms of any performance or incentive plans of the investment Adviser,
including the setting of performance thresholds, the allocation of any such entitlements as between shares and cash and the setting of any
vesting periods (in each case, taking such independent advice as it considers appropriate in the circumstances). in addition, the Remuneration
committee prepares an Annual Report on the remuneration policies of the company. The emoluments of the non-executive directors is a
matter for the Board. no director or manager may be involved in any decisions as to his own emoluments.
The complete details of the Remuneration committee’s formal duties and responsibilities are set out in its terms of reference, which can be
found on the company’s website.
Directors’ Remuneration Policy
directors’ emoluments comprise a fee or salary based compensation plus, in the case of the executive directors dividends in their capacity as
preference shareholders of GiAL, all in accordance with the new fee arrangement plan for the investment Adviser (the ‘plan’), which was
approved by the company’s shareholders in november 2016.
during the year ended 31 december 2016, four meetings of the Remuneration committee were held.
Directors’ Emoluments
The directors’ emoluments during the year ended 31 december 2016 comprised a fixed level of salary and/or fees, plus dividends from GiAL
in the case of the two executive directors.
during the year ended 31 december 2016 the emoluments of the directors were as follows and refer to note 28 to the financial statements for
other transactions with directors:
Amounts in €‘000
ioannis papalekas
dimitris Raptis
Geoff miller
eli Alroy
John Whittle
Akbar Rafiq
Alexis Atteslis
Andreea petreanu
fees
–
–
150
200
61
–
–
49
460
company
subsidiaries1
dividends2
fees
salary
Total
871
150
–
–
–
–
–
–
871
150
30
–
30
–
–
–
1,400
600
–
–
–
–
–
–
Total3
emoluments
2,271
750
180
200
91
–
–
49
1,021
1,081
2,000
3,541
–
–
30
–
30
–
–
–
60
1 Globalworth investment Advisers Limited (‘GiAL') and Aserat properties sRL for ioannis papalekas, and GiAL for dimitris Raptis.
2 The executive directors receive dividends in their capacity of preference shareholders of GiAL, the amount of which depends on the performance and
profitability of GiAL. GiAL provides investment advisory services to the company and is rewarded for the services it provides pursuant to the investment
management Agreement signed on 24 July 2013, as amended from time to time (the ‘imA'). for ioannis papalekas dividends include an accrual of €1.4 million
(c.€0.27 million to be settled in cash and c.€1.13 million by the issuance of shares of the company); and for dimitris Raptis dividends include an accrual of €0.4
million (c.€0.12 million to be settled in cash and c.€0.28 million by the issuance of shares of the company).
3 The amounts indicated represent accrued amounts corresponding to the period during which the beneficiaries were members of the Board. Out of the amounts
disclosed in the above table €1.8 million was payable to the directors as of 31 december 2016. An additional amount of €5,729 was due to the directors as of
31 december 2016 for out-of-pocket expenses incurred, which was settled subsequent to 31 december 2016.
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RemuneRATiOn cOmmiTTee RepORT
cOnTinued
AudiT cOmmiTTee RepORT
overview
Strategic review
Portfolio review
governance
financial StatementS
during the year ended 31 december 2015 the emoluments of the directors were as follows:
Amounts in €‘000
ioannis papalekas
dimitris Raptis
Geoff miller
eli Alroy
John Whittle
Akbar Rafiq
Alexis Atteslis
Andreea petreanu
company
subsidiaries1
dividends2
fees
–
–
70
200
69
–
–
56
395
fees
salary
Total
Total3
emoluments
–
–
35
–
35
–
–
–
70
575
150
–
–
–
–
–
–
725
575
150
35
–
35
–
–
–
2,500
725
–
–
–
–
–
–
3,075
875
105
200
104
–
–
56
795
3,225
4,415
1 Globalworth investment Advisers Limited (‘GiAL') and Aserat properties sRL for ioannis papalekas, and GiAL for dimitris Raptis.
2 The executive directors receive dividends in their capacity of preference shareholders of GiAL, the amount of which depends on the performance and
profitability of GiAL. GiAL provides investment advisory services to the company and is rewarded for the services it provides pursuant to the investment
management Agreement signed on 24 July 2013, as amended from time to time (the ‘imA'). for ioannis papalekas dividends include an accrual of €2.5 million and
for dimitris Raptis dividends include an accrual of €0.575 million. Out of the amounts outstanding at 31 december 2015, €50,000 represent dividends declared
and settled subsequent to 31 december 2015.
3 The amounts indicated represent accrued amounts corresponding to the period during which the beneficiaries were members of the Board. Out of the amounts
disclosed in the above table €3.075 million was payable to the directors as of 31 december 2015. An additional amount of €29,742 was due to the directors
as of 31 december 2015 for out-of-pocket expenses incurred. Out of the amounts due to the directors at 31 december 2015, €50,000 was settled subsequent
to 31 december 2015.
Founder and Director Warrant Agreements
please refer to page 105 of the Annual Report for details on the founder and director Warrant Agreements concluded on 24 July 2013.
Performance Incentive Scheme
The company, following approval from its shareholders in november 2016, has set up a performance incentive scheme for the investment
Adviser, applicable from 1 January 2016. The plan comprises the following three main elements:
¡ a fixed annual fee which includes the payment of an amount by way of profit margin to the investment Adviser for the relevant financial
year;
¡ an annual incentive amount based on the achievement of targets set at the start of the relevant year; and
¡ a more long-term incentive fee, primarily based on achieving certain returns for shareholders..
Geoff Miller
Remuneration committee chairman
3 April 2017
Introduction
We present below the Audit committee (‘the committee’) Report for
the year ended 31 december 2016.
Structure and Composition
during the year ended 31 december 2016, the Audit committee
comprised three independent non-executive directors:
John Whittle (chairman of the Audit committee), Geoff miller
and Andreea petreanu. On 27 february 2017 the composition of
the Audit committee changed pursuant to the new Articles of
Association of the company and Geoff miller stepped down as a
member of the committee. At the same time Richard van Vliet joined
the Audit committee.
Activities of the Committee
during the year ended 31 december 2016 and up to the date of this
report the committee has been active in the following areas,
presented below under the three key areas of focus of financial
reporting, controls and safeguards, and external audit:
Financial Reporting:
¡ reviewed the Annual Report for the years ended 31 december
2015 and 31 december 2016 prior to their approval by the Board;
and
¡ reviewed the interim Report and unaudited interim consolidated
financial statements for the half year ended 30 June 2016 prior to
their approval by the Board.
The chairman of the committee is appointed by the Board and the
members are appointed by the Board, in consultation with the
chairman of the committee. The committee shall have a minimum of
two members. All members of the committee shall be independent
non-executive directors with relevant financial experience.
John Whittle’s profile and relevant experience is presented in the
Board of directors sub-section of the Annual Report (page 57).
Principal Duties of the Committee
The role of the committee includes the following:
¡ financial Reporting:
The committee has had regular contact with management during the
process of preparation of the Annual Report and consolidated
financial statements and the auditor during the audit thereof. in
planning its work and reviewing the audit plan with the auditor, the
committee took account of the most significant issues and risks, both
operational and financial, likely to have an impact on the Group’s
financial statements and selected the following as the most
significant issues impacting the company’s financial statements and
Annual Report disclosures:
¡ investment property appraisal process;
¡ accounting for business acquisitions and disposals;
¡ use of the going concern principle as a basis for preparation of the
– monitoring the integrity of the consolidated financial
financial statements;
–
statements and any formal announcements regarding financial
performance;
reviewing and reporting to the Board on the significant issues
and judgements made in the preparation of the Group’s
published financial statements, preliminary announcements
and other financial information having regard to matters
communicated by the independent auditors; and
– assessing whether the Annual Report and financial statements,
taken as a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to assess
the company’s performance, business model and strategy.
¡ controls and safeguards:
– keeping under review the effectiveness of the company’s
–
internal controls and risk management systems;
reviewing the company’s arrangements for its employees to
raise concerns, in confidence, about possible wrongdoing in
financial reporting or other matters and ensuring that these
arrangements allow proportionate and independent
investigation of such matters and appropriate follow-up action;
and
– considering annually whether there is a need for the company
to have its own internal audit function.
¡ external Audit:
–
reviewing the effectiveness of the external audit process and
the auditor’s independence;
– considering and making recommendations to the Board on the
appointment, reappointment, replacement and remuneration
of the company’s independent auditor;
– developing and implementing a policy on the engagement of
–
the external auditor to supply non-audit services; and
reporting to the Board, identifying any matters in respect of
which it considers that action or improvement is needed and
making recommendations as to the steps to be taken.
The complete details of the committee’s formal duties and
responsibilities are set out in the committee’s terms of reference,
which can be found on the company’s website.
¡ underlying cash flow projections and sensitivity analysis
supporting the viability statement; and
¡ compliance with the fair, balanced and understandable principle.
investment Property valuations
Valuations for investment property, property under construction and
land bank are prepared by an external valuer, cBAR Research &
Valuation Advisors sRL (‘coldwell Banker’). The valuation of the
investment property is inherently subjective, requiring significant
estimates and assumptions by the valuer. errors in the valuation could
have a material impact on the Group’s net assets value. further
information about the portfolio and inputs to the valuations are set
out in note 3 of the consolidated financial statements.
The Board and the committee discuss the outcome of the valuation
process and the details of each property on a semi-annual basis. The
management liaise with valuers on a regular basis and meet them on
a semi-annual basis prior to the finalisation of the portfolio valuation.
The external auditor has access to the external valuer and comments
on the key assumptions used in the valuations performed and
movements on property values. The committee receives a detailed
written report from ernst & Young (‘eY') presented to the committee
upon finalisation of the audit fieldwork.
accounting for acquisitions and Disposals
The committee notes that there is judgement involved in identifying
and valuing the consideration given and the fair value of the assets
acquired in a business combination, or in the acquisition of assets.
The committee also notes that there is judgement involved in the
accounting for disposals, particularly around the valuation of the
consideration receivable. However, during the year ended
31 december 2016 there were no new acquisitions and only a disposal
of a subsidiary in Greece, in connection with which the company
recorded the related investment property under assets held for sale
at 31 december 2015 at a carrying value equal to the disposal
proceeds received.
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109
overview
Strategic review
Portfolio review
governance
financial StatementS
audit fees and non-audit Services
The table below summarises the remuneration of ernst & Young LLp and other entities of eY during the years ended 31 december 2016 and
31 december 2015:
Audit of financial statements
Other assurance services
Other non-audit services
Audit fees €‘000
non-audit fees €‘000
2016
416
–
–
416
2015
365
41
–
406
2016
–
–
276
276
2015
–
11
302
313
The committee has reviewed the level of non-audit fees of the external auditor for the year ended 31 december 2016 and has considered that
they are in line with the Group’s level of development and concluded that they relate to permissible non-audit services under the auditor’s
independence and other related professional standards.
Reviewed the effectiveness of the external auditor and recommended its reappointment to the Board:
for the year ended 31 december 2016 the committee reviewed the effectiveness of the external auditors. This was facilitated through: the
completion of a questionnaire by the relevant stakeholders (including members of the committee and key financial management of the
Group); interviews with finance staff; and a review of the audit plan and process for the year. The committee has also reviewed and considered
the findings of the latest Annual Audit Quality inspection Report of the fRc for ernst & Young LLp, dated may 2016. in addition, the chairman
of the Audit committee discussed with the external auditor in march 2017 their preliminary findings on the audit of the consolidated financial
statements for the year ended 31 december 2016. furthermore, the chairman of the Audit committee discussed with the external auditor in
march 2017 their final findings on the audit of the Annual Report and consolidated financial statements for the year ended 31 december 2016
and their draft audit opinion thereon.
Local statutory audits of individual subsidiary companies are also required in some jurisdictions in which the Group operates. eY Romania and
eY cyprus carry out these audits in Romania and cyprus, respectively.
following this review, the committee recommended to the Board that ernst & Young LLp be reappointed as external auditors for the year
ending 31 december 2017.
for any questions on the activities of the committee not addressed in this report, a member of the Audit committee remains available to
attend each Annual General meeting to respond to such questions..
John Whittle
Audit committee chairman
3 April 2017
AudiT cOmmiTTee RepORT
cOnTinued
going concern Principle
The committee has considered management’s assessment and
conclusion of continuing to use the going concern assumption as a
basis of preparation of the company’s financial statements, as
supported by detailed cash flow projections for the period up to
30 June 2018 and supporting documentation. following their review
of the management’s assessment, the committee concurred with
management’s conclusion to continue using the going concern
assumption as a basis of preparation of the company’s financial
statements.
Underlying cash flow projections and sensitivity analysis
supporting the viability statement
The committee has considered management’s viability analysis,
including the underlying cash flow projections for the three year
period to 31 march 2020, sensitivity analysis, results and conclusion.
following their review of the viability analysis, the committee
concurred with management’s conclusion as reflected in the viability
statement on page 55.
fair, Balanced and Understandable Principle
The committee has considered the Annual Report and financial
statements and, taken as a whole, consider them to be fair, balanced
and understandable and provide the information necessary for
shareholders to assess the company’s performance, financial
position, business model and strategy.
External Audit:
Held regular meetings and discussions with the external auditor:
¡ The chairman of the committee held discussions with the auditor
at the planning phase and at the end of the audit at the reporting
stage, before the approval of the company’s consolidated
financial statements and Annual Report for the year ended
31 december 2016.
¡ At the planning stage of the audit for the year ended 31 december
2016, the chairman of the committee met the auditor in
november 2016. during this meeting the draft audit plan was
presented, reviewed and discussed, as well as a discussion held
regarding the risks on which the audit would be focusing. The
auditor explained that the risks the audit would focus on were the
following:
– valuation of investment property whether in use or under
–
–
development;
revenue recognition, lease incentives and other special
clauses; and
risk of misstatement due to fraud and error (associated to the
significant risks).
in addition, the chairman of the committee met in march 2017 with
the external auditor and discussed the findings from their audit of the
draft Annual Report and their draft audit report for the year ended
31 december 2016, prior to submission of the draft Annual Report to
the Board for formal approval.
The committee has reviewed the company’s Annual Report and
financial statements for the year ended 31 december 2016 and has
advised the Board that, in its opinion, the Annual Report and financial
statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary to assess the company’s
performance, operating model and strategy.
Controls and Safeguards:
¡ reviewed the risk matrix used to identify and monitor the
significant risks encountered by the Group, as well as the analysis
underlying the viability report;
¡ reviewed the principal risks and uncertainties identified by
management and the update thereof during 2016, presented on
pages 50-54 of the Annual Report;
¡ performed an assessment of the internal controls of the Group
and in particular the controls over the most significant financial
reporting risks:
– The Audit committee reviewed the report on controls over
identified significant financial reporting risks, prepared by
management and submitted to the Audit committee by the
company’s chief financial Officer, and concluded that the
related internal control environment is adequate considering
the current size and activities of the company and its
subsidiaries; and
¡ considered whether there is a need for an internal audit function:
– The committee does not consider at present to be a need for
an internal audit function, given the size of the Group and the
fact that its internal control procedures are still under
development so as to align these to the level of continuous
development of the Group’s activities.
The committee has met with the external auditor to discuss in detail
the findings and recommendations based on their audit for the year
ended 31 december 2016.
Assessed the independence and objectivity of the external auditor:
ernst & Young LLp has been appointed the company’s independent
auditor from the date of the initial listing on the Aim market of the
London stock exchange in July 2013.
The committee considers the reappointment of the external Auditor,
including rotation of the audit partner.
The uK corporate Governance code recommends that the
independent audit of fTse 350 companies is put out to tender every
10 years. The committee will continue to follow the developments
around the financial Reporting council’s (‘fRc') related guidance on
tendering at the appropriate time.
in addition, the external Auditor is required to rotate the audit
partner responsible for the Group’s audit every five years.
The auditor has confirmed to the Audit committee its independence
of the Group.
The independence and objectivity of the independent auditor is
reviewed by the committee, which also reviews the terms under
which the independent auditor is appointed to perform non-audit
services, in accordance with the company’s non-audit services policy
which has been in effect since november 2015.
services which are permissible in accordance with the auditor’s
independence and other professional standards as well as the
company’s non-audit services policy, such as tax compliance,
accounting and disclosure advice, special purpose audits,
periodic reviews of financial information, and pre-acquisition
due diligence reviews, are normally permitted to be performed
by the independent auditor.
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111
OvERvIEW
STRATEGIC REvIEW
PORTFOLIO REvIEW
GOvERNANCE
FINANCIAL STATEMENTS
FINANCIAL
STATEMENTSConsolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of
Changes in Equity
Consolidated Statement of
Cash Flows
Section I: Basis of Preparation
Section II: Investment Property
Section III: Financial Results
Section IV: Financial Assets
and Liabilities
Section V: Share Capital and
Reserves
Section VI: Business Combinations
and Related Disclosures
Section VII: Other Disclosures
Independent Auditor’s Report
to the Members of Globalworth
Real Estate Investments Limited
Investing Policy
Schedule of Properties
Glossary
Company Directory
114
115
116
117
118
119
123
128
134
137
139
143
149
150
152
155
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GLOBALWORTH ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
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113
cOnsOLidATed sTATemenT Of cOmpReHensiVe incOme
fOR THe YeAR ended 31 decemBeR 2016
cOnsOLidATed sTATemenT Of finAnciAL pOsiTiOn
As AT 31 decemBeR 2016
overview
Strategic review
Portfolio review
governance
financial StatementS
Revenue
Operating expenses
Net operating income
Administrative expenses
Acquisition costs
fair value movement
Bargain purchase gain on acquisition of subsidiaries
Gain on sale of subsidiary
share-based payment expense
depreciation on other long-term assets
Other expenses
Other income
foreign exchange loss
Profit before net financing cost
Net financing cost
– finance cost
– finance income
Profit before tax
income tax expense
Profit for the year
Other comprehensive income
Attributable to equity holders of the company
Earnings per share
– Basic
– diluted
EPRA earnings per share
– Basic
– diluted
note
7
8
9
3
25
22
7
2016
€’000
68,231
(24,678)
43,553
(7,707)
(105)
6,710
–
272
(14)
(183)
(1,857)
3,111
(119)
2015
€’000
44,776
(16,406)
28,370
(10,201)
(811)
49,422
17,227
–
(125)
(174)
–
–
(249)
108
55,089
43,661
83,459
10
(32,222)
749
(21,472)
526
(31,473)
(20,946)
12,188
62,513
11
(873)
(11,092)
11,315
51,421
–
–
11,315
51,421
Cents
cents
12
12
12
12
17.57
17.56
13.34
13.33
92.01
92.01
(9.41)
(9.41)
ASSETS
Non-current assets
investment property
Goodwill
Advances for investment property
Other long-term assets
Other receivables
prepayments
Current assets
Trade and other receivables
Guarantees retained by tenants
income tax receivable
prepayments
cash and cash equivalents
investment property held for sale
Total assets
EQUITY AND LIABILITIES
Total equity
issued share capital
unissued share capital
share-based payment reserve
Retained earnings
equity attributable to equity holders of the company
Non-current liabilities
interest-bearing loans and borrowings
deferred tax liability
Guarantees retained from contractors
finance lease liabilities
deposits from tenants
Trade and other payables
Current liabilities
interest-bearing loans and borrowings
Guarantees retained from contractors
Trade and other payables
Other current financial liabilities
finance lease liabilities
deposits from tenants
income tax payable
Total equity and liabilities
nAV per share
diluted nAV per share
epRA nAV per share
note
2016
€’000
2015
€’000
3
24
5
17
17
18
25
20
21
22
15
11
16
15
16
19
13
13
13
980,892
12,349
2,454
722
1,183
1,022
937,119
12,349
3,993
661
2,193
1,020
998,622
957,335
10,807
277
411
348
221,337
–
13,114
79
583
1,638
37,036
10,353
233,180
62,803
1,231,802
1,020,138
538,114
8,584
2,139
166,557
341,784
–
2,655
155,242
715,394
499,681
375,570
70,575
33
–
2,261
2,188
261,287
70,413
957
5
1,485
3,278
450,627
337,425
38,665
2,394
20,726
3,574
4
374
44
143,024
3,277
32,275
3,935
18
428
75
65,781
183,032
1,231,802
1,020,138
Cents
cents
791
782
857
798
798
908
The financial statements were approved by the Board of directors on 3 April 2017 and were signed on its behalf by:
John Whittle
director
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115
overview
Strategic review
Portfolio review
governance
financial StatementS
cOnsOLidATed sTATemenT Of cHAnGes in eQuiTY
fOR THe YeAR ended 31 decemBeR 2016
cOnsOLidATed sTATemenT Of cAsH fLOWs
fOR THe YeAR ended 31 decemBeR 2016
equity attributable to equity holders of the company
As at 1 January 2015
shares issued for cash
Transaction costs on issue of shares
fair value of option warrants issued for executive share
scheme
shares granted to executive directors and other senior
management employees
Acquisition of minority interest
profit for the year
As at 31 December 2015
shares issued for cash
Transaction costs on issue of shares
Transaction costs on issue of shares settled in shares
Transaction costs on issue of shares to be settled in
shares
fair value of option warrants issued for executive share
scheme
shares granted to executive directors and other senior
management employees
shares issued to the executive directors and other senior
management employees
shares issued for settlement of interest-bearing liability
profit for the year
issued
share
capital
€’000
unissued
share
capital
€’000
note
288,740
53,830
(786)
–
–
–
–
341,784
20 200,000
(22,191)
20
8,584
20
–
–
–
–
–
–
–
–
–
–
–
21
22
22.2
20
20
–
–
–
3,937
6,000
–
8,584
–
–
–
–
–
share-
based
payment
reserve
€’000
180
–
–
125
Retained
earnings
€’000
103,815
–
–
Total
€’000
392,735
53,830
(786)
–
125
2,350
–
–
–
6
51,421
2,350
6
51,421
non-
controlling
interests
€’000
6
–
–
–
–
(6)
–
Total
equity
€’000
392,741
53,830
(786)
125
2,350
–
51,421
2,655 155,242 499,681
– 499,681
–
–
–
–
14
3,407
(3,937)
–
–
–
–
11,315
– 200,000
(22,191)
–
8,584
–
– 200,000
(22,191)
–
8,584
–
–
–
–
8,584
14
3,407
–
6,000
11,315
–
–
–
–
–
–
8,584
14
3,407
–
6,000
11,315
As at 31 December 2016
538,114
8,584
2,139 166,557 715,394
– 715,394
Profit before tax
Adjustments to reconcile profit before tax to net cash flows
fair value movement on investment property
Bargain purchase gain on acquisition of subsidiaries
Loss on sale of investment property
Gain on sale of subsidiaries
share-based payment expense
depreciation on other long-term assets
net movement in provision for doubtful debts
foreign exchange loss
net financing costs
Operating profit before changes in working capital
decrease in trade and other receivables
(increase)/decrease in trade and other payables
interest paid
interest received
income tax paid
Cash flows from operating activities
Investing activities
expenditure on investment property under development
payment for acquisition of subsidiaries less cash acquired
proceeds from sale of subsidiary less cash disposed
proceeds from sale of investment property
Acquisition of other long-term assets
Cash flows used in investing activities
Financing activities
proceeds from share issuance
payment of transaction costs on issue of shares
proceeds from interest-bearing loans and borrowings1
Repayment of interest-bearing loans and borrowings
payment of loan arrangement fees
payment of other financing costs
Cash flows from financing activities
Net increase in cash and cash equivalents
cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year1
1 net of the €2.9 million (2015: €6 million) cash reserve, see note 18.
note
2016
€’000
2015
€’000
12,188
62,513
3
25
22
16
25
20
(6,710)
–
1,421
(272)
14
183
(98)
119
31,473
38,318
4,174
1,364
(23,171)
22
(795)
(49,422)
(17,227)
–
–
125
174
–
249
20,881
17,293
4,148
(2,896)
(15,158)
78
(447)
19,912
3,018
(51,688)
(1,894)
11,000
3,327
(244)
(69,729)
(114,406)
–
–
(162)
(39,499)
(184,297)
200,000
(1,099)
222,703
(203,017)
(5,543)
(6,127)
53,830
(389)
155,634
(15,095)
(3,622)
–
206,917
190,358
187,330
9,079
18
18
31,036
21,957
218,366
31,036
116
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117
secTiOn i: BAsis Of pRepARATiOn
secTiOn ii: inVesTmenT pROpeRTY
overview
Strategic review
Portfolio review
governance
financial StatementS
This section contains the Group’s significant accounting policies that relate to the financial statements as a whole. significant accounting
policies and related management’s estimates, judgements and assumptions in application of those policies specific to one note are included
with that note. Accounting policies relating to non-material items are not included in these financial statements.
1. Basis of Preparation
corporate information
Globalworth Real estate investments Limited (‘the company’) is a company with liability limited by shares and incorporated in Guernsey.
The Group’s registered office address, corporate profile, principal activities and nature of its operations are set out on pages 4 and 155
of the Annual Report.
Basis of Preparation and compliance
These consolidated financial statements have been prepared in accordance with the international financial Reporting standards (‘ifRs'),
as adopted by the european union (‘eu') and in compliance with the companies (Guernsey) Law 2008, as amended.
The directors believe that it is appropriate to adopt the going concern basis in preparing the consolidated financial statements. The directors
based their assessment on the Group’s detailed cash flow projections for the period up to 30 June 2018. These projections take into account
the latest contracted rental income, anticipated additional rental income from new lease agreements to be concluded during the period
covered by the projections, as well as contracted debt financing, cApeX, and other commitments. The projections show that, in the period
up to 30 June 2018, the company has sufficient resources to continue to fund ongoing operations and asset development without the need
to raise any additional debt or equity financing or the need to reschedule existing debt facilities or other commitments.
These consolidated financial statements have been prepared on a historical cost basis, except for investment property and derivatives which are
measured at fair value. The significant accounting policies adopted are set out in the relevant notes to the financial statements and consistently
applied throughout the periods presented except for the new and amended ifRs, see note 29, which were adopted on 1 January 2016. These
consolidated financial statements are prepared in euro (‘euR' or ‘€’), rounded to the nearest thousand unless otherwise indicated, being the
functional currency and presentation currency of the company.
Basis of consolidation
These consolidated financial statements comprise the financial statements of the company and its subsidiaries (‘the Group’) at 31 december.
subsidiaries are fully consolidated (refer to note 26) from the date of acquisition, being the date on which the Group obtains control (refer to
note 26), and continue 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 31 december, 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 interests represent the portion
of profit or loss and net assets not held by the Group and are 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 equity holders of the company.
foreign currency transactions and Balances
foreign currency transactions during the year 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 the Group’s functional currency
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 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 judgement, 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.
items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in
which the entity operates. consideration in determining the functional currency is given to the denomination of the major cash flows of the entity
e.g. revenues and financing. As a consequence, the company uses the euR as the functional currency, rather than the local currency (ROn) for the
subsidiaries incorporated in Romania, 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 estimate 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 17
¡ Goodwill, see note 24
¡ investment in subsidiaries, see note 26
This section focuses on the assets in the balance sheet of the Group which form the core of the Group’s business activities. This includes
investment property and related disclosures on fair valuation inputs, advances for investment properties and commitments for future
property developments. This section quantifies the property portfolio valuations and movements for the year.
further information about each property is described in the portfolio review section on pages 64 to 99 of the Annual Report.
3. Investment Property
Policy
investment property comprises completed property, property under construction that is held to earn rentals or for capital appreciation or both,
and land bank for further development. investment properties are initially measured at cost, including transaction costs. Transaction costs include
transfer taxes and professional fees for legal services to bring the property to the condition necessary for it to be capable of operating.
After initial recognition, investment property is carried at fair value. fair value is based on valuation methods such as discounted cash flow
projections and recent market comparables adjusted, if necessary, for differences in the nature, location or condition of the specific asset.
investment property under construction is measured at fair value, if the fair value is considered to be reliably determinable. investment
properties under construction for which the fair value cannot be determined reliably, but for which the Group expects that the fair value of
the property will be reliably determinable when construction is completed, are measured at cost less impairment until the fair value becomes
reliably determinable or construction is completed – whichever is earlier.
Valuations are performed as of the statement of financial position date by professional valuers, who hold recognised and relevant professional
qualifications and have recent experience in the location and category of the investment property being valued. This value corresponds to the
price that a third-party investor would be disposed to pay in order to acquire each of the properties making up the portfolio of assets and in
order to benefit from their rental income.
Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the year in which they arise.
in order to avoid double accounting, the assessed fair value is reduced by the carrying amount of any accrued income (if any outstanding
at the statement of financial position date) resulting from the spreading of lease incentives and/or minimum lease payments.
subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future economic benefits associated
with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are
expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.
investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn
from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying
amount of the asset would result in either gains or losses at the retirement or disposal of investment property.
1 January 2015
Business acquisitions
Transfer to investment property under development
subsequent expenditure
Other operating lease commitment
capitalised borrowing costs
disposal during the year
fair value movement on investment property
Transfer to completed investment property
31 December 2015
1 January 2016
subsequent expenditure
Other operating lease commitment
capitalised borrowing costs
disposal during the year
fair value movement on investment property
Transfer to completed investment property
31 December 2016
completed
investment
property
€’000
investment
property
under
development
€’000
Land bank
for further
development
€’000
460,010
209,800
–
4,421
–
–
(1,155)
(3,675)
27,000
91,387
–
29,800
66,170
6,021
3,115
–
53,025
(27,000)
47,860
–
(29,800)
68
–
–
–
72
–
Total
€’000
599,257
209,800
–
70,659
6,021
3,115
(1,155)
49,422
–
696,401
222,518
18,200
937,119
22,908
3,371
–
(5,048)
(6,510)
180,600
19,776
(6,021)
2,073
–
13,374
(180,600)
4
–
–
–
(154)
–
42,688
(2,650)
2,073
(5,048)
6,710
–
891,722
71,120
18,050
980,892
Judgement Used in the classification of investment Property
investment property comprises completed property, property under construction 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 business then it is classified as inventory property.
3.1 other operating lease commitment
Other operating lease commitment of €3.4 million (2015: €6.0 million) as of 31 december 2016 (a similar corresponding amount was recorded in
trade and other payables as payables for tenant lease incentives, see note 16) represents the Group’s estimated net cost for undertaking
existing operating leases in properties owned by third parties, as well as for the commitment to undertake additional operating lease expense,
under certain conditions, related to one of the Group’s tenants. The net cost is estimated by deducting from the operating lease expenses the
revenues from sub-letting the respective properties to third parties selected by the Group, for the unexpired portion of their leases.
118
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secTiOn ii: inVesTmenT pROpeRTY
cOnTinued
4. Fair Value Measurement and Related Estimates and Judgements
Policy
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
¡ Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
¡ Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly
observable
¡ Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
The Group measures non-financial assets such as investment properties at fair value (recurring) at each statement of financial position date
and for financial liabilities such as interest-bearing loans and borrowings, carried at amortised cost using the effective interest rate method,
the fair value is disclosed.
for assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have
occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
investment Property measured at fair value
The Group’s investment properties were valued by cBAR Research & Valuation Advisors sRL (“coldwell Banker”), independent professionally
qualified valuers who 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 the valuations performed by the independent valuers for financial reporting
purposes. This team reports directly to the chief financial Officer (‘cfO'), the chief investment Officer (‘ciO') and the chief executive Officer
(‘ceO'). discussions of valuation processes and results are held between the cfO, ciO, ceO, the valuation team and the independent valuers
twice in a financial year.
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, 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. during the year there were no transfers between fair value hierarchy levels.
valuation techniques, Key inputs and Underlying management’s estimations and assumptions
As noted under subsection investment property Valuations of the Audit committee Report on page 109 of the Annual Report, property
valuations are inherently subjective as they are made on the basis of assumptions made by the valuer which may not prove to be accurate.
Valuation techniques comprise the discounted cash flow, the sales comparison approach and residual value method. The key assumptions
concerning 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 financial year, are described below. The Group based its
assumptions and estimates on parameters available when the consolidated financial statements were prepared. existing circumstances and
assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the
Group. such changes are reflected in the assumptions when they occur.
overview
Strategic review
Portfolio review
governance
financial StatementS
Key information about fair value measurements using significant unobservable inputs (Level 3) are disclosed below:
class of property
carrying value
2016
€’000
2015
€’000 Valuation technique
fair value
hierarchy
Range
input
2016
2015
completed investment
790,511
589,060 discounted cash flow Level 3
Rental value (sqm)
€2.77–€65
€2.77–€65
property
discount rate
exit yield
7.10%–9.70% 7.30%–9.00%
6.65%–9.20% 6.65%–8.75%
101,211
107,341 sales comparison
Level 3
sales value (sqm)
€1,192
€1,190
891,722
696,401
investment property under
development
71,120
222,518 Residual method
Level 3
Rental value (sqm)
€3.33–€17.00 €12.50–€35.00
discount rate
exit yield
capex (€m)
8.00%–9.00% 7.40%–8.50%
7.25%–8.75% 7.00%–7.25%
€53.6
€19.4
Land bank – for further
18,050
18,200 sales comparison
Level 3
sales value (sqm)
development
TOTAL
980,892
937,119
€1,819–
€1,864
€1,833–€1,872
The fair value movement on investment property recognised, as gain, in the income statement includes an amount of €6.7 million
(2015: €49.4 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 31 december 2016 and 2015, the independent valuation
experts used their market knowledge and professional judgement and did not rely solely on historical transactional comparables. 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 inputs
The assumptions on which the property Valuation Reports have been based include, but are not limited to, rental value per sqm, discount rate,
exit yield, cost to complete, comparable market transactions for land bank for further development, tenant profile 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 rental value (per sqm per annum) 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:
investment
property
– completed
– under
development
– further
development
Year
2016
2015
2016
2015
2016
2015
€0.5 change in rental value
per month, per sqm
25 bps change in market
yield
increase
€’000
26,640
21,330
decrease
€’000
increase
€’000
(26,750)
(21,320)
(19,310)
(14,150)
decrease
€’000
20,470
15,080
5% change in capex
increase
€’000
decrease
€’000
–
–
–
–
€50 (2015:€25) change in
sales prices per sqm
2.5% change in vacancy in
perpetuity
increase
€’000
2,251
1,940
decrease
€’000
increase
€’000
(2,250)
(1,937)
(15,460)
(11,730)
decrease
€’000
14,980
10,620
5,460
(5,460)
(4,290)
4,630
(3,200)
3,200
9,720
(9,520)
(8,560)
9,390
(4,439)
4,439
–
–
–
–
–
–
–
–
–
–
–
–
–
–
500
450
–
–
(3,210)
2,990
(7,160)
6,310
(480)
(530)
–
–
–
–
other Disclosures related to investment Property
interest-bearing loans and borrowings are secured on investment property, see note 15 for details. further information about individual
properties is disclosed in the portfolio Review section on pages 64 to 99 of the Annual Report.
120
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121
secTiOn ii: inVesTmenT pROpeRTY
cOnTinued
5. Advances for Investment Property
Advances for land and other property acquisitions
Advances to contractors for investment properties under development
2016
€’000
2,000
454
2,454
2015
€’000
2,000
1,993
3,993
6. Commitments
commitments for investment Property Under construction
As at 31 december 2016 the Group had agreed construction contracts with third parties and is consequently committed to future capital
expenditure in respect of investment property completed €1.0 million (2015: €nil), investment property under construction of €37.1 million
(2015: €32.0 million), and had committed with tenants to incur fit-out works of €1.1 million (2015: €1.6 million).
operating leases commitments – group as lessor
Policy
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, whether
fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if
that right is not explicitly specified in an arrangement. Leases in which the Group does not transfer substantially all the risks and benefits of
ownership of an asset are classified as operating leases; see note 7 for policies on revenue recognition for properties under operating leases
and related costs.
Judgements made for Properties Under operating leases
The Group has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks
and rewards of ownership of the investment properties leased to third parties, therefore, accounts for these leases as operating leases.
The duration of these leases is one year or more (2015: one year or more) and rentals are subject to annual upward revisions based on the
consumer price index.
The future aggregate minimum rentals receivable under non-cancellable operating leases are as follows:
not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
2016
€’000
47,335
179,354
94,156
2015
€’000
35,100
162,200
109,200
320,845
306,500
overview
Strategic review
Portfolio review
governance
financial StatementS
secTiOn iii: finAnciAL ResuLTs
This section includes the results and performance of the Group, including the net asset value and epRA net asset value. This section also
includes details of the Group’s tax credits in the year and deferred tax assets and liabilities held at the year end.
The section quantifies the financial impact of the operations for the year; further analysis on operations is described in the financial Review
section on page 38 of the Annual Report.
7. Revenue
Policy
a) rental income
Rental income is measured at the fair value of the consideration received or receivable, except for contingent rental income which is
recognised when it arises. The value of rent-free periods and all similar lease incentives is spread on a straight-line basis over the term of
the lease.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease unless another systematic basis
is more representative of the time pattern in which the benefit derived from the leased asset is diminished. if the annual lease rent increases as
a result of a price index to cover inflationary cost, then the policy is not to spread the amounts but to recognise them when the increase takes
place (applied prospectively when the right to receive it arises). The amount received from tenants to terminate non-cancellable operating
leases are recognised in the statement of profit or loss when the right to receive them arise.
b) Service charge income
income arising from service charges and expenses recoverable from tenants is recognised in the period in which the compensation becomes
receivable.
c) rendering of Services
Revenue from property and asset management fees is recognised at the time the service is provided. Revenue from rendering property
development services is recognised by reference to the stage of completion.
Rental income
service charge income
property development services
2016
€’000
46,166
14,825
7,240
68,231
2015
€’000
30,921
10,814
3,041
44,776
The total contingent rents recognised as income during the year amount to €0.1 million (2015: €0.1 million).
in order to determine if the Group is acting as principal or agent, it assesses the primary responsibility for providing the goods or services,
inventory risk, discretion in establishing prices, and who bears the credit risk. The Group has concluded that it is acting as a principal in all of
the above-mentioned revenue arrangements.
other income
it mainly refers to the execution of bank guarantee letters held from tenants under operating lease commitments.
8. Operating Expenses
Policy
a) Service costs
service costs paid, as well as those borne on behalf of the tenants, are included under direct property expenses. Reclaiming them from
tenants is presented separately under revenue.
b) works carried out on Properties
Works carried out which are the responsibility of the building’s owner and which do not add any extra functionality to, or enhance significantly,
the standard of comfort of the building are considered as current expenditure for the period and recorded in the income statement as expenses.
property management, utilities and insurance
property development services costs
property maintenance costs and other non-recoverable costs
Operating expenses analysis by revenue and non-revenue generating properties
property expenses arising from investment property that generate rental income
property expenses arising from investment property that did not generate rental income
property development services costs
2016
€’000
17,331
6,848
499
2015
€’000
14,002
2,009
395
24,678
16,406
2016
€’000
17,712
118
6,848
2015
€’000
14,057
340
2,009
24,678
16,406
122
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123
secTiOn iii: finAnciAL ResuLTs
cOnTinued
overview
Strategic review
Portfolio review
governance
financial StatementS
9. Administrative Expenses
Policy
Administrative expenses are expensed as incurred with the exception of expenditure on long-term developments, see note 3.
subsidiary acquisition costs are presented separately in the consolidated statement of comprehensive income.
unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable
that future taxable profit will allow the deferred tax asset to be recovered. deferred tax assets and deferred tax liabilities are offset, if a legally
enforceable right exists to offset current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and
the same taxation authority.
directors’ emoluments (pages 107-108 )1
salaries and wages1
Accounting, secretarial and administration costs
Legal and other advisory services
Audit and non-audit services (page 111)
corporate social responsibility costs
Travel and accommodation
marketing and advertising services
post, telecommunication and office supplies
stock exchange expenses
2016
€’000
2,056
3,048
377
261
777
357
118
217
177
319
2015
€’000
4,441
3,240
276
294
713
151
237
465
92
292
7,707
10,201
1 costs of €1 million (2015: €0.4 million) associated with the team of executive directors and other employees who worked on development projects were
capitalised in line with the progress made on the properties under development during the year. in addition, €0.5 million (2015: €nil) was capitalised as debt issue
costs and €0.4 million (2015: €nil) as transaction costs on issue of shares.
during the year, the Group contributed €0.3 million (2015: €0.2 million) and €0.1 million (2015: €0.1 million) to the mandatory Government pension fund of the
employees and key management of the Group, respectively.
10. Finance Cost
Policy
Borrowing costs associated with direct expenditure on properties under development or undergoing major refurbishment are capitalised.
Where borrowings are associated with specific developments, the amount capitalised is the gross interest less finance income (if any) incurred
on those borrowings. interest is capitalised as from the commencement of the development work until the date of practical completion.
Arrangement fees are amortised over the term of the borrowing facility. All other borrowing costs are expensed in the period in which
they occur.
interest on secured loans
interest on corporate Loan facility
debt issue cost amortisation and other finance cost
Other financial expenses
Bank charges1
2016
€’000
18,640
4,453
8,421
584
124
32,222
2015
€’000
11,551
5,609
4,045
202
65
21,472
1 prior year bank charges were classified under Administrative expenses.
11. Taxation
Policy
current income tax
current income tax is the tax payable on the taxable income for the year using tax rates applicable at the statement of financial position date.
Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the
income statement in the period in which the determination is made. Tax is included in the income statement except to the extent that it relates
to items recognised directly in equity, in which case the related tax is recognised in equity.
Deferred income tax
deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements at the income tax rate applicable at the reporting date, with the following exceptions:
¡ where the temporary difference arises from the initial recognition of goodwill, or of an asset, or liability in a transaction that is not a
business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
¡ deferred tax assets are only recognised to the extent that it is foreseeable that taxable profit will be available against which the deductible
temporary differences, carried forward tax credits or tax losses, can be utilised; and
¡ in respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary
difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
income tax expense
current income tax expense
deferred income tax expense
2016
€’000
711
162
873
2015
€’000
245
10,847
11,092
The company has obtained an exempt company status in Guernsey under the terms of the income Tax (exempt Bodies) Ordinance, 1989.
The directors intend to conduct the company’s affairs so that it remains eligible for exemption. The subsidiaries in Romania, the netherlands
and cyprus are subject to income taxes in respect of local sources of income. The income tax rate applicable to the company in Guernsey is
nil. The current income tax charge of €0.7 million (2015: €0.2 million) represents tax charges on profit arising in the subsidiaries in Romania and
cyprus (2015: Romania, the netherlands and cyprus). Tax charges on profit arising in Romania, the netherlands and cyprus are subject to
corporate income tax at the rate of 16%, 25% (20% for tax on profit up to €0.2 million), and 12.5%, respectively.
The Group’s subsidiaries registered in cyprus and the netherlands need to comply with the cyprus and netherlands tax regulations; however,
the Group does not expect any taxable income, other than dividend and interest income, which are the most significant future sources of
income of the Group companies registered in these countries. dividend income is exempt or taxed at 0% in cyprus and the netherlands,
respectively; however, interest income is subject to corporate income tax at the rate of 12.5% in cyprus and ranges from 20% to 25%,
depending on total taxable profit (20% for tax on profit up to €0.2 million), in the netherlands.
Judgements and assumptions Used in the computation of current income tax liability
uncertainties exist, particularly in Romania where the Group has significant operations, with respect to the interpretation of complex tax
regulations, changes in tax laws, and the amount and timing of future taxable income. differences arising between the actual results and
the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already
recorded. such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective
company’s domicile. in Romania, the tax position is open to further verification for five years and no subsidiary in Romania has had a corporate
income tax audit in the last five years.
reconciliation Between applicable and effective tax rate
The reconciliation between tax expense and the product of accounting profit multiplied by the company’s income tax rate for the year ended
31 december 2016 and the year ended 31 december 2015 is as follows:
profit before tax
At company’s income tax rate 0% (2015: 0%)
Effect of higher tax rates in foreign jurisdictions
Tax in Romania
– Corporate income tax
– deferred tax expenses for taxable temporary differences
Tax in cyprus
– Corporate income tax
Tax in the netherlands
– Corporate income tax
Tax expense reported in the income statement
Effective tax rate, including deferred tax expenses (%)
Effective tax rate, excluding deferred tax expenses (%)
deferred Tax Liability
Acquired under business combinations:
Recognised unused tax losses
deferred tax liability
Valuation of investment property at fair value
deductible temporary differences
discounting of tenant deposits and long-term deferred costs
share issue cost recognised in equity
Valuation of financial instruments at fair value
Recognised unused tax losses
2016
€’000
12,188
–
644
162
67
–
873
7.2%
6.0%
2015
€’000
62,513
–
202
10,847
12
31
11,092
17.7%
0.3%
consolidated statement
of financial position
consolidated statement
of comprehensive income
2016
€’000
–
–
–
77,121
(288)
311
(7)
(572)
(5,990)
2015
€’000
12,456
(50)
12,506
60,003
(467)
164
(7)
110
(1,846)
2016
€’000
2015
€’000
–
–
–
3,876
179
147
–
53
(4,093)
–
–
–
11,611
(6)
(84)
–
110
(784)
70,575
70,413
162
10,847
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cOnTinued
11. Taxation continued
in Romania, the Group has unused assessed tax losses carried forward of €73.5 million (2015: €68.3 million) that are available for offsetting
against future taxable profits of the respective entity in Romania, in which the losses arose, within seven years from the year of origination.
As of the statement of financial position date the Group had recognised deferred tax assets of €5.9 million (2015: €1.9 million) out of the total
available deferred tax assets of €11.8 million (2015: €10.9 million) calculated at the corporate income tax rate of 16%.
expiry year
fiscal year
Available deferred tax assets (€m)
2017
2010
0.7
2018
2011
0.5
2019
2012
2.0
2020
2013
2.0
2021
2014
1.5
2022
2015
3.3
2023
2016
1.8
TOTAL
11.8
There are also temporary non-deductible interest expenses and net foreign exchange losses related to intercompany loans of €11.2 million
(2015: €21.8 million). such amounts can be carried forward indefinitely, until the corresponding subsidiaries reach a debt-to-equity tax ratio
in the range from nil to 3, at which time the amount would become tax deductible, for which no deferred tax asset was recorded as well.
Judgements, estimates and assumptions Used for assessed tax losses and related Deferred tax assets
At each statement of financial position date, the Group assesses whether the realisation of future tax benefits is sufficiently probable to
recognise deferred tax assets. This assessment requires the exercise of judgement on the part of management with respect to, among other
things, benefits that could be realised from available tax strategies and future taxable income, as well as other positive and negative factors.
Based on the above assessment performed at year end, the Group recognised an additional €4.0 million (2015: €1.0 million) deferred tax asset
due to improved forecasts and transformation of some subsidiaries in Romania in taxable profit position.
The recorded amount of total deferred tax assets could be reduced if estimates of projected future taxable income and benefits from
available tax strategies are lowered, or if changes in current tax regulations are enacted that impose restrictions on the timing or extent of the
Group’s ability to utilise future tax benefits.
12. Earnings Per Share
The following table reflects the data used in the calculation of basic and diluted earnings per share and number of shares used in the basic
and diluted nAV and epRA nAV per share:
date
event
2015
October 2015
At the beginning of the year
shares issued for cash
2015
2016
shares in issue at year end (basic and diluted)
At the beginning of the year
January 2016
June 2016
October 2016
december 2016
december 2016
december 2016
shares issued for:
– the executive directors and other senior management employees
– settlement of interest-bearing liability
– the executive directors and other senior management employees
– cash
– transaction costs on issue of shares
– the executive directors and other senior management employees
2016
Shares in issue at year end (basic)
december 2016
2016
shares to be issued for transaction costs on issue of shares
Shares in issue at year end (diluted)
ifrS earnings Per Share
profit attributable to equity holders of the company for basic and diluted earnings per share
IFRS earnings per share
– Basic
– Diluted
subsequent to 31 december 2016, no shares were issued.
number of
shares issued
(‘000’)
note
53,645
8,972
62,617
62,617
407
1,000
270
25,000
1,073
30
90,397
1,073
91,470
22.2
20.1
22.2
20.2
20.2
22.2
21
% of the
period
100
25.0
93.4
56.4
22.5
3.0
3.0
2.0
3.0
Weighted
average
(‘000’)
53,645
2,243
55,888
62,617
380
564
61
753
32
1
64,408
32
64,440
2016
€’000
2015
€’000
11,315
51,421
cents
17.57
17.56
cents
92.01
92.01
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ePra earnings Per Share
The following table reflects the reconciliation between earnings as per the statement of comprehensive income and epRA earnings:
Earnings attributable to equity holders of the Company (IFRS)
fair value movement
Losses on disposal of investment properties
Tax credit relating to losses on disposals
Bargain purchase gain on acquisition of subsidiaries
changes in fair value of financial instruments and associated close-out costs
Acquisition costs
deferred tax charge in respect of above adjustments
EPRA earnings
EPRA earnings per share
– Basic
– Diluted
13. Net Asset Value (‘NAV') Per Share
nav Per Share
The following reflects the net assets used in the nAV per share computations:
net assets attributable to equity holders of the company
NAV per share
Diluted NAV per share
EPRA NAV Per Share
The following reflects the net assets used in the epRA nAV per share computations:
net assets attributable to equity holders of the company
exclude:
deferred tax liability
fair value of interest rate swap instrument
Goodwill as a result of deferred tax
EPRA NAV attributable to equity holders of the Company
EPRA NAV per share
2016
€’000
2015
€’000
11,315
51,421
(6,710)
1,657
(265)
–
1,522
105
969
(49,422)
619
(99)
(17,227)
872
811
7,768
8,593
(5,257)
cents
13.34
13.33
cents
(9.41)
(9.41)
2016
€’000
2015
€’000
715,394
499,681
Cents
cents
791
782
798
798
note
11
19
2016
€’000
2015
€’000
715,394
499,681
70,575
3,574
(5,697)
70,413
3,935
(5,697)
783,846
568,332
Cents
857
cents
908
epRA nAV includes properties and other investment interests at fair value and excludes certain items not expected to crystallise in a
long-term investment property business model.
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secTiOn iV: finAnciAL AsseTs And LiABiLiTies
This section focuses on financial instruments, together with the working capital position of the Group and financial risk management of the
risks that the Group is exposed to at year end.
14. Financial Instruments
Policy
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another
entity. financial instruments are recognised on the balance sheet when the Group becomes a party to the contractual obligations of the
instrument. The Group determines the classification of its financial assets and financial liabilities at initial recognition.
initially, financial instruments are recognised at their fair value. Transaction costs directly attributable to the acquisition or issue of financial
instruments are only recognised in determining the carrying amount, if the financial instruments are not measured at fair value through profit
or loss. subsequently, financial instruments are measured according to the category to which they are assigned.
A financial asset and a financial liability is offset and the net amount is reported in the statement of financial position if, and only if, the Group
has a legally enforceable right to offset the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle
the liability simultaneously.
financial assets
financial assets of the Group mainly include cash and cash equivalents, trade and other receivables and guarantees retained by tenants.
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when the rights
to receive cash flows from the asset have expired; or the Group has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either:
(a) the Group has transferred substantially all the risks and rewards of the asset; or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
cash and cash equivalents
cash and cash equivalents include highly liquid investments that are readily convertible into cash and which are subject to an insignificant risk
of change in value. such investment includes cash in hand and cash balances at banks and short-term bank deposits with maturity of three
months or less.
trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently at amortised cost including, where relevant and material,
an adjustment for the time value of money, less any impairment provision. A provision for impairment is established where there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables concerned.
if, in a subsequent year, the amount of the provision for impairment loss changes because of an event occurring after the impairment was
recognised, the previously recognised impairment loss is increased or reduced by recording a gain or loss in the income statement.
Trade and other receivables together with the associated provision are written off when there is no realistic prospect of future recovery and
all collateral has been realised or has been transferred to the Group. if collection is expected in more than one year, they are classified as
non-current assets.
financial liabilities
financial liabilities of the Group mainly comprise interest-bearing loans and borrowings, trade and other payables, guarantees retained from
contractors, finance lease payables, other derivative financial liabilities and tenant security deposits.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial
liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognised in the income statement.
interest-Bearing loans and Borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs, and are subsequently
measured at amortised cost using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated
future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. The calculation takes into
account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate.
Derivative financial instruments
derivatives are recognised initially, and are subsequently remeasured at fair value. derivatives are classified as assets when their fair value is
positive or as liabilities when their fair value is negative. derivative assets and liabilities arising from different transactions are offset only if
the transactions are with the same counterparty, a legal right of offset exists, and the parties intend to settle the cash flows on a net basis.
fair value movements on derivative financial instruments at fair value through profit and loss account are recognised in the statement of
comprehensive income.
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15. Interest-Bearing Loans and Borrowings
This note describes information on the material contractual terms of the Group’s interest-bearing loans and borrowings. for more information
about the Group’s exposure to market risk, currency risk and liquidity risks, see note 19.
Current
current portion of secured loans
corporate loan facility
Non-current
secured loans
2016
€’000
2015
€’000
38,665
–
42,681
100,343
38,665
143,024
375,570
261,287
414,235
404,311
Terms and conditions of outstanding loans were as follows:
secured facility
Loan 3
Loan 6
Loan 7
Loan 8
Loan 9
Loan 11
Loan 13
Loan 14
Loan 15
Loan 16
Loan 17
Loan 18
Loan 19
Loan 20
corporate Loan
Loan 21
Loan 22
Loan 23
Loan 24
Total
contract
date
nov 2013
mar 2013
Aug 2008
may 2008
may 2008
sep 2014
Jun 2015
Jun 2015
Aug 2008
mar 2010
mar 2010
Aug 2015
Jun 2015
dec 2015
Jun 2015
mar 2016
may 2016
may 2016
dec 2016
currency
nominal interest rate
maturity date
ROn
euR
euR
euR
euR
euR
euR
euR
euR
euR
ROn
ROn
euR
euR
euR
euR
euR
euR
euR
ROBOR 3m+ margin
euRiBOR 3m+ margin
euRiBOR 3m+ margin
euRiBOR 3m+ margin
euRiBOR 3m+ margin
euRiBOR 3m+ margin
euRiBOR 3m+ margin
euRiBOR 3m+ margin
euRiBOR 1m+ margin
euRiBOR 1m+ margin
ROBOR 1m+ margin
ROBOR 3m+ margin
euRiBOR 3m+ margin
euRiBOR 3m+ margin
fixed rate
euRiBOR 3m+ margin
euRiBOR 3m+ margin
fixed rate
euRiBOR 3m+ margin
feb 2016
mar 2019
dec 2016
dec 2018
dec 2018
Oct 2032
Jun 2022
Jun 2022
dec 2017
Jun 2022
Apr 2019
Aug 2018
Jul 2035
dec 2030
Jul 2016
mar 2031
nov 2026
Jun 2019
dec 2026
2016
2015
Face value
€’000
–
12,718
–
32,732
80,611
27,347
–
–
27,510
20,507
572
4,739
–
–
–
25,949
10,300
178,607
2,200
Carrying
value
€’000
–
12,187
–
32,732
80,611
26,944
–
–
27,510
20,507
572
4,739
–
–
–
25,434
10,300
170,499
2,200
face value
€’000
423
13,768
30,000
33,626
82,505
25,317
7,885
8,905
28,398
21,907
718
4,872
27,165
20,022
103,067
–
–
–
–
carrying
value
€’000
423
13,518
29,938
33,626
82,505
24,909
7,660
8,905
28,398
21,907
718
4,845
26,849
19,767
100,343
–
–
–
–
423,792
414,235
408,578
404,311
On 9 march 2016, the Group signed a c.€29.1 million long-term debt facility (Loan 21) agreement with Banca comerciala Romana (‘BcR') in
Romania (erste Bank Group) in order to refinance the existing secured loan facilities (Loans 13 and 14) related to the TAp light-industrial park in
Timisoara, and to fund the development of an extension to this property. This facility is secured on the TAp property and matures in year 2031.
On 19 may 2016, the Group signed a €10.3 million long-term debt facility (Loan 22) agreement with Garanti Bank in Romania in order to
refinance equity and to fund the remaining development costs of the Gara Herastrau office building. This facility is secured on the land and
completed building and matures in year 2026. in december 2016, the facility was supplemented with an additional €2.2 million.
The Group secured a €180 million three-year bond (the ‘matisse facility’, Loan 23). The facility was provided by matisse funding B.V. (an
orphan spV) which issued €180 million of senior secured notes to institutional investors. The proceeds of such issuance were on-lent to the
Group in order to refinance the €100 million short-term corporate level facility obtained in 2015 from funds managed by York capital and
Oak Hill Advisors and three secured debt facilities at the level of three of its Romanian subsidiaries. The matisse facility is secured on the
properties of four Romanian subsidiaries as well as the shares of their holding companies. drawdown under the facility was completed in
June 2016.
secured bank loans are secured by investment properties with a carrying value of €902.0 million at 31 december 2016 (2015: €692.0 million)
and also carry pledges on rent receivable balances of €6.1 million (2015: €3.0 million), tenant deposits of €2.6 million (2015: €1.9 million), VAT
receivable balances of €0.4 million (2015: €3.3 million) and a moveable charge on the bank accounts (see note 18).
other Disclosures
The loans are subject to certain financial covenants, which are calculated based on the individual financial statements of the respective
subsidiaries and of the Group. The Group is in compliance with all financial covenants and there were no defaults for payments during the year
2016. financial covenants mainly include the loan-to-value ratio (“LTV”) which ranges from 50% - 83% and the debt service cover ratio (‘dscR')
that ranges from 100% - 125%. LTV is calculated as the loan value divided by the market value of the relevant property (for a calculation date),
and dscR (historical and/or projected, as the case may be, for a 12-month period) is calculated as net operating income divided by the debt
service. As of 31 december 2016, the Group had undrawn borrowing facilities of €2.5 million (2015: €2.0 million).
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cOnTinued
16. Trade and Other Payables
Current
payable for property service charges
payable to suppliers for properties under development
payable for tenant lease incentives
consideration payable for business acquisition
Advances from customers
deferred income
directors’ emoluments payable
salaries and related payables
Accruals for administrative expenses
Accruals for non-recurring costs
Other taxes payable
Other short-term payables
Non-current
payable for tenant lease incentives
17. Trade and Other Receivables
Current
Rent and service charges receivable
VAT and other taxes receivable
Loan receivable from subsidiary disposed
consideration receivable from the seller
Advances to suppliers for services
Advances to directors
sundry debtors
Non-current
VAT and other taxes receivable
note
3.1
2016
€’000
1,415
7,371
1,183
–
1,161
4,553
396
418
1,129
2,806
294
–
20,726
2015
€’000
2,358
12,263
2,743
1,894
625
3,381
3,650
915
776
1,939
588
1,143
32,275
3.1
2,188
3,278
22,915
35,553
2016
€’000
6,209
3,987
–
290
211
–
110
2015
€’000
3,399
8,045
400
290
184
650
146
10,807
13,114
1,183
2,193
11,990
15,307
rent and Service charges receivable
Rent and service charges receivable are non-interest-bearing and are typically due within 30-90 days (see more information on credit risk and
currency profile in note 19). for the terms and conditions for related party receivables, see note 28.
18. Cash and Cash Equivalents
cash at bank and in hand
short-term deposits
Cash and cash equivalents as per statement of cash flows
corporate Loan - restricted cash reserve
matisse facility - restricted cash reserve
Cash and cash equivalents as per statement of financial position
note
15
2016
€’000
217,467
899
218,366
–
2,971
221,337
2015
€’000
25,778
5,258
31,036
6,000
–
37,036
details of cash and cash equivalents denominated in foreign currencies are disclosed in note 19.
short-term deposits are made for varying periods depending on the immediate cash requirements of the Group and earn interest at rates
ranging from 0.02% to 0.15% (2015: 0.05% to 0.1%) per annum. cash at bank and in hand includes restricted cash balances of €5.2 million
(2015: €12.4 million).
19. Financial Risk Management – Objective and Policies
The Group is exposed to the following risks from its use of financial instruments:
¡ market risk (including currency risk, interest rate risk);
¡ credit risk; and
¡ liquidity risk.
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market risk
market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.
The Group’s market risks arise from open positions in: (a) foreign currencies; and (b) interest-bearing assets and liabilities, to the extent that
these are exposed to general and specific market movements.
i) foreign currency risk
The Group has entities registered in several eu countries, with the majority of operating transactions arising from its activities in Romania.
Therefore, the Group is exposed to foreign exchange risk, primarily with respect to the Romanian Lei (ROn). foreign exchange risk arises in
respect of those recognised monetary financial assets and liabilities that are not in the functional currency of the Group. The Group’s exposure
to foreign currency risk was as follows (based on nominal amounts):
All amounts are presented in €’000 equivalent value
ASSETS
cash and cash equivalents
Trade and other receivables
income tax receivable
Total
LIABILITIES
interest-bearing loans and borrowings
Trade and other payables
income tax payable
deposits from tenants
Total
Net exposure
RON
2016
GBP
denominated
USD
ROn
2015
GBp
denominated
usd
19,141
11,379
214
30,734
5,311
9,386
–
1,304
16,001
14,733
18
–
–
18
–
236
–
–
236
106
–
–
106
–
–
–
–
–
(218)
106
13,561
13,757
583
27,901
5,987
15,459
1
1,094
22,541
5,360
14
–
–
14
–
994
–
–
994
80
–
–
80
–
–
–
–
–
(980)
80
Foreign Currency Sensitivity Analysis
As of the statement of financial position date, the Group is exposed to foreign exchange risk in respect of the exchange rate of the ROn, usd
and GBp. The following table details the Group’s sensitivity (impact on income statement before tax and equity) to a 5% devaluation in ROn,
usd and GBp exchange rates against the euR, on the basis that all other variables remain constant.
The 5% sensitivity rate represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity
analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the yearend for a 5%
appreciation in the euR against other currencies.
All amounts in €’000
ROn
GBp
usd
2016
2015
Profit and
(loss)
(737)
11
(5)
Equity
(737)
11
(5)
profit and
(loss)
(268)
49
(4)
equity
(268)
49
(4)
A 5% devaluation of the euR against the above currencies would have had an equal but opposite impact on the above currencies to the
amounts shown above, on the basis that all other variables remain constant.
ii) interest rate risk
interest rate price risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates relative to the
interest rate that applies to the financial instrument. interest rate cash flows risk is the risk that the interest cost will fluctuate over time.
The Group’s interest rate risk principally arises from interest-bearing loans and borrowings. As at 31 december 2016, 58.8% (2015: 75%) of
the total outstanding borrowings carried variable interest rates (including the 1m and 3m euRiBOR and 1m ROBOR as bases) which expose
the Group to cash flow interest rate risk. in order to minimise this risk, the Group hedged 14% (2015: 19%) of such variable interest rate
borrowings with fixed-variable interest rate swap and interest rate cap instruments. Based on the Group’s debt balances at 31 december 2016,
an increase or decrease of 25 basis points in the euRiBOR or ROBOR will result in an increase or decrease (net of tax) in the result for the year
of €1.0 million (2015: €0.7 million), with a corresponding impact on equity for the same amount. This analysis assumes that all other variables,
in particular foreign currency rates, remain constant.
The Group has euR denominated long-term borrowings (Loan 23) at fixed rates which constitute 41.2% (2015: 25%) of total debt portfolio. The
facility is payable in June 2019; as a consequence, the Group is exposed to fair value interest rate risk, which has been disclosed under ifRs
but will not have an impact on the income statement. As of 31 december 2016, the fair value was higher by €1.7 million than the carrying value
as disclosed below in fair value hierarchy table.
credit risk
credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group’s
policy is to trade with recognised and creditworthy third parties. The Group’s exposure is continuously monitored and spread amongst
approved counterparties.
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cOnTinued
19. Financial Risk Management – Objective and Policies continued
The Group’s maximum exposure to credit risk, by class of financial asset, is equal to their carrying values at the statement of financial
position date.
Trade receivables – net of provision
Other receivables
Guarantees retained by tenants
VAT and other taxes receivable
income tax receivable
cash and cash equivalents
2016
€’000
6,209
123
277
5,170
411
221,337
233,527
2015
€’000
3,399
757
79
10,238
583
37,036
52,092
trade receivables – net of Provision
There is no significant concentration of credit risk with respect to trade receivables, as the Group has a large number of tenants, a few of which
are part of multinational groups, internationally dispersed, as disclosed in the subsection ‘Leasing review’ on the pages 36 and 37 of the
Annual Report. for related parties it is assessed that there is no significant risk of non-recovery.
estimates and assumptions Used for impairment of trade receivables
The Group assesses when there is sufficient objective evidence to require the impairment of individual trade receivables. it does this on the
basis of the age of the relevant receivables, external evidence of the credit status of the counterparty and the status of any disputed amounts.
The movements in the provision for impairment of receivables during the respective periods were as follows:
Opening balance
provision for doubtful debts
Reversal of provision for doubtful debts
doubtful debts written off during the year
Closing balance
2016
€’000
2,542
200
(298)
(435)
2,009
2015
€’000
2,313
229
–
–
2,542
The analysis by credit quality of financial assets, cumulated for rent, service charge and property management, is as follows:
2016 (€’000)
2015 (€’000)
neither past
due nor
impaired
5,051
2,602
past due but not impaired
<90 days
<120 days
<365 days
936
228
145
554
77
15
TOTAL
6,209
3,399
The customer balances which were overdue but not provisioned are due to the fact that the related customers committed and started to pay
the outstanding balances subsequent to the year end. further deposits payable to tenants may be withheld by the Group in part or in whole if
receivables due from the tenant are not settled or in case of other breaches of contract.
other receivables
This balance relates to sundry debtors of €0.1 million (2015: €0.15 million) and consideration receivable for the seller of €0.3 million
(2015: €0.3 million). management has made due consideration of the credit risk associated with these balances resulting in no impairment
being identified.
vat and other taxes receivable
This balance relates to corporate income tax paid in advance, VAT and other taxes receivable from the Romanian tax authorities. The balances
are not considered to be subject to significant credit risk as all the amounts receivable from Government authorities are secured under
sovereign warranty.
cash and cash equivalents
The credit risk on cash and cash equivalents is very small, since the cash and cash equivalents are held at reputable banks in different
countries. The most significant part of the cash and cash equivalents balance is kept at the company level with bank having credit rating
of A-2 and in subsidiaries in Romania in local branches of reputable international banks with credit rating of BBB.
liquidity risk
The Group’s policy on liquidity is to maintain sufficient liquid resources to meet its obligations as they fall due. ultimate responsibility for
liquidity risk management rests with management. The Group manages liquidity risk by maintaining adequate cash reserves and planning
and close monitoring of cash flows. The Group expects to meet its financial liabilities through the various available liquidity sources, including
a secure rental income profile, further equity raises, undrawn committed borrowing facilities and, in the medium term, debt refinancing.
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The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments.
All amounts in €’000
Contractual payment
2016
interest-bearing loans and borrowings
Trade payables and guarantee retained from contracts
(excluding advances from customers)
Other payables
finance lease liabilities
deposits from tenants
income tax payable
Total
All amounts in €’000
2015
interest-bearing loans and borrowings
Trade payables and guarantee retained from contracts
(excluding advances from customers)
Other payables
finance lease liabilities
deposits from tenants
income tax payable
Total
Difference
from
carrying
amount
Carrying
amount
<3 months
3 months –
1 year
1-5 years
>5 years
Total
8,036
51,028
363,156
66,715
488,935
(74,700)
414,235
5,492
296
3
791
44
10,731
887
1
–
–
2,221
–
–
864
–
–
–
–
1,552
–
18,444
1,183
4
3,207
44
–
–
–
(572)
–
18,444
1,183
4
2,635
44
14,662
62,647
366,241
68,267
511,817
(75,272)
436,545
contractual payment
<3 months
3 months –
1 year
1-5 years
>5 years
Total
difference
from
carrying
amount
carrying
amount
8,891
152,517
205,175
103,320
469,903
(65,592)
404,311
15,863
743
6
164
75
11,798
3,143
14
263
–
3,278
–
4
1,450
–
–
–
–
447
–
30,939
3,886
24
2,324
75
–
–
(1)
(411)
–
30,939
3,886
23
1,913
75
25,742
167,735
209,907
103,767
507,151
(66,004)
441,147
The tables above present the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to
pay, and includes both interest and principal cash flows. As the amount of contractual undiscounted cash flows related to bank borrowings is
based on variable rather than fixed interest rates, the amount disclosed is determined by reference to the conditions existing at the year end,
that is, the actual spot interest rates effective at the end of year are used for determining the related undiscounted cash flows.
financial instruments for which fair values are Disclosed
set out below is a comparison by class of the carrying amounts and fair values of the Group’s financial instruments, other than those with
carrying amounts that are reasonable approximations of their fair values.
All amounts in €’000
interest-bearing loans and borrowings (note 15)
Other current financial liabilities
finance lease obligations
Year
2016
2015
2016
2015
2016
2015
carrying
amount
414,235
404,311
3,574
3,935
4
23
fair value hierarchy
Level 1
Level 2
Level 3
TOTAL
–
–
–
–
–
–
243,736
404,311
180,339
–
424,075
404,311
3,574
3,935
4
23
–
–
–
–
3,574
3,935
4
23
The fair value of financial liabilities is included at the amount at which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale. When determining the fair values of interest-bearing loans and borrowings and
finance lease obligations the Group used the dcf method with inputs such as discount rate that reflects the issuer’s borrowing rate as at the
statement financial position date. The own non-performance risk at the statement of financial position date was assessed to be insignificant.
other current financial liabilities
Other current financial liabilities represent the market-to-market value of an interest rate swap, obtained from the counterparty financial
institution, at €3.6 million (2015: €3.9 million) at the end of the current year. The fair value of derivative was developed in accordance with the
requirements of ifRs 13. under the terms of the swap agreement, the Group is entitled to receive a floating rate of 1m euRiBOR at a notional
amount of €22.8 million and is required to pay a fixed rate of interest of 3.62% p.a. on the said notional amount in four quarterly instalments,
with maturity date of June 2022. The movement in fair value recognised in the income statement for the year was a financial income of
€0.3 million (2015: €0.7 million).
On 31 december 2016, the Group had interest rate cap instruments valued market-to-market at €4,000 for secured loan 21 (2015: €0.15 million
for secured loans 11, 19 and 20), see note 15, under which the Group capped euRiBOR at 1.25% for 50% of the notional loan facilities. These
derivative financial instruments were fair valued (level 2) at each reporting date and any change in fair value is recognised in the consolidated
statements of income within other financial expenses. The change in the fair value during the year ended 31 december 2016 was a loss of
€0.3 million (2015: €0.2 million).
The Group assessed that the fair values of other financial assets and financial liabilities, such as trade and other receivables, guarantees retained
by tenants, cash and cash equivalents, income tax receivable and payables, trade and other payables, guarantees retained from contractors and
deposits from tenants, approximate their carrying amounts largely due to short-term maturities and low transaction costs of these instruments
as of the statement of financial position date.
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The disclosures in this section focus on the issued share capital, the share schemes in operation and the associated share-based payment
charge to profit or loss. Other mandatory disclosures, such as details of capital management, can also be found here.
20. Issued Share Capital
Policy
Ordinary shares are classified as equity. The costs of issuing or acquiring equity are recognised in equity (net of any related income tax
benefit), as a reduction of equity on the condition that these are incremental costs directly attributable to the equity transaction that
otherwise would have been avoided. The costs of an equity transaction that is abandoned are recognised as an expense. Those costs might
include registration and other regulatory fees, amounts paid to legal, accounting and other professional advisers, printing costs and
stamp duties.
Opening balance
shares issued for settlement of interest-bearing liability
shares issued to the executive directors and other senior management
employees
shares issued for cash
Transaction costs on issue of shares
Transaction costs on issue of shares settled in shares
Balance at 31 December
2016
2015
note
€’000
Number
(’000’)
€’000
341,784
62,617
288,740
20.1
6,000
1,000
–
22.2
20.2
20.2
20.2
3,937
200,000
(22,191)
8,584
707
25,000
–
1,073
–
53,830
(786)
number
(’000’)
53,645
–
–
8,972
–
overview
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financial StatementS
The following table analyses the movement in total cost outstanding at year end.
Share-based payments reserve
executive share option plan
shares granted to executive directors and other senior management employees
note
22.1
22.2
2016
€’000
319
1,820
2,139
2015
€’000
305
2,350
2,655
22.1 executive Share option Plan
under the plan, the directors of the Group were awarded share option warrants as remuneration for the services performed. The share
options granted to the directors of the Group are equity settled.
in 2013, the Group granted warrants to the founder and the directors which entitle each holder to subscribe for Ordinary shares in the
company at an exercise price of €5.00 per share if the market price of an Ordinary share, on a weighted average basis over 60 consecutive
days, exceeds a specific target price and the holder is employed on such date. The contractual term of each warrant granted is 10 years. There
are no cash settlement alternatives and the Group does not have the intention to offer cash settlement for these warrants. further details are
disclosed in the directors’ Report on the page 105 of the Annual Report.
538,114
90,397
341,784
62,617
The following table analyses the total cost of the executive share option plan (Warrants), together with the number of options outstanding.
Ordinary shares carry no right to fixed income but are entitled to dividends as declared from time to time. each Ordinary share is entitled to
one vote at meetings of the company. There is no limit on the authorised share capital of the company. The company can issue no par value
and par value shares as the shareholders see fit for the five-year period following the incorporation of the company (unless renewed, revoked
or varied by a general meeting). This authority has not been revoked by the shareholders.
under Guernsey company Law there is no distinction between distributable and non-distributable reserves, requiring instead that a company
passes a solvency test in order to be able to make distributions to shareholders. similarly, share premium for issuance of shares above their par
value per share is recognised directly under share capital and no separate share premium reserve account is recognised.
20.1 Shares issued for settlement of interest-bearing liability
On 8 June 2016, the company issued 1.0m Ordinary shares for the settlement of €6.0 million, an aggregate amount payable by the company
to lenders of a short-term corporate Level facility (‘facility’), in respect of a prepayment fee and interest payable by the company under the
facility which was prepaid in full during the year. The Ordinary shares have been issued at €6.00 per Ordinary share as the placing price at the
last fundraising by the company in september 2015, and equates to a premium of 18%. of the closing middle-market price on 8 June 2016.
The 1.0 million new Ordinary shares rank pari passu with the existing shares of the company.
20.2 Shares issued for cash
On 20 december 2016, an additional 25 million Ordinary shares were issued at €8.00 each (€200 million) following the completion of the
fundraising, which was announced on 1 december 2016. The Group recognised an amount of €22.2 million as transaction costs for the
fundraising, out of which €8.6 million was settled in 1.07 million shares issued on 20 december 2016 and €8.6 million to be settled with the
further issuance of 1.07 million Ordinary shares, see note 21. The funds raised from the subscription will be used to develop the Globalworth
campus project, pursue attractive pre-identified investment opportunities in line with the company’s investing policy and for other general
corporate purposes.
As a term of the subscription, the company issued 1.07 million Ordinary shares at €8.00 each share as initial fee shares to settle transaction
costs incurred for fundraising. The 26.07 million new Ordinary shares rank pari passu with the existing shares of the company.
21. Unissued Share Capital
As disclosed in note 20.2 under the terms of equity fundraising completed in december 2016, the company will issue, by no later than
31 december 2017 an additional 1.07 million Ordinary shares as a second tranche of fee shares to settle remaining equity settled transaction
costs in shares. The second tranche of fee shares are disclosed as dilutive shares for earnings per share and net asset value per share, see
note 12.
22. Share-Based Payment Reserve
Policy
equity-settled transactions where vesting is conditional upon a market or non-vesting condition, are treated as vesting irrespective of whether
or not the market or non-vesting condition is satisfied, provided that all service conditions are satisfied. The cost of equity-settled transactions
is recognised in income statement, together with a corresponding increase in other reserves in equity (share-based payment reserve), over the
period in which the service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each reporting date
until the vesting date reflects the extent to which the vesting period has expired. Where the share scheme has market-related performance
criteria, the Group has used a binomial option pricing model to establish the relevant fair values at grant date, taking into account the terms
and conditions.
At the beginning of the year
share scheme expense during the year
At 31 December
Weighted average remaining contractual life (years)
2016
2015
Cost
€’000
305
14
319
Number
(‘000’)
4,635
–
4,635
6.58
cost
€’000
180
125
305
number
(‘000’)
4,635
–
4,635
7.58
The fair value of the warrants was estimated at the grant date (i.e. July 2013) at €0.073 per share. There have been no cancellations or
modifications to any of the plans during the year.
22.2 Shares granted to executive Directors and other senior management employees
At the beginning of the year
shares granted to executive directors and other senior management employees
shares issued to the executive directors and other senior management employees
Closing balance
2016
€’000
2,350
3,407
(3,937)
1,820
2015
€’000
–
2,350
–
2,350
Shares issued to the Executive Directors and other senior management employees
On 25 January 2016, the company issued 0.4 million Ordinary shares (Ordinary shares of no par value) and delivered them to the executive
directors and other senior management employees from share-based payment reserve in their capacity as GiAL's preference shareholders, on
behalf of its subsidiary GiAL, in order to settle a liability of €2.35 million owed by the company to its subsidiary, related to the fees charged by
GiAL to the company pursuant to the investment Advisory Agreement concluded between the company and GiAL. The 0.4 million new shares
rank pari passu with the existing shares of the company. The Ordinary shares have been issued at €5.77 per Ordinary share, representing the
volume-weighted average market price over the 90 trading days prior to the date of allotment.
Shares granted and issued to Executive Directors and other senior management employees
On 8 April 2016, the Board approved the award of an additional fee of €3.6 million to GiAL for the services rendered to the company during the
year ended 31 december 2015, which in turn GiAL has distributed to its preference shareholders. 50% of such amount was settled in the form
of Ordinary shares in the company. in this respect on 10 October 2016 the company issued 269,927 Ordinary shares at €6.00 per share (market
price on the date of allotment was €5.13 per share), and on 22 december 2016 it issued 30,073 Ordinary shares at €6.00 per share (market price
on the date of allotment was €6.75 per share). The Ordinary shares issued rank pari passu with the existing shares of the company.
Shares granted to Executive Directors and other senior management employees
On 20 march 2017, the Board approved the award of a variable fee of €2.16 million to GiAL for the services rendered to the company during
the year ended 31 december 2016. The Board also agreed that c.€1.6 million of the total amount of €2.16 million will be settled in the form of
Ordinary shares in the company (to be issued at €8.00 per share), subject to the vesting conditions set out in the performance incentive
scheme for the investment Adviser.
in addition, the amount of c.€3.4 million includes also a c.€0.2 million performance reward to employees of subsidiaries of the Group for their
work during the year ended 31 december 2016, which will be settled with the issuance of Ordinary shares in the company. The Ordinary
shares to be issued will rank pari passu with the existing shares of the company.
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23. Capital Management
The company has no legal capital regulatory requirement. The Group’s policy is to maintain a strong equity capital base so as to maintain
investor, creditor and market confidence and to sustain the continuous development of its business. The Board considers from time to time
whether it may be appropriate to raise new capital by a further issue of shares.
The Group monitors capital primarily using a LTV ratio, which is calculated as the amount of outstanding debt divided by the open market
value of its investment property portfolio as certified by external valuers. As at 31 december 2016 the LTV ratio was 43.4% (2015: 43.9%).
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secTiOn Vi: Business cOmBinATiOns And ReLATed discLOsuRes
This section includes details about Globalworth’s subsidiaries goodwill, subsidiary disposed and related impact on the income statement and
cash flows.
24. Goodwill
Policy
Goodwill only arises upon a business combination, and is initially measured at cost, being the excess of the aggregate of the consideration
transferred and the amount recognised for non-controlling interests, and any previous interest held, after recognising the acquiree’s
identifiable assets, liabilities and contingent liabilities.
subsequently, goodwill is carried at cost and is subject to reviews for impairment at each year end or whenever there is an indication of
impairment. At the date of acquisition, goodwill is allocated to one or more cash-generating units that are expected to benefit from the
combination. The recoverable amount of a cash-generating unit, for the purpose of impairment testing, is determined using the discounted
cash flows method and is applied to the full cash-generating unit rather than each legal entity. Where the recoverable amount of the
cash-generating unit is less than their carrying amount, an impairment loss is recognised. impairment losses relating to goodwill cannot be
reversed in future periods.
Where goodwill arises as a result of deferred tax liabilities, recognised under a business combination on acquisition date, the impairment of
this goodwill is calculated according to the amounts of tax optimisation existing at the date of reporting. Where goodwill has been allocated
to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is
included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is
measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
Goodwill balance
At 31 December
2016
€’000
2015
€’000
12,349
12,349
Goodwill is allocated to the Group’s cash-generating units (‘cGus') which represented individual properties acquired under business
combinations. The goodwill balance arose from deferred tax liabilities, recognised at the acquisition date of a subsidiary (Globalworth Asset
managers sRL), and its property management activities.
Key estimates and assumptions used for goodwill impairment testing
The Group’s impairment test for goodwill is based on value-in-use calculations that use a discounted cash flow model. The cash flows are
derived from the budget for the next four years approved by management and significant future investments that will enhance the asset base
of the cash-generating unit being tested. These calculations require the use of estimates which mainly include the assumptions on the
financial performance of cGu's operations. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow
model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.
At 31 december 2016, the goodwill related to property management activity with a carrying value of €6.7 million (2015: 6.7 million) was tested
for impairment. As permitted by iAs 36 impairment of Assets, the detailed calculations of recoverable amount performed in 2015 were used
for the 2016 impairment test as the criteria in that standard were considered to be satisfied: the assets and liabilities comprising the cGu have
not changed significantly since the prior year; the previously calculated recoverable amount exceeded the carrying amount by a substantial
margin; and the likelihood that an updated calculation of the recoverable amount would be less than the cGu's, carrying amount at the time
of the test was remote.
no impairment charge arose as a result of this assessment at year end. management believes that as of 31 december 2016 no reasonable
change in the main assumptions could result in an impairment charge (31 december 2015: same)
At 31 december 2016 and 2015 respectively, the value-in-use of the property management activity was determined based on the following
main assumptions:
¡ budgets for 4 years;
¡ discount rate of 12.0% p.a.; and
¡ extrapolation in perpetuity from year 4 onwards, considering a growth rate of 1.0% p.a.
The goodwill related to deferred tax liabilities recognised on acquisition was not tested for impairment as there were no changes in the tax
circumstances of the relevant entities or other events that would indicate an impairment thereof.
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cOnTinued
25. Gain on Sale of Subsidiary
On 24 february 2016, the Group disposed of its 100% shareholding in and control of mycre investment s.A. for total consideration
of €11.3 million, in cash, and ceased to have control over this entity by transferring the title of the shares to Bakaso Holdings Limited,
being the buyer.
The following table presents the amount of the assets and liabilities in the disposed subsidiary on the disposal date, summarised by each
major category.
Assets
investment property held for sale
Trade and other receivables
cash and cash equivalents
Total assets
€’000 Liabilities
10,353 Loan payable to the Group
387 Trade and other payables
300
11,040 Total liabilities
net assets of the subsidiary on disposal date (total assets minus total liabilities per the above table)
Loan payable to the Group
Total assets disposed
disposal consideration
(Gain) on sale of subsidiary
Cash flows from the disposal:
cash received
cash balance of the subsidiary at disposal date
Net cash inflows from the disposal
€’000
8,497
12
8,509
2,531
8,497
11,028
(11,300)
(272)
11,300
(300)
11,000
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secTiOn Vii: OTHeR discLOsuRes
This section includes segmental disclosures highlighting the core areas of Globalworth’s operations in the office, residential and other
(industrial and corporate segments). There were no significant transactions between segments except for management services provided by
the offices segment to the residential and other (industrial) segments.
This section also includes the transactions with related parties, new standards and amendments, contingencies that existed at the year end
and details on significant events which occurred subsequent to the date of the financial statements.
26. Investment in Subsidiaries
Policy
The Group assesses whether it has control over a subsidiary or an investee, in order to consolidate the assets, liabilities, income and expenses
of the subsidiary or the investee in the Group’s consolidated financial statements, based on certain judgements and assumptions.
Key Judgements and assumptions used in Determining the control over an entity:
¡ power over the investee (i.e. existing rights, directly or indirectly, in the investee that give it the current ability to direct the relevant
activities of the investee). if the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant
facts and circumstances in assessing whether it has power over an investee, including the contractual arrangement with the other vote
holders of the investee, rights arising from other contractual arrangements and the Group’s voting rights and potential voting rights.
¡ exposure, or rights, to variable returns from its involvement with the investee.
¡ The ability to use its power over the investee to affect its returns (such as appointment of administrator or director in the subsidiary or investee).
details on all direct and indirect subsidiaries of the company, over which the Group has control and consolidated as of 31 december 2016 and
2015, are disclosed in the table below. There are no other subsidiaries which were not consolidated.
As of 31 december 2016, the Group held a 100% shareholding interest (31 december 2015: 100%) in the following subsidiaries, being holding
companies as principal activities.
subsidiary
Globalworth investment Advisers Limited, Globalworth finance Guernsey Limited
GWi finance B.V., Globalworth Holding B.V., GW Real estate finance B.V.
Globalworth Holdings cyprus Limited, Zaggatti Holdings Limited, Tisarra Holdings Limited, Ramoro Limited,
Vaniasa Holdings Limited, serana Holdings Limited, Kusanda Holdings Limited, Kifeni investments Limited,
casalia Holdings Limited, pieranu enterprises Limited, dunvant Holding Limited, Oystermouth Holding
Limited, saniovo Holdings Limited.
place of incorporation
Guernsey, channel islands
netherlands
cyprus
mycre investment s.A.1
1 disposed of during the year, see note 25.
As of 31 december 2016, the Group held a 100% shareholding interest (31 december 2015: 100%) in the
following subsidiaries, who own real estate assets in Romania, being asset holding companies as their
principal activities except Globalworth Building management sRL as building management.
corinthian five sRL, Tower center international sRL, upground estates sRL, BOB development sRL,
BOc Real property sRL, netron investment sRL, see exclusive development sRL, Aserat properties sRL,
corinthian Tower sRL, Bog’Art Offices sRL, Beta property development company sRL, spc Gamma property
development company sRL, Globalworth Asset managers sRL, Globalworth Building management sRL
Greece
Romania
during the year ended 31 december 2016 the following companies were incorporated, 100% owned by the
Group, as holding companies in cyprus.
Kinolta investments Limited, minory investments Limited
cyprus
27. Segmental Information
Policy
The Board of directors is of the opinion that the Group is engaged mainly in three segments of business, being offices investment property,
residential investment property and other, in one geographical area, Romania. Operating segments are reported in a manner consistent
with the internal reporting provided to the chief operating decision-makers. The chief operating decision-makers, who are responsible for
allocating resources and assessing performance of the operating segments, have been identified as the executive directors.
The Group is domiciled in Guernsey. The Group earns revenue and holds non-current assets (investment properties) in Romania only, the
geographical area of its operations.
for investment property, discrete financial information is provided on a property-by-property basis (including those under construction)
to members of executive management, which collectively comprise the executive directors of the Group. The information provided is net
Opearting income (‘nOi') (gross rental income less property expenses) and property valuation gains/losses. The individual properties are
aggregated into segments with similar economic characteristics, such as the nature of the property and the occupier market it serves.
management considers that this is best achieved by aggregating into the office, residential and other segments.
consequently, the Group is considered to have three reportable operating segments: the Offices segment (acquires, develops, leases and
manages offices and spaces), the Residential segment (builds, acquires, develops and leases apartments) and the Other segment (acquires,
develops, leases and manages industrial spaces and corporate holding offices). share-based payments expense is not allocated to individual
segments as underlying instruments are managed at Group basis.
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27. Segmental Information continued
segment assets and liabilities reported to executive management on a segmental basis are set out below:
2016
Segments
Office
€’000
Residential
€’000
Other
€’000
Inter-
segment
eliminations
€’000
Total
€’000
Office
€’000
Residential
€’000
Revenue
Operating expenses
59,725
(20,947)
2,985
(944)
6,807
(3,156)
(1,286)
369
68,231
(24,678)
37,977
(11,885)
2,855
(1,843)
2015
Other
€’000
5,779
(3,333)
inter-
segment
eliminations
€’000
Total
€’000
(1,835)
655
44,776
(16,406)
The related party transactions are set out in the table below:
name
nature of transactions/balance amounts
Asia ccf investment s.à r.l
corporate Loan facility
cdp escf investment s.à r.l.
corporate Loan facility
escf investment s.à r.l.
corporate Loan facility
Segment NOI
38,778
2,041
3,651
(917)
43,553
26,092
1,012
2,446
(1,180)
28,370
York Global finance Offshore BdH
corporate Loan facility
Administrative expenses
Acquisition costs
change in fair value of
investment property
Bargain purchase gain on
acquisition of subsidiary
depreciation on other
long-term assets
Other expenses
Other income
foreign exchange loss
finance cost
finance income
(3,529)
(14)
(599)
–
(4,478)
(91)
899
–
(7,707)
(105)
(3,434)
(811)
(1,210)
–
(6,447)
–
890
–
(10,201)
(811)
6,527
(1,277)
1,460
–
–
–
(119)
(169)
2,910
(135)
(28,153)
748
(62)
(1,688)
201
(17)
(2,644)
1
(2)
–
–
33
(1,425)
–
–
–
–
–
–
–
–
–
6,710
47,859
(437)
2,000
–
17,227
–
–
(183)
(1,857)
3,111
(119)
(32,222)
749
(108)
–
–
(169)
(18,568)
522
(66)
–
–
(10)
(2,210)
2
–
–
–
(70)
(694)
2
–
–
–
–
–
–
–
–
49,422
17,227
(174)
–
–
(249)
(21,472)
526
Segment results
16,844
(4,044)
(852)
(18)
11,930
68,610
(2,919)
(2,763)
(290)
62,638
share-based payment
expense
Gain on sale of subsidiary
–
–
–
–
(14)
272
–
–
(14)
272
–
–
–
–
(125)
–
–
–
(125)
–
Profit before tax
16,844
(4,044)
(594)
(18)
12,188
68,610
(2,919)
(2,888)
(290)
62,513
Revenues are derived from a large number of tenants and no tenant contributes more than 10% of the Group’s rental revenues for the year
ended 31 december 2016 (2015: €nil).
2016
2015
Office
€’000
Residential
€’000
Other
€’000
Inter-
segment
eliminations
€’000
Total
€’000
Office
€’000
Residential
€’000
Other
€’000
inter-
segment
eliminations
€’000
Total
€’000
844,752 101,454
52,445
(29) 998,622
804,218
108,760
44,391
(34)
957,335
1,054,626 104,831
73,975
(1,630) 1,231,802
844,212
110,246
67,140
(1,460) 1,020,138
451,205
34,857
32,015
(1,669) 516,408
458,184
37,606
26,158
(1,493)
520,455
Segments
segment non-current
assets
Total assets
Total liabilities
Additions to
non-current assets
37,691
200
4,220
–
42,111
70,982
24
8,789
–
79,795
none of the Group’s non-current assets are located in Guernsey except for goodwill (there are no employment benefit plan assets, deferred
tax assets or rights arising under insurance contracts) recognised on business combination.
28. Transactions with Related Parties
The Group’s related parties are the company’s executive and non-executive directors, as well as all companies controlled by them or under
their joint control, or under significant influence. The Group’s major shareholders are disclosed on page 105 of the director’s Report of the
Annual Report.
overview
Strategic review
Portfolio review
governance
financial StatementS
income statement
statement of
financial position
income/(expense)
Amounts owing (to)/from
2016
€’000
(994)
(1,364)
(1,867)
2015
€’000
(828)
(1,204)
(1,774)
(3,011)
(2,606)
(533)
(361)
(723)
(181)
–
1,667
(541)
(247)
(493)
(123)
–
–
2016
€’000
–
–
–
–
–
–
–
–
–
–
2015
€’000
(11,337)
(15,563)
(21,300)
(34,356)
(6,081)
(4,123)
(8,245)
(2,061)
650
–
(Luxembourg) s.à r.l.
spfc investment s.à r.l.
corporate Loan facility
indiana public Retirement system
corporate Loan facility
centre street investments s.à r.l.
corporate Loan facility
OcA OHA credit fund LLc
corporate Loan facility
mr ioannis papalekas
mr ioannis papalekas1
Advances to directors
Revenue from sale of residential completed
property
1 during the year, Globalworth Asset managers sRL completed the sale, the terms of which had been agreed in 2011, of two apartments and a few parking and
storage spaces for an amount of €2 million including VAT (€1.67 million excluding VAT).
The emoluments of the executive and non-executive directors are disclosed in the Remuneration committee Report on pages 107 – 108
of the Annual Report.
29. New and Amended Standards
starting from 1 January 2016 the Group adopted the following new and amended standards and interpretations. The new standards and
amendments had no impact on the Group’s financial position and performance.
new and amended standards and interpretations
ifRs 11 Joint arrangements (Amendment): Accounting for Acquisitions of interests in Joint Operations
iAs 16 property, plant & equipment and iAs 38 intangible Assets (Amendment): clarification of Acceptable methods of
depreciation and Amortisation
iAs 27 separate financial statements (amended)
ifRs 10, ifRs 12 and iAs 28: investment entities – Applying the consolidation exception (Amendments)
iAs 1 disclosure initiative (Amendment)
Annual improvements to ifRss 2012–2014 cycle
effective
date
Jan-16
Jan-16
Jan-16
Jan-16
Jan-16
Jan-16
standards issued but not yet effective and not early adopted by the Group are presented in the table below.
ifRs 15 does not apply to rental income, but only apply to service charge income and property development services revenues generated by
the Group. The Group does not currently anticipate that the adoption of ifRs 15 would have a material impact on the measurement of revenues
derived from the above mentioned two revenue streams, however, additional disclosures may be required to be made in the consolidated
financial statements. The Group will continue its assessment of the possible impact from the adoption of this new standard starting from
1 January 2018 and will consider any interpretation notes and guidance that may be issued in the meantime by the international Accounting
standards Board. The Group is in the process of assessing the impact of ifRs 16. for other standards issued but not yet effective and not early
adopted by the Group, the management believes that there will be no significant impact in the Group’s consolidated financial statements.
narrow scope amendments and new standards
iAs 12 income taxes (Amendments): Recognition of deferred Tax Assets for unrealised Losses
iAs 7 statement of cash flows (Amendments): disclosure initiative
ifRs 2 Amendments to ifRs 2: classification and measurement of share-based payment Transactions
ifRs 9 financial instruments: classification and measurement
ifRs 15 Revenue from contracts with customers
ifRs 16 Leases
effective
date
Jan-17
Jan-17
Jan-18
Jan-18
Jan-18
Jan-19
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29. New and Amended Standards continued
narrow scope amendments and new standards
ifRs 10 consolidated financial statements and iAs 28 investments in Associates and Joint Ventures: sale or
contribution of Assets between an investor and its Associate or Joint Venture
ifRs 14 Regulatory deferral Accounts
ifRs 15 Revenue from contracts with customers (clarifications)
ifRs 4: Applying ifRs 9 financial instruments with ifRs 4 insurance contracts (Amendments)
iAs 40: Transfers to investment property (Amendments)
ifRic 22: foreign currency Transactions and Advance consideration
Annual improvements to ifRss 2014 – 2016 cycle
effective
date
not yet announced
not yet announced
not yet announced
not yet announced
not yet announced
not yet announced
not yet announced
30. Contingencies
Policy
contingent liabilities are not recognised in the consolidated financial statements. They are disclosed unless the possibility of an outflow of
resources embodying economic benefits is remote. A contingent asset is not recognised in the consolidated financial statements but
disclosed when an inflow of economic benefits is probable.
legal claims
One of the company’s subsidiaries (the ‘subsidiary’) is involved in court proceedings with a third party. following the third party’s decision to
terminate the lease agreement signed with the subsidiary, the subsidiary enforced the c.€3.16 million bank letter of guarantee provided by the
third party, on the grounds that the third party has unlawfully terminated the agreement. The third party claimed that the subsidiary was not
entitled to enforce the guarantee and requested before the court that the subsidiary reimburses the guarantee amount. On top of the
cashed-in guarantee, the subsidiary has submitted a court claim against the third party claiming an amount of c.€24.7 million representing
penalties as per the agreement for the unlawful termination of the agreement by the third party. The presiding judge accepted the subsidiary’s
claim to merge the two claims into one court case and the next hearing will be held in April 2017. Based on the legal advice it has received,
management believes that the presiding judge will embrace its view that the subsidiary acted in accordance with the applicable law and the
remedies available to it under the agreement when enforcing the bank letter of guarantee provided by the third party.
taxation
All amounts due to state authorities for taxes have been paid or accrued at the balance sheet date. The Romanian tax system undergoes
a consolidation process and is being harmonised with the european legislation. different interpretations may exist at the level of the tax
authorities in relation to the tax legislation that may result in additional taxes and penalties payable. Where the state authorities have findings
from reviews relating to breaches of Romania’s tax laws, and related regulations these may result in: confiscation of the amounts in case;
additional tax liabilities being payable; fines and penalties (that are applied on the total outstanding amount). As a result, the fiscal penalties
resulting from breaches of the legal provisions may result in a significant amount payable to the state. The Group believes that it has paid in
due time and in full all applicable taxes, penalties and penalty interests in the applicable extent.
transfer Pricing
According to the applicable relevant Romanian tax legislation, the tax assessment of related party transactions is based on the concept of
market value for the respective transfers. following this concept, the transfer prices should be adjusted so that they reflect the market prices
that would have been set between unrelated companies acting independently (i.e. based on the “arm’s length principle”). it is likely that
transfer pricing reviews will be undertaken in the future in order to assess whether the transfer pricing policy observes the “arm’s length
principle” and therefore no distortion exists that may affect the taxable base of the Romanian tax payer.
31. Subsequent Events
date
description
21 february 2017
Signing of agreement for acquisition of subsidiary
The Group signed an agreement for the acquisition of a 100% holding and control of elgan Automotive Kft., an unlisted
holding company based in Hungary, and its subsidiary elgan Automotive sRL, an unlisted company based in Romania.
elgan Automotive sRL operates in the real estate management and development business and currently owns a modern
warehouse facility 100% leased to Automobile dacia, Romania's largest corporate, on a long-term basis. The transaction
value is c.€42.5 million. closing of the transaction is expected at the beginning of April 2017.
independenT AudiTOR’s RepORT TO THe memBeRs Of GLOBALWORTH ReAL esTATe
inVesTmenTs LimiTed
1. Our opinion on the consolidated financial statements
in our opinion Globalworth Real estate investments Limited’s (“the company”) and its subsidiaries (together the “Group”) consolidated
financial statements (the “financial statements”):
¡ give a true and fair view of the state of the Group’s affairs as at 31 december 2016 and its profit for the year then ended;
¡ have been properly prepared in accordance with international financial Reporting standards as adopted by the european union (“ifRs”);
and
¡ have been prepared in accordance with the requirements of the companies (Guernsey) Law 2008.
2. What we have audited
We have audited the Group financial statements of Globalworth Real estate investments Limited for the year ended 31 december 2016,
which comprise:
• the consolidated statement of comprehensive income for the year ended 31 december 2016;
• the consolidated statement of financial position as at 31 december 2016;
• the consolidated statement of changes in equity for the year ended 31 december 2016;
• the consolidated statement of cash flows for the year ended 31 december 2016; and
• the related notes 1 to 31.
The financial reporting framework that has been applied in their preparation is applicable law and ifRs.
3. Overview of our audit approach
Risks of material misstatement
• Valuation of investment property
• Revenue recognition
Audit scope
• We have performed an audit of the complete financial information of nine components and audit
procedures on specific balances, particularly the valuation of investment property, where we
considered the risk of material misstatement to be higher, for a further four components.
We also performed work on other specific balances for a further thirteen components.
• The reporting components where we performed audit procedures accounted for 100% of total equity
(including the parent company which was a full scope component), and 100% of the Groups’ total revenue.
materiality
• Overall materiality of €5.2 million (2015: €5.0 million) which represents 1% (2015: 1%) of total equity net of
What has changed
• Our scope of work has changed from the prior year as follows
new equity in 2016.
Business combinations
Accounting for business combinations was considered a significant risk in the prior year. There were no
significant business combination in the year so this is not considered to be a significant risk in the
current year.
management’s judgements about going concern
during the year the Group obtained significant new debt and equity financing. Accordingly we no longer
consider that there is a significant risk with respect to management’s judgements about going concern.
The audit was led by eY Guernsey. The Group audit team comprised individuals from Guernsey and Romania and we operated as an
integrated team across both jurisdictions. We engaged component teams in Romania and in cyprus. The engagement partner and senior
manager from Guernsey visited Romania to review work done there. We performed audit procedures and responded to the risks identified
as described below.
3.1. Our assessment of risk of material misstatement
We identified the risks of material misstatement described below as those that had the greatest effect on our overall audit strategy, the
allocation of resources in the audit and the direction of the efforts of the audit team. This is not a complete list of all risks or areas of focus
identified by our audit. in addressing these risks, we have performed the procedures below which were designed in the context of the financial
statements as a whole and, consequently, we do not express any opinion on these individual areas.
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Risk
Our response to the risk
Key observations
communicated to the
Audit Committee
Valuation of investment
property (€981 million;
2015 – €937 million)
The valuation of investment
property is the key driver of
the Group’s net asset value
and total return. Valuation of
investment property requires
specialist expertise and the
use of significant estimates
and judgements giving rise to
a higher risk of misstatement.
Refer to the Audit Committee
Report (page 109) and note 3
of the financial statements
(page 119)
We performed full and specific scope audit procedures over the valuation
of investment property which covered 100% thereof. specific scope
procedures were performed by component audit teams based on
instructions issued by the Group audit team. Those procedures are
described below:
We confirmed that there were
no material matters arising
from our audit work that we
wished to bring to the attention
of the Audit committee.
We confirmed that investment
property was not materially
misstated.
¡ We documented our understanding of the processes, policies and
methodologies used by management for valuing investment property
and performed walkthrough tests to confirm our understanding of the
systems and controls implemented.
¡ We agreed the valuations recorded in the consolidated financial
statements to the values reported by the company’s independent
experts (“specialists”).
¡ We agreed a sample of the significant inputs, particularly rental data, let
areas and projected capex, used by the specialists to value investment
property to contractual documentation and
development plans.
¡ We tested the arithmetical accuracy of the calculations done by
specialists for the main assumptions in the model, by reperforming
a sample of their calculations.
¡ We engaged our own internal valuation experts from Romania to:
– use their knowledge of the market to assess and corroborate the
market related judgements and valuation inputs (including discount
rates, exit yields and sales values) used by the specialists; and
– assist us in determining whether the specialists were appropriately
qualified and independent.
Recognition of rental
income (€46 million;
2015 – €31 million)
management may seek to
overstate rental income as
it is a significant metric and
indicator of the Group’s
progress giving rise to a higher
risk of misstatement.
Refer to note 7 of the financial
statements (page 123)
¡ We documented our understanding of the processes, policies and
methodologies used by management in respect of revenue recognition
and performed walkthrough tests to confirm our understanding of the
systems and controls implemented.
¡ On a sample basis we agreed rental rates to tenancy agreements and
rent received to bank statements.
¡ for a sample of tenancy agreements with lease incentives, we
recalculated the spreading of the incentives over the period of the
contract by reference to the terms of the agreements and we assessed
the appropriateness of the accounting treatment by reference to the
requirements of ifRs.
We confirmed that there were
no matters identified during
our audit work on revenue
recognition that we wished to
bring to the attention of the
Audit committee.
We confirmed that revenue
from rental income was
recognised in accordance
with ifRs.
4. Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements on our audit and
on the financial statements. for the purposes of determining whether the financial statements are free from material misstatement we define
materiality as the magnitude of misstatement that makes it probable that the economic decisions of a reasonably knowledgeable person,
relying on the financial statements, would be changed or influenced.
4.1. materiality
This is the magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our
audit procedures.
We determined planning materiality for the Group to be €5.2 million (2015: €5.0 million), which is 1% of total equity less equity raised in
december 2016 of €200 million, net of transaction costs of issuing shares (2015: 1% of equity). This provided a basis for determining the nature,
timing and extent of risk assessment procedures, identifying and assessing the risk of material misstatement and determining the nature,
timing and extent of further audit procedures.
it was considered inappropriate to determine materiality based on the Group’s profit before tax as the primary performance measures of the
Group for internal and external reporting are based on equity.
We believe that total equity provides us with an appropriate basis for audit materiality as it is a key published performance measure and is a
key metric used by management in assessing and reporting on overall performance.
during the course of our audit, we reassessed initial materiality and noted no matters leading us to amend materiality levels from those
originally determined at the audit planning stage.
4.2. Performance materiality
This refers to the application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately
low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that
performance materiality was 50% (2015: 50%) of our planning materiality, namely €2.6 million (2015: €2.5 million). Our objective in adopting
this approach was to ensure that total uncorrected and undetected audit differences in the financial statements did not exceed our
materiality level.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken
based on a percentage of total performance materiality. for the Group audit, the performance materiality set for each component is based on
the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. in the
current year, the range of performance materiality allocated to components was €0.52 million to €1.7 million (2015: €0.4 million to €1.2 million).
This is set out in more detail in section 5 below.
4.3. reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit committee that we would report to them all uncorrected audit differences in excess of €260,000 (2015: €250,000),
which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on
qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.
5. Scope of the audit of the Financial Statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.
in addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited
financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the audit. if we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
5.1. tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each
entity within the Group. Taken together, this enables us to form an opinion on the Group financial statements. The factors that we considered
when assessing the scope of the Group audit and the level of work to be performed at each location included the following: the financial
significance and specific risks of the location; the size of the component in relation to Group total equity; the organisation of the Group and
effectiveness of the control environment, including group-wide controls; and changes in the business environment.
Of the 30 components selected, which includes the parent company, we performed an audit of the complete financial information of nine
components (“full scope component”) which were selected based on their size and risk characteristics. for the remaining twenty-one
components (“specific scope components”), we performed specific audit procedures on specific accounts within that component that we
considered had the potential for the greatest impact on the significant accounts in the financial statements either because of the size of the
accounts or their risk profile. for those specific accounts selected, as part of our specific scope components, the extent of our audit work on
those accounts was the same as that for a full scope audit.
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inVesTmenTs LimiTed cOnTinued
The components selected, in addition to the parent company, which is a full scope component, together with the allocated performance
materiality, were as follows:
Component Name
Globalworth Asset managers sRL
BOc Real property sRL
upground estates sRL
Tower center international sRL
corinthian five sRL
corinthian Tower sRL
Bog’art Offices sRL
spc Beta property development company
sRL
spc Gamma property development company
sRL
Location
Romania
Romania
Romania
Romania
Investment type
Scope
Performance
materiality €
Asset manager / completed investment
property / investment property under
development
full scope
1,300,000
completed investment property
full scope
1,430,000
completed investment property
completed investment property
full scope
full scope
1,170,000
1,170,000
Romania
investment property under development
full scope
1,690,000
Romania
Romania
Romania
completed investment property
completed investment property
completed investment property
full scope
full scope
full scope
1,170,000
1,170,000
780,000
Romania
completed investment property
full scope
780,000
BOB development sRL
see exclusive development sRL
Romania
Romania
completed investment property
specific scope (1)
1,170,000
completed investment property /
investment property under development
specific scope (2)
780,000
netron investment sRL
Aserat properties sRL
Globalworth Building management sRL
Globalworth Holdings cyprus Limited
pieranu enterprises Ltd
Tisarra Holding Limited
Ramoro Ltd
Oystermouth Holding Limited
dunvant Holding Limited
Zaggatti Holdings Limited
casalia Holdings Limited
Kifeni Holdings Limited
serana Holdings Limited
Vaniasa Holdings Limited
saniovo Holding Limited
Kusanda Holdings Limited
minory investments Limited
Kinolta investments Limited
Romania
investment property under development
specific scope (3)
Romania
Romania
Land bank for further development
specific scope (4)
Building management services
specific scope (5)
cyprus
cyprus
cyprus
cyprus
cyprus
cyprus
cyprus
cyprus
cyprus
cyprus
cyprus
cyprus
cyprus
cyprus
cyprus
Holding entity
specific scope (5)
Holding entity
specific scope (5)
Holding entity
specific scope (5)
Holding entity
specific scope (5)
Holding entity
specific scope (5)
Holding entity
specific scope (5)
Holding entity
specific scope (5)
Holding entity
specific scope (5)
Holding entity
specific scope (5)
Holding entity
specific scope (5)
Holding entity
specific scope (5)
Holding entity
specific scope (5)
Holding entity
specific scope (5)
Holding entity
specific scope (5)
Holding entity
specific scope (5)
780,000
520,000
520,000
520,000
520,000
520,000
520,000
520,000
520,000
520,000
520,000
520,000
520,000
520,000
520,000
520,000
520,000
520,000
1
2
investment property, rental and service charge income, cash, bank loans & interest expense, commitments and contingent liabilities and taxation (including
deferred taxation)
investment property, rental and service charge income, cash, accounts payable, bank loans & interest expense, commitments and contingent liabilities and
taxation (including deferred taxation)
investment property, cash, accounts payables, commitments and contingent liabilities and taxation (including deferred taxation and VAT receivable)
investment property, cash, commitments and contingent liabilities and taxation (including deferred taxation)
3
4
5 Taxation and contingent liabilities.
The remaining components together represent below 1% of the total equity and none are individually greater than 2% of the Group’s total
equity. for these components we only performed analytical procedures (and certain audit procedures as applicable) as there were no risks
identified that could indicate the group financial statements might be materially misstated.
5.2. involvement with component teams
Team structure
The overall audit strategy is determined by the opinion signatory who is based in Guernsey. since the group’s operations are principally in
Romania, the audit team includes eY teams from Romania. The Group audit team visited Romania during the current year and prior year
audits. Whilst in Romania we focused our time on the significant risks and judgemental areas of the audit. in addition, eY cyprus was involved
for the components in cyprus with assigned specific scope.
Involvement with component teams
in establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of the
components by the Group audit team, or by the component team operating under our instruction. for the specific scope components,
where the work was performed by component auditors, we determined the appropriate level of involvement to enable us to be satisfied that
sufficient audit evidence had been obtained as a basis for our opinion on the Group as a whole. The Group audit team, assisted by our internal
valuation specialists in Romania, performed procedures on the valuations of investment properties.
The Group audit team also participated in key discussions, via conference calls with all full and specific scope locations. The Group audit team
interacted regularly with the component teams where appropriate during various stages of the audit, reviewed key working papers and were
responsible for the scope and direction of the audit process. This, together with the additional procedures performed at group level, gave us
appropriate audit evidence for our opinion on the Group financial statements.
6. Respective responsibilities of Directors and auditor
As explained more fully in the directors’ Responsibilities statement set out on page 106, the directors are responsible for the preparation of
the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion
on the financial statements in accordance with applicable law and international standards on Auditing (uK and ireland). Those standards
require us to comply with the Auditing practices Board’s ethical standards for Auditors.
This report is made solely to the company’s members, as a body, in accordance with section 262 of the companies (Guernsey) Law 2008.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
7. Matters on which we are required to report by exception
ISAs (UK and Ireland)
reporting
We are required to report to you if, in our opinion, financial and non-financial
information in the annual report is:
¡ materially inconsistent with the information in the audited financial
We have no exceptions
to report.
statements; or
¡ apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the company acquired in the course of performing our audit; or
¡ otherwise misleading.
in particular, we are required to report whether we have identified any
inconsistencies between our knowledge acquired in the course of performing
the audit and the directors’ statement that they consider the annual report and
accounts taken as a whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess the entity’s performance,
business model and strategy; and whether the annual report appropriately
addresses those matters that we communicated to the audit committee that we
consider should have been disclosed.
Companies (Guernsey)
Law 2008 reporting
We are required to report to you if, in our opinion:
¡ proper accounting records have not been kept; or
¡ the financial statements are not in agreement with the accounting records; or
¡ we have not received all the information and explanations we require for
We have no exceptions
to report.
our audit.
The reporting components where we performed audit procedures accounted for 100% (2015: 98%) of the Group’s total equity (including the
parent company which was a full scope component), and 100% (2015: 99%) of the Group’s total revenue. for the current year, the full scope
components contributed 80% (2015: 77%) of the Group’s total equity and 82% (2015: 79%) of the Group’s total revenue. The specific scope
components contributed 20% (2015: 21%) of the Group’s total equity and 18% (2015: 21%) of the Group’s total revenue.
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147
independenT AudiTOR’s RepORT TO THe memBeRs Of GLOBALWORTH ReAL esTATe
inVesTmenTs LimiTed cOnTinued
inVesTinG pOLicY
8. Statement on the Directors’ Assessment of the Principal Risks that Would Threaten the Solvency or Liquidity
of the Entity
ISAs (UK and Ireland)
reporting
Ernst & Young LLP
Guernsey
3 April 2017
We have nothing material to
add or to draw attention to.
We are required to give a statement as to whether we have anything material to
add or to draw attention to in relation to:
¡ the directors’ confirmation in the Annual Report that they have carried out a
robust assessment of the principal risks facing the entity, including those that
would threaten its business model, future performance, solvency or liquidity;
¡ the disclosures in the annual report that describe those risks and explain how
they are being managed or mitigated;
¡ the directors’ statement in the financial statements about whether they
considered it appropriate to adopt the going concern basis of accounting in
preparing them, and their identification of any material uncertainties to the
entity’s ability to continue to do so over a period of at least twelve months
from the date of approval of the financial statements; and
¡ the directors’ explanation in the annual report as to how they have assessed
the prospects of the entity, over what period they have done so and why they
consider that period to be appropriate, and their statement as to whether
they have a reasonable expectation that the entity will be able to continue in
operation and meet its liabilities as they fall due over the period of their
assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
notes:
1. The maintenance and integrity of the Globalworth Real estate investments Limited web site is the responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they
were initially presented on the web site.
2. Legislation in Guernsey governing the preparation and dissemination of group financial statements may differ from legislation in other jurisdictions.
Investing strategy
The company’s primary focus is to invest in a diversified portfolio of
real estate opportunities situated in Romania and the wider south
and central eastern european regions. The directors believe its
primary market of investment represents an attractive real estate
investment proposition over the medium to long term.
By investing in income-generating properties, asset repositioning
and development opportunities, and seeking to derive most of its
income from multinational corporate groups and institutional
financial tenants on long, triple net leases, the company intends
to provide investors with an attractive, risk-adjusted combination
of yield and capital appreciation.
Globalworth is internally managed, with all investment advisory and
portfolio management services exclusively provided by Globalworth
investment Advisers Ltd (‘GiAL'), a wholly owned subsidiary of the
company. Asset management services to the company’s real estate
portfolio are provided by Globalworth Asset managers (‘GAm'),
another wholly owned subsidiary of Globalworth, which employs a
team of 53 professionals.
Assets or companies in which the Company can invest
investments made by the company may take the form of, but
are not limited to, single real estate assets, real estate portfolios
and companies, joint ventures, loan portfolios and equity and
debt instruments.
Strategy through which the investing policy is achieved
The company’s strategy is to focus on acquiring underperforming
or undervalued properties (due to financial distress, mismanagement
or otherwise) and, through active asset management, to transform
these into performing and marketable assets. most of the current
or expected income from these assets is derived from multinational
corporate groups and institutional financial tenants on long, triple
net and annually indexed leases.
Investment approach
The company assumes a proactive approach to every real estate
investment in the company’s portfolio and pursues various asset
management initiatives according to the most appropriate business
plan for each investment. These initiatives may include: repositioning
of existing assets (including re-letting, refurbishment or
redevelopment); development of new assets, corporate restructuring
and reorganisation; portfolio break-ups (for example, ‘wholesale’ to
‘retail’ trades); and optimising capital structure.
Holding period for investments
The typical holding period for any investment is expected to be five
to seven years. The decision to exit a particular investment will be
taken by the company’s Board of directors (‘the Board’) following
the recommendation of the investment Adviser, and may be less or
greater than the expected holding period. such a decision may result
from a variety of factors, including the need to optimise the risk/
return of the investment, responding to asset or market dynamics,
or taking advantage of an unsolicited enquiry, but always with a view
to ensuring that returns to shareholders are maximised.
Gearing and cross holdings policies
The company is permitted, directly or indirectly, to borrow for
working capital, investment and any other purpose. debt financing
is expected to be an important component of the structuring and
execution of the company’s investments, to improve returns for both
developmental and income-generating assets. Borrowings may be
undertaken by the company itself or by any of its subsidiaries or
project companies. The amount of leverage employed in respect
of an investment is dependent on the nature of the opportunity,
however, it is expected that the maximum loan-to-value for the
Group will not exceed 60%.
Hedging instruments
in connection with third-party debt, the company may enter into
one or a series of interest rate hedging products (including, among
others, swaps, caps, collars or options) to protect the returns of
the relevant investment against adverse interest rate fluctuations.
Although it is anticipated that all rentals and debt finance will be in
euro, the company may also enter into one or a series of currency
hedging instruments (including, among others, swaps, caps, collars
or options) to protect the returns of the relevant investment against
adverse currency fluctuations.
Investing restrictions
unless the Board (at its absolute discretion) approves otherwise, the
company will not acquire or invest in commercial properties which
do not satisfy the minimum pre-letting commitment targets and will
not acquire any asset where any such acquisition would result in more
than 50% of the company’s net asset value (at the time of investment)
being attributable to assets located outside Romania. The
company’s minimum pre-letting commitment is as follows:
¡ for any logistics or warehouse property, pre-letting commitments
for a minimum of 60% of the gross leasable area of such property;
and
¡ for any other commercial property, pre-letting commitments for
minimum of 50% of the gross leasable area of such property.
These above restrictions will not preclude the company making
investments in short-dated cash or near-cash equivalent securities,
which form part of its cash management practices.
Nature of returns that the Company seeks to deliver
to Shareholders
To support shareholder dividends, the directors anticipate that a
sustainable cash flow will be generated through stable and recurring
rental income, increased where appropriate through active asset
management. The determination as to whether or not to reinvest
some of the proceeds of the disposal of an asset, and the declaration
of dividends, is at the absolute discretion of the Board. it is intended
that not less than 90% of the company’s funds from operations will
be distributed to shareholders of the company on a semi-annual
basis, subject to solvency or other legal requirements.
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149
scHeduLe Of pROpeRTies
property name
Location
Address
Year of
completion
Acquisition
date
Ownership
%
office Standing
BOB
BOc
Bucharest
6A dimitrie pompeiu Blvd, district 2
Bucharest
3 George constantinescu st., district 2
city Offices
Bucharest
2 – 4A Oltenitei street., district 4
Tci
Bucharest
15-17 ion mihalache Blvd, district 1
unicredit HQ
Bucharest
1f expozitiei Blvd, district 1
Globalworth plaza1
Bucharest
42 pipera Road, district 2
Green court A
Bucharest
4 Gara Herastrau, district 2
Green court B
Bucharest
4 Gara Herastrau, district 2
Globalworth Tower
Bucharest
201 Barbu Vacarescu street, district 2
Gara Herastrau
Bucharest
4B Gara Herastrau street, district 2
2008
2009
2014
2012
2012
2010
2014
2015
Q1 2016
Q2 2016
Q1, 2014
Q1, 2014
Q3, 2013
Q1, 2014
Q1, 2015
Q1, 2015
Q2, 2015
Q4, 2015
Q3, 2013
Q2, 2014
100
100
100
100
100
100
100
100
100
100
office Development
Globalworth campus2 Bucharest
4-6 dimitrie pompeiu Blvd, district 2
2017e/2018e
Q1, 2014
100
industrial
completed
TAp – completed3
Timisoara
Lipovei Way, Giarmata, Timis
2011 & 2015
Q3, 2014
development
TAp – (development)3 Timisoara
Lipovei Way, Giarmata, Timis
2017e
Q3, 2014
100
100
retail/residential
upground Towers
Bucharest
9B fabrica de Glucoza street, district 2
2011
Q1, 2014
100
land bank – for further development
Luterana
Bucharest
7-13 Luterana street, district 1
Herastrau One
Bucharest
48-50 soseaua nordului, district 1
–
–
Q4, 2014
Q3, 2013
100
100
note: All data as of 31 december 2016
1 Globalworth plaza, was previously referred to as nusco Tower
2 phase A is under construction (GLA: c.57k sqm) with expected completion dates for
Towers i and ii in 2017 and 2018 respectively. phase B expected to commence in 2018.
includes all extension options available to tenants. currently two facilities with total GLA of 25.5k sqm,
100% leased to Valeo and Litens are under construction and are expected to be completed in 2017.
3
4 Retail units in the property
5 Residential units available in the property
GLA
m²
Standing
22,391
56,962
35,968
22,453
15,500
24,020
19,589
18,369
54,686
12,037
281,975
Development
88,650
88,650
industrial
81,349
50,000
131,349
commercial/
residential
56,662
56,662
land bank –
for further
development
–
–
–
558,905
Occupancy4
contracted rent
WALL
years
“As is” valuation
€’000
“completion” valuation
€’000
97.3
97.2
21.8
99.7
100.0
29.7
100.0
100.0
83.2
68.9
78.7
–
–
97.3
100.0
98.3
99.3/47.8
99.3/47.8
–
–
–
3.6
9.6
1.4
5.0
3.8
1.3
3.4
3.5
9.6
1.4
42.6
–
–
3.5
1.9
5.4
2.4
2.4
–
–
–
5.5
5.8
4.5
4.1
5.4
4.7
5.3
4.2
8.8
6.3
–
11.1
11.0
7.44/1.95
7.4/1.9
–
–
50,250
143,700
62,000
76,700
52,500
56,500
51,300
53,200
162,500
28,800
737,450
70,430
70,430
50,250
143,700
62,000
76,700
52,500
56,500
51,300
53,200
162,500
28,800
737,450
170,900
170,900
42,869
42,869
7,511
50,380
101,211
101,211
12,300
5,750
18,050
977,521
21,911
64,780
101,211
101,211
12,300
5,750
18,050
1,092,391
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151
GLOssARY
Accounting Return
The growth in epRA nAV plus dividend paid which can be expressed
as a percentage of epRA nAV per share at the beginning of the period.
EBITDA
earnings before finance cost, tax, depreciation, amortisation of other
non-current assets and purchase gain on acquisition of subsidiaries.
AIC
The Association of investment companies.
Bargain Purchase Gain
Any excess between the fair value of net assets acquired and
consideration paid, in accordance with ifRs 3 Business combination.
BREEAM
Building Research establishment Assessment method, which
assesses the sustainability of the buildings against a range of criteria.
CAPEX
Represents the estimated capital expenditure to be incurred for the
completion of the development projects.
Capitalisation Rates
Based on actual location, size and quality of the properties and
taking into account market data at the valuation date.
CBD
central Business district
CEE
central and eastern europe
Commercial Properties
comprises the office, light-industrial and retail properties or areas of
the portfolio.
Completed Investment Property
completed developments consist of those properties that are in a
condition which will allow the generation of cash flows from its rental.
Completion Dates
The date when the properties under development will be completed
and ready to generate rental income after obtaining all necessary
permits and approvals.
Costs to Complete
it represents additional costs to complete the property
under development.
Debt Service Cover Ratio (DSCR)
it is calculated as net operating income for the year as defined in
specific loan agreements with the respective lenders, divided by the
principal plus interest due over the same year.
Discount Rates
The discount rate is the interest rate used to discount a stream of
future cash flows to their present value.
Discounted Cash Flow Analysis (DCF)
Valuation method that implies income projections of the property
for a discrete period of time, usually between 5-10 years. The dcf
method involves the projection of a series of periodic cash flows
either to an operating property or a development property.
discounted cash flow projections based on significant unobservable
inputs taking into account the costs to complete and
completion date.
Earnings Per Share (EPS)
profit after tax divided by the basic/diluted weighted average
number of shares in issue during the year.
EBITDA (normalised)
earnings before interest, depreciation, bargain purchase gain, fair
value movement and other non-operational and/or non-recurring
income and expense items.
EPRA
The european public Real estate Association is a non-profit
association representing europe’s publicly listed property companies.
EPRA Earnings
profit after tax attributable to the equity holders of the company,
excluding investment property revaluation, gains, losses on
investment property disposals and related tax adjustment for losses
on disposals, bargain purchase gain on acquisition of subsidiaries,
acquisition costs, changes in the fair value of financial instruments
and associated close-out costs and the related deferred tax impact
of adjustments made to profit after tax.
EPRA Earnings Per Share
epRA earnings divided by the basic or diluted number of shares
outstanding at the year or period end.
EPRA NAV Per Share
epRA nAV divided by the basic/diluted number of shares
outstanding at the year or period end.
EPRA Net Assets (EPRA NAV)
net assets per the statement of financial position, excluding the
mark-to-market on effective cash flow hedges and related debt
adjustments and deferred taxation on revaluations excluding goodwill.
Estimated Rental Value (ERV)
eRV is the external valuers’ opinion as to the open market rent which,
on the date of valuations, could reasonably be expected to be
obtained on a new letting or rent review of a property.
Estimated Vacancy Rates
Represent vacancy rates computed based on current and expected
future market conditions after expiry of any current lease.
EURIBOR
The euro interbank Offered Rate: the interest rate charged by one
bank to another for lending money, often used as a reference rate in
bank facilities.
Financial Year
period from 1 January to 31 december.
FFO
free funds from operations, estimated as the epRA earnings for the
relevant period.
Future Rental Cash Inflows
future rental cash inflows computed based on the actual location,
type and quality of the properties and supported by the terms of any
existing lease, other contracts or external evidence such as current
market rents for similar properties.
GLA
Gross leasable area.
IFRS
international financial Reporting standards as adopted by the
european union.
Income Capitalisation Method
Valuation method that takes into consideration the income that a
property is expected to generate if leased out assuming a stabilised
occupancy level, and applying to that income a capitalisation rate
reflecting the investors’ interest in a property of this kind.
Property Under Development
properties in the development process that do not meet all the
requirements to be transferred to completed investment property.
Property Under Refurbishment
properties in the process of being refurbished and do not meet all
the requirements to be transferred to completed
investment property.
IPO
Admission to the Aim market of the London stock exchange.
Land Bank for Further Development
Land bought for further development but for which the Group did
not obtain all the legal documentations and authorisation permits
in order to start the development process.
LEED
Leadership in energy & environmental design, a green building
certification programme that recognises best-in-class building
strategies and practices.
Like-for-like Property Value (LTLV)
LTLV is the change in fair value over a period of one year on the
standing and underdevelopment investment properties.
Portfolio Open Market Value (OMV)
portfolio open market value means the fair value of the Group’s
investment properties determined by cBAR Research & Valuation
Advisors sRL (coldwell Banker), independent professionally qualified
valuers who hold a recognised relevant professional qualification
and have recent experience in the locations and segments of the
investment properties valued, using recognised valuation techniques.
Property Valuation “As Is”
Represents the appraised value for standing and operational
properties (owned and announced), properties under development
and land, performed by coldwell Banker as of financial position date.
Property Valuation on “Completion”
Represents the appraised value for standing and operational
properties (owned and announced), properties under development
and land, performed by coldwell Banker as of financial position date,
assuming that the properties under development were completed
as of the date of valuation. The estimated appraised values on
completion are subject to risks and uncertainties that could cause
actual outcomes to differ materially from those expressed or implied
by the relevant statements; they are not guarantees of future
performance and there can be no assurance that these estimated
values on completion can or will be achieved.
Residual Value Method
Valuation method that estimated the difference between the market
value of the building upon completion that can be built on the plot of
land and all the building’s construction costs, as well as the
developer’s profit. This method relies on the contribution concept by
estimating from the future income of the building, the amount that
can be distributed to the land.
Loan to Value (LTV)
calculated as the total outstanding debt excluding amortised cost
as of financial position date divided by the appraised value of owned
assets as of financial position date.
Sales Comparison Approach
Valuation method that compares the subject property with quoted
prices of similar properties in the same or similar location.
Maintenance Costs
including necessary investments to maintain functionality of the
property for its expected useful life.
SEE
south-eastern europe, in alphabetical order, Albania, Bosnia and
Herzegovina, Bulgaria, croatia, cyprus, Greece, Kosovo, moldova,
f.Y.R. macedonia, montenegro, Romania, serbia, slovenia and Turkey.
Net Assets Value (NAV)
equity attributable to equity holders of the company and/or net
assets value.
SPA
share sale purchase agreement.
Net Asset Value (NAV) Per Share
equity attributable to equity holders of the company divided by the
number of Ordinary shares in issue at the period end.
SQM
square metres.
Net Operating Income (NOI)
net operating income (being the gross operating income less
operating expenses that are not paid by or rechargeable to tenants,
excluding funding costs, depreciation and capital expenditure).
Non-Controlling Interest (NCI)
The equity in a subsidiary not attributable, directly or indirectly,
to the parent.
Occupancy Rate
The estimated rental value of let sqm as a percentage of the total
estimated rental value of the portfolio, excluding development
properties. it includes spaces under offer or subject to asset
management (where they have been taken back for refurbishment
and are not available to let as of financial position date).
Passing Rent
it is the gross rent, less any ground rent payable under the
head leases.
Stabilised Vacancy
it represents the reasonably estimated vacancy rate registered
by the building with the proper marketing, management and
maintenance conditions.
Terminal Value
The value of an asset at a specified, future valuation date, taking into
account factors such as discount rates and the current value of the
asset, and assuming a stable growth rate. Terminal value refers to the
value of an entire property at a specified future valuation date. The
common approach used to evaluate the terminal value of an asset is
the “exit approach”.
The Company or the Group
Globalworth Real estate investments Limited and its subsidiaries.
The Investment Adviser
Globalworth investment Advisers Limited, a wholly owned holding
subsidiary incorporated in Guernsey.
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153
GLOssARY
cOnTinued
The Asset Manager
Globalworth Asset managers sRL, an Asset Holding and Asset
manager wholly owned subsidiary incorporated in Romania.
WALL
Represents the remaining weighted average lease length of the
contracted leases as of the financial position date, until the lease
contracts full expiration.
Weighted Average Interest Rate
The average of the interest rate charged on the Group’s loans,
weighted by the relative outstanding balance of each loan at the year
or period end.
cOmpAnY diRecTORY
Registered Office
Ground floor
dorey court
Admiral park
st peter port
Guernsey
GY1 2HT
Nominated Adviser and Joint Broker
panmure Gordon (uK) Limited
One new change
London
ec4m 9Af
united Kingdom
Investment Adviser*
Globalworth investment Advisers Limited
Ground floor
dorey court
Admiral park
st peter port
Guernsey
GY1 2HT
Auditors
ernst & Young LLp
Royal chambers
st. Julians Avenue
st. peter port
Guernsey
GY1 4Af
Registrar
capita Registrars (Guernsey) Limited
mont crevalt House
Bulwer Avenue
st. sampson
Guernsey
GY2 4LH
Public Relations
milbourne
1 Ropemaker street
London
ec2Y 9AW
united Kingdom
* Wholly owned subsidiaries of the company
Administrator and Company Secretary
JTc (Guernsey) Limited
pO Box 156
Ground floor
dorey court
Admiral park
st peter port
Guernsey
GY1 4eu
Joint Broker
cantor fitzgerald europe
One churchill place
canary Wharf
London e14 5RB
Asset Manager*
Globalworth Tower
26th floor
201 Barbu Vacarescu Boulevard
2nd district
Bucharest 020276
Romania
Legal Advisers – English Law
sidley Austin LLp
Woolgate exchange
25 Basinghall street
London
ec2V 5HA
united Kingdom
skadden, Arps, slate, meagher & flom (uK) LLp
40 Bank street
canary Wharf
London
e14 5ds
united Kingdom
Advocates – Guernsey Law
carey Olsen
pO Box 98
carey House
Les Banques
st. peter port
Guernsey
GY1 4BZ
Legal Adviser – Romanian Law
nestor nestor diculescu Kingston petersen
Globalworth Tower
18th floor
201 Barbu Vacarescu Boulevard
2nd district
Bucharest 020276
Romania
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155
Globalworth Real Estate Investments Limited
Ground Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey GY1 2HT
Globalworth Tower
26th Floor
201 Barbu Vacarescu Boulevard,
2nd district
Bucharest, 020276
Romania
Tel: +4 (0) 372 800 000
Fax: +4 (0) 371 600 000
Email: enquiries@globalworth.com
www.globalworth.com