globalworthTM
ROMANIA & POLAND:
CREATING CEE'S LEADING
OFFICE LANDLORD
ANNUAL REPORT AND FINANCIAL STATEMENTS 2017
2017 HIGHLIGHTS
GLOBALWORTH
seeks to be the CEE region’s leading
office investor and landlord of choice
to the growing variety of multi-
national tenants through its portfolio
in Romania and Poland
Overview
2017 highlights
At a Glance
Investment proposition
Investment journey
Strategic review
Our markets
Our business model and strategy
Strategy in action
Chief Executive’s review
Management review
Investment review
Leasing review
Financial review
Financing and liquidity review
The team
Corporate social responsibility
Risk report
Viability statement
01
01
02
04
06
08
10
14
16
18
20
26
28
30
34
36
38
52
58
Portfolio review
60
Financial statements
110
Introduction
Romania properties map
Globalworth Tower
Globalworth Plaza
Globalworth Campus
bOb
bOC
Green Court Complex
Unicredit hQ
Renault bucharest Connected
TAP
Dacia warehouse
Poland properties map
hala Koszyki
Cb Lubicz I/II
Green horizon
A4 business Park
Tryton business house
Governance
board of Directors
Corporate governance report
Directors’ report
Remuneration committee report
Audit committee report
62
68
70
71
72
74
75
76
78
79
80
81
82
84
86
87
88
89
90
92
98
100
103
105
Consolidated 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
Additional information
Schedule of properties
Investing policy
Glossary
Company directory
112
113
114
115
116
118
122
128
138
141
146
154
158
160
164
165
168
“2017 was a transformational year
for Globalworth, with the business
well positioned to further consolidate
its leading platform in 2018.”
Visit us online:
www.globalworth.com
Ioannis Papalekas
Chief executive officer
overview
StrateGiC review
PortFolio overview
GovernanCe
FinanCial StatementS
FINANCIAL
Portfolio open market value
Net Loan to value ratio
Net operating income
34.3%
€51.1m
€1,815.4m
2017
2016
2015
20.7%
34.3%
2017
2016
2015
39.9%
€51.1m
€43.6m
€28.4m
Earnings before tax
€26.2m
€41.2m
2017
€26.2m
€36.3m
2016
€12.2m
Dividends
44 cents
2017
2016 0 cents
44 cents
€22.4m
2015
€62.5m
2015 0 cents
€1,068.9m
EPRA NAV
€1,171.5m
EPRA Earnings
€16.8m
2017
2016
2015
€1,068.9m
2017
€1,171.5m
€715.4m
€499.7m
2016
2015
€783.8m
€568.3m
2017
2016
€8.6m
€16.8m
-€5.3m
2015
EPRA Earnings per share
18.17 cents
EPRA NAV per share
€8.84
€8.09
2017
€7.91
€7.98
2016
2015
€8.84
€8.57
2017
2016
18.17 cents
13.34 cents
€9.08
-9.41 cents
2015
€1,815.4m
2017
2016
2015
€977.5m
€931.1m
Normalised EbITDA
€41.2m
2017
2016
2015
NAV
NAV per share
€8.09
2017
2016
2015
OPERATIONAL
¡ Completed the acquisition of 71.7% of the warsaw-listed
GPRE at a price reflecting a discount of 20% to its latest EPRA
NAV per share.
¡ Formed a strong partnership with Groupe Renault through
the acquisition of its primary warehouse in Pitesti and the
development of its new headquarters in bucharest.
¡ Our footprint in the Polish market at year-end 2017 comprised
a portfolio of office and mixed-use properties of 242.6k sqm,
valued at €680.1 million.
¡ Our inaugural €550 million Eurobond issue was more than
2x oversubscribed resulting in a fixed interest rate of 2.875%.
¡ Reduced the weighted average interest rate on debt financing
at group level by 263 basis points to 2.62% (31 December 2017).
¡ Completed a €340 million new equity capital raise, above
target and oversubscribed at a price of €8.75 per share.
¡ Completed the acquisition of building “C” of the award
winning Green Court complex in bucharest, becoming the
sole owner of the complex.
¡ Delivered 51.0k sqm of new high quality office and light-
industrial space in bucharest and Timisoara, increasing the
number of our standing properties in Romania to 19.
– Globalworth Campus – Tower I in Q3-2017 (GLA: 29k sqm).
¡ Successfully negotiated the take-up or extension of 57.4k sqm
of commercial space in our Romanian portfolio in 2017.
¡ Doubled our commercial standing GLA to c.748.1k sqm.
¡ Two active class “A” office developments in Romania (70.5k
sqm.) at year-end 2017, with three others in the planning phase.
¡ 747.9k sqm of commercial space let or pre-let in Romania
and Poland with a wALL of 5.7 years.
¡ Average occupancy of commercial standing GLA at 93.3%.
¡ Diversified tenant base with c.440 national and multinational
corporates from 28 countries and 37 different sectors /
industries.
¡ Added 11 new green certified properties to our
environmentally friendly portfolio which now comprises
18 properties certified with LEED Gold / bREEAM Very Good
or higher certifications.
– Globalworth Tower; was the first property in the SEE to be
– TAP – two facilities Q1/Q3-2017 (GLA: 22k sqm).
awarded LEED Platinum certification.
Please refer to the Glossary pages 165-167 for the definitions used and
the Financial Review section (page 30) for further details.
C
GLObALwORTh ANNUAL REPORT AND FINANCIAL STATEMENTS 2017
GLObALwORTh ANNUAL REPORT AND FINANCIAL STATEMENTS 2017
1
AT A GLANCE
Globalworth focuses on maximising shareholder
value from real estate investment opportunities
in Romania and Poland, while seeking to provide
best-in-class space for tenants
Globalworth is an aim quoted real estate company (ticker "Gwi")
operating in the central and eastern europe (cee) region. we are
strategically focused on income generation and value creation primarily
through a sizeable portfolio of class "a" offices in romania and Poland.
€1,815m
it prioritises modern and environmentally friendly properties in prime
locations in the cities in which it invests. these are typically occupied
by established, high-quality and mostly multinational tenants.
WHAT WE DO
we acquire, develop and actively manage high-quality office, mixed-
use and light-industrial/logistic real estate assets in prime locations in
romania and Poland, through which we benefit from a strong rental
income profile from high quality tenants from around the globe.
6.6%
5.7%
17.0%
Poland
12
investments
Sector breakdown
office
mixed-Use – office/retail
light-industrial / logistics
other
romania
17
investments
70.7%
29
total Investments
GaV
39
Standing properties
93.3%
occupancy rate
791k sqm
Standing Gla
OUR SECTORS
Office:
Our principal focus is on Class “A” offices,
standing and developments, located in
prime locations within their respective
sub-markets, accounting for 70.7% of our
combined portfolio by value.
Mixed-Use
Investment in mixed-use modern
multifunctional properties, which combine
high quality retail and commercial use with
Class “A” office space.
Light-Industrial / Logistics
Acquisition and development of high quality
light-industrial / logistics properties leased
to well-known international tenants on
long-term contracts, providing exposure to
one of the fastest growing market segments.
Other
Partial ownership of a residential complex,
adjacent and complementary to our office
properties in the new CBD of Bucharest,
and of land for future development in four
locations in Romania.
overview
StrateGic review
PortFolio overview
Governance
Financial StatementS
OUR LOCATIONS
OUR TENANTS
Portfolio Value by Status
1.4%
4.4%
94.2%
Standing properties
Developments
land for future development
Contracted rent by Property type
2.0%
7.4%
16.0%
74.6%
office
mixed-Use
light-industrial / logistics
residential & other
Romania
Romania has been our primary focus
since Globalworth’s incorporation in 2013,
now accounting for 62.5% of our portfolio
by value.
Key highlights
¡ One of the fastest growing economies in
Europe with a positive market outlook.
¡ Real estate market with significant
growth potential as demand for high
quality real estate space remains
strong and yields are high compared
to more mature CEE markets.
Poland
Becoming the main destination for
Globalworth's expansion in the CEE
region following its Q4-2017 investment in
GPRE, the pure-play Polish real estate
platform which, at year end, owned a
portfolio of 12 standing investments with
242.6k sqm of GLA.
Key highlights
¡ The largest economy and most mature
commercial real estate market in the
CEE, benefiting from sustained healthy
economic conditions.
¡ Deep investor appetite, resulting in
investment volumes at 10-year record
levels, with growing focus on regional
cities. Ongoing supportive outlook for
tenant demand for the right space.
€115.9m
Contracted rent
We focus on high-quality national and
multinational corporate groups and
financial institutions with whom we seek to
contract long-term, triple net, annually
indexed, euro-denominated leases. Our
diversified tenant base as of year-end 2017
comprised of c.440 national and
multinational corporates from 28 countries
and 37 different sectors / industries.
“By targeting the right
sectors in the right
markets, we believe we are
well positioned to
capitalise on the dynamic
structural trends we are
witnessing today.”
Dimitris Raptis
Deputy chief executive officer
& chief investment officer
See oUr MarKEtS
on page 10
ENVIRONMENTAL
APPROACH
We focus on properties which are, or have
the potential to be, environmentally
certified. Currently our portfolio includes
18 green accredited properties,
accounting for +55% of standing portfolio
value and are in the process of certifying
or re-certifying 8 further properties in our
portfolio. In addition we are assessing the
green certification potential of our larger,
non-certified office and mixed-use
properties, targeting green accreditations
of BREEAM Very Good / LEED Gold or
higher, thus aiming to further increase the
number of green certified properties in
our portfolio over the next 12 months
See CorPoratE SoCIal rESPoNSIbIlItY
on page 38
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Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
03
INVESTMENT PROPOSITION
PILLARS
OF SUCCESS
overview
StrateGic review
PortFolio overview
Governance
Financial StatementS
1
2
3
4
ATTRACTIVE MARKET FUNDAMENTALS
QUALITY PORTFOLIO
LEADING MANAGEMENT PLATFORM
MULTIPLE AVENUES TO GROWTH
compelling macro-economic and
real estate fundamentals in romania
and Poland.
Sizeable and modern portfolio of high
quality properties with triple-net and
long dated euro-denominated leases
with blue chip, typically international
tenants.
exceptional track-record of delivering
earnings and nav growth through
internal multi-skilled platform of
experienced professionals.
asset management, value-add
acquisitions and developments in
core markets.
See oUr MarKEtS
on page 10
See PortFolIo rEVIEw
on page 60
See MaNaGEMENt rEVIEw
on page 20
See oUr bUSINESS MoDEl aND StratEGY
on page 14
5
6
CAPITAL DISCIPLINE
STRONG CASH FLOWS
conservative corporate financing policy
targeting low leverage and supportive
shareholder base.
Portfolio generating long and sustainable
income stream from high quality tenants
providing attractive dividend yield.
7
GOVERNANCE
robust and transparent corporate
governance structure.
See FINaNCING aND lIQUIDItY rEVIEw
on page 34
See lEaSING rEVIEw
on page 28
See boarD oF DIrECtorS
on page 92
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Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
05
INVESTMENT JOURNEY
Globalworth’s journey so far
overview
StrateGic review
PortFolio overview
Governance
Financial StatementS
acquisitions
Key corporate events
Completion of developments
2013
2015
2017
FEB 2013
Incorporation of GWI
SEP 2013
Acquisition of GAM
FEB 2014
APR 2014
JUL 2014
Acquisition of TCI
Equity Capital
raise €144million
Acquisition of TAP
JUL 2013
Admission to AIM,
raising €54 million
DEC 2013
Acquisition of
Globalworth Tower site
MAR 2014
JUN 2014
DEC 2014
Acquisition of
BOB, BOC &
Upground Towers
Acquisition of
GWI Campus site
Acquisition of
Gara Herastrau &
Luterana lands
MAR 2015
JUN 2015
OCT 2015
Acquisition of
UniCredit HQ and
Globalworth Plaza
Acquisition of
Green Court "A"
Equity Capital raise
€54 million
FEB 2016
Delivery of
Globalworth
Tower
JUN 2016
Delivery of
Gara Herastrau
APR 2015
Delivery of
Continental
warehouse in taP
SEP 2015
Delivery of Elster
facility in taP
DEC 2015
acquisition of
Green Court "b"
MAY 2016
€180 million bond issue
subscribed by CPPIb and
Cairn Capital
DEC 2016
Equity Capital raise
€200 million subscribed
by Grt and oak hill
MAR 2017
Delivery of Valeo
extension in TAP
JUN 2017
€550m Eurobond Issue
AUG 2017
Acquisition of
Green Court "C"
DEC 2017
DEC 2017
Equity Capital raise
of €340m
Acquisition of EPP portfolio
through GPRE
MAY 2017
Acquisition of
Dacia Warehouse
JUL 2017
Launch of Renault
Bucharest Connected
development
OCT 2017
Delivery of Litens
facility in TAP
DEC 2017
Acquisition of 71.7%
of GPRE in Poland
Globalworth over
the past 4.5 years
has assembled a
high-quality real
estate portfolio in
romania and Poland
with a combined
value of €1.8 billion.
06
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
07
STRATEGIC
REVIEW
our markets
our business model and strategy
Strategy in action
Chief Executive’s review
Management review
Investment review
leasing review
Financial review
Financing and liquidity review
the team
Corporate social responsibility
risk report
Viability statement
10
14
16
18
20
26
28
30
34
36
38
52
58
08
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Globalworth aNNUal rEPort aND FINaNCIal StatEMENtS 2017
09
OUR MARKETS
Romania: one of Europe’s fastest growing
economies, continues to positively impact
the commercial real estate market
romania has been Globalworth’s primary market of focus,
with the company having invested more than €1.0 billion of
capital since its inception, principally targeting class “a” office
properties in Bucharest and high quality light-industrial /
logistics properties in prime hubs of the country.
Dynamics
¡ Strong country performance and macro outlook,
positively impacting the real estate sector.
¡ Expansion of operations from national and
multi-national corporates driving the demand
for new office space.
¡ Need for workforce at a time of low
unemployment driving demand for high quality
space to attract and retain employees.
¡ Growing supply for office space in the market
with a number of projects announced or under
construction to be delivered in the short /
medium term, however positive net absorption
rate and imbalance of Class “A” and Class “B”
offices anticipated to maintain occupancy level
for top quality developments.
Opportunities
¡ Establishing long-term partnerships with high
quality national and multinational tenants
ensuring sustainable cash flow generation.
¡ Investing in new opportunities – developments
and standing properties – as the market
continues to grow in Bucharest and regional
cities, supported by the expanding economy.
¡ European Union grants and subsidies to
continue to positively impact the economy in
the short/medium term.
¡ Contraction of yields as they remain above
those of other, more mature CEE and EU
markets and as the economy expands.
Challenges
¡ Addressing low unemployment rate which may
impact economic growth in the future.
¡ Implementation of new infrastructure to unlock
economic potential.
¡ Increasing construction costs impacting
deployment of schemes and investor returns.
Outlook
¡ Yield contraction as the real estate market
becomes more liquid and the economy expands.
¡ Demand for high quality properties with good
connectivity and which are environmentally.
friendly (particularly for offices) to remain
strong.
¡ Increasing interest in regional cities as potential
employment constraint in Bucharest drives
demand.
Romania has been one of Europe’s strongest performing
economies over the past seven years, outpacing the EU’s
average growth. The country’s attractive macro-
fundamentals resulted in real GDP rising again in 2017,
recording an increase of 8.8% in Q3-2017 and forecast at
7.0% for the year. The economy is expected to continue
to expand in the medium term.
In recent years Romania has been a top beneficiary of
multinational companies operating and looking to
expand or relocate. Companies in the IT&C1 , BPO2
and SSC3 sectors, have benefited from the high
quality infrastructure, employee skillset, and low
overall operating costs in Romania and these sectors,
amongst others, are anticipated to benefit further as
a result of Brexit. In addition, other core segments
such as the industrial, manufacturing, agriculture and
automotive sectors have continued to make progress.
A significant stimulus in the Romanian economy has
been the grants and subsidies made available
following its EU accession in 2007. The country is
currently in the second phase of its funding
programme, with c.€43 billion of approved EU funds
expected to flow into Romania between 2014 and
2020.
One of the main drivers of economic growth in 2017 was a
rise in private consumption due to higher wages in both
the public and private sectors. Interest from companies
looking to expand or enter the market has led to higher
wages (still one of the lowest in the EU), driving the
unemployment level to an all-time low in November 2017
(forecast at c.5.0% by year-end).
This low level of unemployment has resulted in the
employee landscape becoming more competitive
and the space and overall working experience offered
by employers becoming increasingly important.
Companies are now willing to invest more in the
space they occupy to achieve and maintain employee
satisfaction and reduce attrition levels.
Positive Impact on Real Estate
Romania’s improved visibility on the back of its
expanding economy has positively impacted the
commercial real estate market. For a third consecutive
year, investment activity increased reaching
c.€1.0 billion in 2017, with a number of both existing
and new international investors entering and/or
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
Timisoara
Pitesti
Bucharest
"Significant
footprint in
Bucharest and
in two of the
country’s primary
logistic hubs."
increasing their exposure to the market.
Prime yields for office and industrial properties were
stable in 2017 at 7.25/7.5% and 8.5% respectively, but
remain higher than most other prime markets in the
CEE region, despite the favourable market
conditions, presenting further valuation growth
potential.
The positive net absorption rate (where demand exceeds
supply) for office space over the past few years,
combined with the growing economy, has resulted in a
number of new schemes being announced and existing
ones being at various stages of development. Supply in
the market is expected to increase by 200k to 500k sqm
over the next three years, including c.105k sqm to be
developed by Globalworth in Bucharest.
Companies in the IT&C and BPO/SSC sectors have been
the main drivers of demand for space, with many
multinational corporates expanding their operations in
Romania. This trend was reflected by leases signed by
Globalworth over the year, with tenants which included
Amazon, Stefanini, Wipro and Microsoft.
Class “A” energy-efficient properties, which are easily
accessible and combine high quality space with other
amenities, are in demand and command low vacancy
rates and stable rents. Within our portfolio, Globalworth
Tower and the Green Court Complex have occupancy
rates in excess of 98.5%, while Amazon’s recent selection
of the completed Globalworth Campus Tower I to house
its operations provides an example of tenant preference
for such properties.
Elsewhere, the light-industrial/warehouse sector was
again in demand in 2017, driven by growth in retail
consumption and industrial production. Rents for
high quality space in prime sub-markets have
stabilised with vacancy remaining low, at less than
5.0% at the national level, despite c.500k sqm of new
supply being delivered to the market. 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 97.9%
occupancy, leading us to purchase additional land for
further expansion.
1 IT&C: Information Technology
2 BPO: Business Process Outsourcing
3 SSC: Shared Service Centre
Investment Volume - romania
m
€
1000
800
600
400
200
0
11
12
13
14
15
16
17
Year
bucharest office demand exceeds supply since 2011
)
s
’
0
0
0
(
m
q
S
500
400
300
200
100
0
11
12
13
15
16
17
14
Year
Supply
Demand
2017 Romania
economic performance
Real GDP Growth
Private consumption growth
Current account % of GDP
Budget deficit % of GDP
Q3-2017
Q4-2017F
8.8%
7.5%
-3.0%
-3.0%
7.0%
9.3%
-3.4%
-3.0%
Public debt % of GDP
35.7%
36.3%
Inflation %
Unemployment %
3.2%
4.7%
3.3%
4.9%
Source: National Bank of Romania, Eurostat, National Statistics
Institute (“INS”), Company and Colliers.
GDP: Gross Domestic Product
10
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
11
OUR MARKETS
CoNtINUED
Poland: the CEE’s largest economy
supporting the region’s most significant
and mature commercial real estate market
Globalworth entered the Polish commercial real estate market
at the end of 2017, securing a high-quality office and mixed-
use portfolio valued at €680.1 million through the acquisition
of a controlling shareholding in GPre.
Dynamics
¡ Strong country performance and macro outlook,
positively impacting the real estate sector.
¡ Expansion of operations from national and
multi-national corporates driving demand for
new office space.
¡ Growing supply for office space in the Polish
market (Warsaw and regional cities) with most of
the projects announced or under construction
to be delivered in the medium term.
¡ Need for workforce at a time of low
unemployment driving demand for high quality
space to attract and retain employees.
Opportunities
¡ Establishing long-term partnerships with high
quality national and multinational tenants
ensuring sustainable cash flow generation.
¡ Leveraging existing relationships with high
quality corporates in our Romanian portfolio
which are also present in Poland to improve
effectiveness of our asset management.
¡ Investing in new opportunities – developments and
standing properties – as the market continues to
grow, supported by the expanding economy.
¡ Contraction of yields which remain above those of
other more mature western European markets as
the economy expands at a faster comparative pace.
Challenges
¡ Addressing low unemployment rate which may
impact economic growth in the future.
¡ Effectively managing the real estate portfolio at
a time when the majority of new supply is
delivered to the market (3-5 years).
Outlook
¡ Increasing competition between investors and a
low interest rate environment driving yield
contraction as the economy expands.
¡ A number of developers rethinking / redesigning
their development schemes, altering the end
product mix (including the residential, hotel
components).
¡ Demand for high quality properties with good
connectivity and which are environmentally
friendly (particularly for offices) to remain strong.
Poland became a member of the EU in May 2004, and
over the past decade has been one of Europe’s
strongest performing economies. It is the largest
economy in CEE, a position which it maintained in
2017 as the country’s real GDP continued to rise,
recording an increase of 4.9% in Q3-2017 and forecast
at 4.6% for the year.
Similar to Romania, Poland has been a major
beneficiary of multinational companies looking to
expand or relocate, with a number of financial
institutions and companies operating in the
Information Technology (IT&C), Business Process
Outsourcing (BPO) and Service Centre (SSC) sectors
establishing operations in the country to take
advantage of Poland’s proximity to western Europe,
its high quality infrastructure and employee skillset.
Economic growth in 2017 was supported by a favourable
labour market and increasing consumer spending, in
conjunction with a decreasing savings rate and low
interest rate environment. These conditions, together
with the positive trade balance, are forecast to sustain
growth in the short to medium term.
The impact of the expanding economy can also be
witnessed in the performance of the labour market
which in 2017, recorded the lowest unemployment
rate for the past 26 years. In addition, salaries are
estimated to increase by more than 7.0%.
Positive impact on Real Estate
Poland is the largest and most mature commercial
real estate market in the CEE, and its strong and
expanding economy has positively impacted the
commercial real estate market, with investment
activity exceeding €5.0 billion in 2017, the highest
since its peak in 2006.
Investment volumes have been increasing over the
past several years, and 2017’s activity represented an
annual rise of c.10%, with international investors being
the most active in the market.
The retail and office sectors have been the principal
beneficiaries of this investment, with significant
interest in logistics and hotel properties.
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
Gdansk
Warsaw
Lodz
Wroclaw
Katowice
Krakow
The depth and diversity of the Polish market is a
unique feature in the CEE region, with interest in
sizeable regional cities competing with the capital,
Warsaw. Prime yields for all asset classes continued to
contract in 2017, with prime yields for office and retail
properties in Warsaw at 5.0/5.2% and 5.0%
respectively at year end but still more than 200 basis
points higher than in Western Europe. Office yields in
prime secondary cities are wider by up 100 basis
points, depending on the individual city.
Companies in the IT&C, BPO and SSC and financial
sectors have been the main drivers of demand for
space, with a number of multinational corporates
consolidating their positions and expanding their
operations in the country. This trend is reflected in
the type of tenants in our portfolio, which include
Infosys, Nokia, HP and Intel.
Increased consumer spending has also benefited the
retail sector and this is apparent in the retail
component of our portfolio, where occupancy stands
at c.94.3%.
Demand for Class “A” energy-efficient properties, which
are easily accessible by public and private transport, are
in firm demand and command low vacancy rates and
stable rents. We have nine properties in our portfolio
which meet these criteria (including properties being
re-certified), with occupancy rates in excess of 95.8%
(excluding Master lease).
Strong demand for office space, combined with
ongoing investor interest in recent years and a
growing economy, has resulted in a number of
projects being announced or under construction in
Poland, with more than 1.8 million square metres
expected to be developed in the next four to five
years. Key to the sustainability of existing and new
schemes is the quality of space to be delivered and its
accessibility. This has been demonstrated of late, with
high quality tenants electing to take up space in
non-typical office locations if the above criteria are
met. An example of this is our A4 Business Park in
Katowice, which has attracted multinational tenants
such as IBM, PKP Cargo and Rockwell for the quality
of the development and its easy access, despite not
being in one of city’s traditional office hubs.
“Present in six of
Poland’s largest cities.”
Investment Volume - Poland
6000
5000
4000
m
€
3000
2000
1000
0
11
12
13
14
15
16
17
Year
healthy demand for office space Poland since 2011
)
s
’
0
0
0
(
m
q
S
1600
1400
1200
1000
800
600
400
200
0
11
12
13
15
16
17
14
Year
Supply
Demand
2017 Polish
economic performance
Real GDP Growth
Private consumption growth
Current account % of GDP
Budget deficit % of GDP
Public debt % of GDP
Inflation %
Unemployment %
Q3-2017
Q4-2017F
4.9%
4.8%
0.1%
0.7%
(surplus)
52.0%
1.6%
6.8%
4.6%
4.8%
0.1%
1.7%
54.1%
1.6%
6.6%
Source: Eurostat, Central Statistics Office, Company and Colliers
GDP: Gross Domestic Product
12
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
13
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
OUR BUSINESS MODEL AND STRATEGY
A 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
OUR STRATEGY
RESULTS
Strong Management Platform
¡ Internal, multi-skilled platform of
experienced professionals.
¡ Proven track record.
¡ local presence, with scale in core markets.
High Quality Portfolio and Asset
Management Capabilities
¡ Sizeable and modern portfolio in
prime locations.
¡ Diverse and international tenant base.
¡ high occupancy rate, also supported
by rental guarantees on select properties
in Poland.
¡ turnkey solutions and fit-out services.
Financial Strength
¡ Focus on conservative financing and
cash flow generation.
¡ Simplified debt structure with limited
number of financing providers.
¡ Euro-denominated assets, liabilities
and revenues.
¡ transparency and strong corporate
governance.
Growth Drivers
¡ Identified pipeline of value-add
investments in romania and Poland.
¡ high-quality developments.
¡ active management of our portfolio
and operations.
¡ Positive market outlook.
Region
¡ targeting fast growing markets.
¡ Focused on two countries in
Central & Eastern Europe;
specifically Poland and romania.
¡ Deep market knowledge with
country headquarters in bucharest
and warsaw.
Sector
¡ Primarily focused on the office
sector, followed by the mixed use
(office and retail) and light-
industrial/logistics sectors.
¡ active management of real estate
properties to maximize returns.
¡ high-quality national and
multinational corporates with
existing presence or interested to
expand in our markets of operation.
Properties
¡ Favouring modern class “a”
Tenants and lease terms
¡ Diversity of tenant base
comprising of c.440 national
and multinational corporates
and financial institutions from
28 countries and 37 different
sectors / industries.
¡ Focus on quality revenue
streams, backed by long-term,
euro-denominated triple net,
inflation linked leases.
offices, with secondary focus on
high-quality mix-use (office and
retail) and light-industrial/
logistics properties, located in
prime locations within their
respective sub-markets.
¡ holistic focus across the value chain;
– Investment in standing
properties offering
appreciation and re-
positioning potential.
– Development of new high-
quality properties.
– active management of
existing portfolio.
¡ ability to execute complex
transactions.
¡ attractive, risk-adjusted returns, through
yield and capital appreciation.
¡ targeting a sustainable and progressive
dividend pay-out.
¡ Judicious use of debt and equity capital
to facilitate further growth.
NaV
€1,068.9m
2017
2016
2015
€715.4m
€499.7m
EPra NaV
€1,171.5m
2017
2016
2015
€783.8m
€568.3m
€1,068.9m
€1,171.5m
Normalised EbItDa
€41.2m
2017
2016
2015
€22.4m
€41.2m
€36.3m
See StratEGY IN aCtIoN
on page 16
See StratEGY IN aCtIoN
on page 16
14
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
15
STRATEGY IN ACTION
Expansion
to Poland
Our significant expansion into Poland,
the largest market in central and eastern
europe, is a pivotal development in
Globalworth’s strategy to establish itself
as the cee region’s leading office investor.
Local platform poised for growth
Globalworth’s execution of its strategic expansion into
Poland through the acquisition of a 71.7% shareholding in
Griffin Premium RE.. N.V. (GPRE) offers immediate scale
and critical mass through an efficient and local platform
achieving an appealing footprint in Warsaw and the key
regional cities. GPRE is a Warsaw-listed, pure-play office
and mixed used real estate platform which, as at 31
December 2017, has a standing portfolio in Poland with a
valuation of €680.1 million and a gross lettable area of
242.6k sqm, managed through a team of 32 employees.
With considerable overlap in investment philosophy and
culture, this presents an exciting opportunity for growth
and future consolidation by Globalworth in the largest
economy and real estate market in the CEE region. Both
Globalworth’s CEO and Deputy CEO & CIO are now
represented on the Board of GPRE, and areas of
common expertise, for example in tenant relationships
and technical know-how, are being leveraged.
Successful execution of a complex
corporate transaction
The execution of this transaction, completed in
December 2017, demonstrates Globalworth’s ability to
unlock attractive opportunities in an otherwise
competitive investment market. Having been established
in 2016 and listed in April 2017, GPRE’s share price had
been underperforming for reasons, in the Company’s
view, that were entirely capital markets related and not
fundamental to GPRE’s real estate or operating
capability. As a consequence of the desire for GPRE’s
largest shareholder to exit their remaining position,
having initially sold at IPO, Globalworth launched and
successfully completed a tender offer for between
50.01% and 67.90% of the issued share capital, at a price
that represented a discount of approximately 20% to the
Company’s last reported EPRA NAV per share. A further
off-market purchase subsequently increased this to
71.7%. The strategic appeal of this transaction has
therefore been complemented with a compelling entry
price, below the appraisal value of the properties and
with no value ascribed to the competent operating
platform, which offers considerable future optionality.
GPRE will soon be rebranded to Globalworth Poland,
and subject to shareholder approval, will be renamed
Globalworth Poland Real Estate N.V.
Portfolio Value: Evolution by Country
€680.1 m
€1,815.4 m
€157.7 m
€977.5 m
Globalworth
(romania)
YE16
romania
Net Portfolio
Increase YE17
Poland
Portfolio
addition YE17
Globalworth
Portfolio
YE17
Year-end portfolio value
2017 net portfolio additions
“We prioritised the Polish market
due to its size, liquidity, strong
fundamentals and depth of
opportunities. Through this
transaction we achieved critical
mass Day 1.”
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
“At present we are in the process
of facilitating the gradual move of
Amazon into their new high
quality space.”
Globalworth Campus tower I:
occupancy
11.0%
34.5%
46.8%
7.7%
amazon
Honeywell
tenant Options
vacant
Globalworth
Campus
Globalworth campus is another project
which showcases all of the company’s
capabilities, and specifically its in-house
capacity to develop high-end space for
top quality tenants.
With Globalworth Campus we wanted to develop a large
scale campus-style project which would blend three class
“A” offices with retail / commercial space and other
amenities, spanning over 92k sqm and creating an
environment where businesses can flourish.
During the implementation of this project, the
Company was involved in all principal activities
including the acquisition of the site, the design
and permitting process, project management
and leasing.
Key to the success of this type of project is its
location and accessibility. In our view, the selected
site more than meets these criteria as it is located
adjacent to the main metro station in the New CBD of
Bucharest, providing easy access through both
public and private transport.
Globalworth Campus’ offices combine high
technical and environmentally-friendly specifications
(BREEAM pre-certified), to be complemented by
retail / commercial space, a conference centre,
extensive green areas, a unique running track, bicycle
racks, electric vehicle charging stations and other
features promoting a healthy lifestyle. In short,
not just a professional working environment but
also one in which people can enjoy spending time.
Tower I was completed in Q3-2017 and we are
delighted to have been able to partner with Amazon,
which will become the largest tenant in the
development. Amazon, the largest internet retailer in
the world, has been seeking to identify suitable
premises to house its operations in Bucharest.
The high quality features of Globalworth Campus,
both existing and under construction, and the
overall commercial approach of our in-house team,
have resulted in Amazon agreeing to a long-term
partnership with Globalworth on this project, with
an option to extend its premises in the future.
16
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Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
17
CHIEF EXECUTIVE’S REVIEW
2017 was a truly transformational year for
our Company, as demonstrated by a number
of significant landmark achievements in
investment and capital markets
to initiate our next phase of developments, delivering
more than 100k sqm of prime office space in
Bucharest and Warsaw, as well as more than 150k sqm
of light-industrial / logistics space in Timisoara.
Over the course of 2017 Globalworth has raised €890
million of capital from both the equity and debt capital
markets, which included the listing of our debut
Eurobond on the Bucharest and Dublin exchanges.
Market conditions
We are strategically positioned to benefit from
geographic exposure to the two most significant
economies in Central and Eastern Europe, Poland and
Romania, which are both enjoying economic growth
far ahead of the wider European region. 2017 real
GDP growth in both Romanian and Poland is forecast
to have significantly outperformed the European
Union average, and is estimated to continue to do so
over the next two years. In addition, both principal
focus markets exhibit similar characteristics,
benefiting from low public debt to GDP ratios,
increasing disposable incomes and private
consumption, low levels of unemployment rates and
healthy inflation rates.
This strong economic backdrop is supportive for the
real estate markets, alongside the structural
expansion of many multi-national tenants which
continue to be attracted to the region by a young,
educated and ambitious labour force, as they expand
their operations in the region. This is a key driver of
demand for the office and industrial real estate
sectors on which we focus. In turn investor interest
has been increasing. In our view however there is still
room for further yield contraction, supported by
continued economic expansion and while property
yields remain higher than those of more mature real
estate markets.
Portfolio
In 2017, Globalworth invested approximately €694.4
million, primarily through the expansion into Poland,
but also further acquisitions in Romania and our
ongoing development progress to bring to market
high quality new space. Our focus on buying well and
unlocking value was evident at the compelling
valuation we acquired the controlling interest in
GPRE, at 20% below the reported EPRA NAV per
share at 30 September 2017, and by far better than
the level we could replicate in the direct market, not
least given the inherent potential within the operating
platform established. We also completed three
developments over the period, and remain on-site on
a further two. Today our footprint is 791.0k sqm, of
which 548.4k1 sqm is high quality office space, and a
Ioannis Papalekas
chief executive Officer
Our leading portfolio in romania continued to strengthen and
is now complemented by our strategic expansion in Poland,
providing us with exposure to a portfolio in excess of €1.8
billion and approximately 791k sqm of leasable area, in the
two largest markets in the cee region. Beyond this, we have
an exciting pipeline of new investment and development
opportunities.
Highlights of the year
Strategically, 2017 was marked by our expansion into
Poland, via the acquisition of a 71.7% shareholding in
GPRE, a Polish real estate platform with a portfolio
valued at 31 December 2017 at €680.1 million, and
which we are now taking steps to rebrand as
Globalworth Poland. We are delighted to be working
with such a strong team, and to have achieved
immediate, local critical mass in this market. This is an
important step to us becoming the leading landlord
in Central and Eastern Europe, with a dominant
presence in two of the most significant markets,
Poland and Romania.
Besides our geographic expansion, we are pleased to
report on the good ongoing progress in Romania.
Our portfolio has been complemented, amongst
others, by the first of three buildings comprising
Globalworth Campus and we were delighted to
welcome Amazon as our largest tenant, which we see
as testament to the quality of our product. Overall,
the commercial occupancy of our portfolio at year
end stood at 93.3%, and against a backdrop of
ongoing healthy tenant demand, we are taking steps
1
Including the proportion of office in mixed-use properties
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
total combined portfolio size in excess of €1.8 billion. By value,
this is 85.7% higher than the comparable period last year,
principally due to the investments in Poland. In Romania, our leasing
team recorded excellent progress with the lease-up of 57.4k sqm
over the year in Romania and, combined with acquisitions, our
contracted rent roll has increased by €21.9 million, up 45.1%, and now
combined with Poland stands at €115.9 million.
Our commercial occupancy rate at December 2017 was 93.3%
(2016: 83.1%). Reflecting the strong progress we have made to date,
but also in light of the further opportunities ahead, in December
2017 we communicated our intentions to make further acquisitions
and initiate the next phase of developments, in both Romania
and Poland.
Financial performance
We are pleased with the ongoing progress in our financial
performance, as we lay down strong foundations for the future
through growth in contracted rent and enhancements to our debt
structure. It is also important to note the significance of our Polish
investment which, in accordance with accounting rules, we now
consolidate 100% of the activities of GPRE, offset by a minority
interest for the 28.3% we do not own. From December 2017, this is
fully consolidated on Globalworth’s balance sheet, albeit that the
earnings and cash flow statements only recognise the impact
from 6 December 2017. The attractive acquisition price paid by
Globalworth for the 71.7% shareholding, which reflected a discount
to the underlying net asset value resulted in a one-off bargain
purchase gain of €25.7 million recognised in our 2017 profit.
Notwithstanding this, our key financial metrics are as follows.
¡ Total revenue generated by our portfolio increased to
€77.9 million, 14.1% higher than the previous year.
¡ Normalised EBITDA increased to €41.2 million
(€36.3 million in 2016).
¡ EPRA NAV rose by 49.5% to €1.17 billion (€783.8 million in 2016,
which on a per share basis is €8.84 (€8.57 in 2016).
Shareholders’ Equity rose to €1.1 billion (€0.7 billion in 2016).
¡ Net LTV was 34.3% (20.7% in 2016).
Capital structure
Globalworth raised €890.0 million of capital in 2017, which is
testimony to the compelling investment proposition the
Company offers. We were delighted to list our inaugural
Eurobond on the Bucharest and Irish stock exchanges in June
2017, having raised €550.0 million of new debt, with an
investment rating of BB+ from S&P and Ba2 from Moody’s, the
performance of which has been noteworthy since launch. In
December 2017, following a successful investor engagement
program, we raised €340 million through a non-pre-emptive
equity placing. In addition to receiving good support from our
existing shareholders, we were delighted to welcome a number
of new shareholders to Globalworth and also to see improved
liquidity in our shares in recent months. The investors in both
the debt and equity issues we conducted, which included the
European Bank of Reconstruction and Development (EBRD),
were of notable quality. This new capital has enabled us to
unlock new investment opportunities, and will continue to do so,
as well as reduce our overall cost of capital and diversify our
sources of that capital.
Dividend
In July 2017, Globalworth paid its first interim dividend of €0.22
per share, with a second interim dividend for 2017 paid in
January 2018. Reflecting the ongoing growth in underlying
operations and in particular the growth in future contracted rent
roll, the Company has been pleased to provide guidance for
2018, with the intention of paying an interim dividend in
August 2018 of no less than €0.27 per share and a second interim
dividend in January 2019 of no less than €0.27 per share, or in
aggregate no less than €0.54 per share in respect of the 2018
financial year.
Environmental, corporate and social responsibility
At Globalworth, we are serious proponents of the importance
and benefits of maintaining high environmental and sustainable
standards and acting with the highest standards or ethical
behaviour. We pride ourselves on delivering best-in-class real
estate to our tenants. Today, we are pleased to announce that in
Romania 10 of our 12 standing offices are green certified with
LEED Gold or BREEAM Very Good or higher accreditation.
Overall in our portfolio we have 18 properties which are green
certified, representing over 55% of our standing portfolio value,
and we will be adding new properties to our environmentally
friendly portfolio in the next 12 months. As a Company, we are
also proud to be able to give back to the community and once
again in 2017 we were pleased to have been able to actively
support existing and new worthy causes.
Team
I would once again like to thank the team at Globalworth for their
dedication, expertise and enthusiasm, without which our continued
growth would not be possible. As our staff of 75 professionals
continue to grow, and now following our close collaboration with the
GPRE team in Poland, we will focus on attracting, developing and
supporting talent in an efficient and open environment that will
support our business needs into the future.
Priorities for 2018 and beyond
Our strategy adopts a total return philosophy for our
shareholders, targeting the delivery of a sustainable and
progressive dividend, as well as net asset value growth. We seek
to do this through well-executed acquisitions, value creating
developments and ongoing asset and property management to
maintain the highest quality portfolio. We are pleased with how
our strategy has evolved alongside our growth and the dynamic
market conditions. We focus on being innovative, for example we
have been proactively exploring the trends in co-working and
flexible office space and the next generation of tenant needs.
We have started 2018 with confidence, knowing our business is well
positioned and recognising that the market opportunity,
notwithstanding global uncertainties, continues to offer a good
backdrop for growth. Our priorities are to expand our footprint
through value-enhancing acquisitions and developments, further
improve our occupancy rate while enhancing our tenant experience
and satisfaction, whilst maintaining capital discipline and a prudent
capital structure as we seek to maximise returns for our shareholders.
We are committed to our goal of being the leading office
investor in the CEE region through our investments in Romania
and Poland, and to be the partner of choice for the wide variety
of high-quality tenants active or seeking to become established
in the region.
Ioannis Papalekas
chief executive Officer
7 March 2018
18
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
19
MANAGEMENT REVIEW
Unicredit HQ
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
Expansion in Poland and focusing on the two
largest markets in CEE, while benefiting from
a strong balance sheet, is the next step in the
evolution of Globalworth
GPRE is a pure-play Polish real estate platform which,
at the time of the offer, owned a portfolio of high
quality office and mixed-use investments located in
Warsaw and five other key regional cities in Poland. Its
portfolio comprised six office and three mixed-use
(office and retail) investments, offering 171k sqm of
GLA with an aggregate value of €509.2 million (as at
30 September 2017). GPRE had also secured an
attractive investment pipeline, including a forward
funding agreement for a class “A” office in Wroclaw/
Poland (under construction) and a 25% interest in
three class “A” offices in Warsaw (at various stages of
development), for which GPRE has an option to
acquire the remaining 75% stake on completion.
Through GPRE, the Company also contracted to
acquire a further three high quality office properties
in Wroclaw, Gdansk and Katowice from Echo Polska
Properties (“EPP”) for an aggregate purchase price of
€160 million. The acquisition of the EPP portfolio was,
amongst other things, conditional on Globalworth
completing the GPRE transaction.
Globalworth successfully acquired an initial 67.9%
stake in GPRE at the end of November, and an
additional 3.8% in December, raising its total stake
in GPRE to 71.7%. In total, the Company invested
€145.7 million for the acquisition of 111.9 million shares
in GPRE, at a 20% discount to its EPRA NAV per share
as at 30 September 2017.
At 31 December 2017, GPRE held a portfolio of
standing properties with 242.6k sqm of GLA, valued
at €680.1 million.
Investments in Romania
In 2017, Globalworth continued to acquire and
develop high quality real estate properties in
Romania while maintaining its commitment to owning
a modern and environmentally friendly portfolio.
During the year we completed the acquisition of two
standing properties, which not only meet our
standalone investment criteria but are also of
strategic importance to the Company.
Through the acquisition of Green Court Building “C”,
Globalworth added the third and last class “A” office
building within the award-winning Green Court
development in the New CBD of Bucharest, thus
controlling 100% of the 54.3k sqm of the complex.
Dimitris Raptis
Deputy chief executive Officer,
chief investment Officer
2017 was a very busy year for Globalworth, with our efforts
focused on reinforcing our position as the dominant office
investor in romania, expanding our footprint in Poland, and
further strengthening the fundamentals of our business.
Over the course of the year, Globalworth successfully
completed several newsworthy transactions including
two sizeable capital market issues, raising €890.0
million in total, the acquisition of a majority stake in
the Warsaw-listed GPRE, and the subsequent
acquisition of a portfolio of class “A” properties in
Poland.
In Romania, we continued to strengthen our presence
in our primary operating market through selective
acquisitions, making progress with our development
program, and actively managing our portfolio. In
addition, we took further steps to optimise the way in
which the Company operates, a process which will
intensify as we increasingly collaborate with the team
at GPRE.
Expansion in Poland
As part of its ongoing effort to become a reference
provider of high quality office space in the CEE region,
Globalworth launched a public tender offer in October
2017 for the acquisition of a minimum of 50.01% and up to
67.90% of the issued share capital of GPRE.
Elsewhere, through the acquisition of the
Dacia Warehouse (Groupe Renault) and the
subsequent partnership with the Elgan Group
for the development of Groupe Renault’s new
headquarters in Bucharest, Globalworth has formed
a strong and long-term partnership with one of
Romania’s largest corporates.
Globalworth’s very active development programme
continued in 2017, with our main targets being delivering
Tower I of the Globalworth Campus project in Bucharest
to market and, within our TAP park, completing the
expansion of Valeo Lighting’s light-industrial facility and a
new, light-industrial facility leased to Litens. We are very
pleased to have met these targets and to have added
51.0k sqm of GLA of new high quality office and
light-industrial space to our portfolio, which was
developed by the Company.
Since we acquired TAP in July 2014, we have
progressively developed the park by adding four new
light-industrial / logistics facilities with a total of
c.76.0k sqm of GLA, increasing its total size to c.103.4k
sqm. Encouraged by tenant interest for high quality
space in the area, we have acquired an additional 30
hectares of land that we will be looking to develop in
the future.
In addition, we currently have 70.5k sqm of office space
under construction in two projects which we expect to
complete in Q1-2018 and Q1-2019 respectively.
As part of our ongoing efforts to maintain and
improve the marketability of the Globalworth
portfolio, we have continued to implement our
renovation and maintenance programme at selected
standing properties. Over the course of the year,
improvement works were carried out at six standing
properties, with works on a further two scheduled to
start in 2018. We are pleased to observe that the
results of our efforts have been visible at properties
such as Globalworth Plaza and City Offices, where
occupancy improved materially in 2017 and where we
are in active discussions with a number of tenants for
the take-up of remaining available space.
We delivered our projects, including renovations and
maintenance, to plan in 2017. We were able to respect
scheduled delivery dates and budgets and we remain
on track for projects still under construction.
20
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
21
MANAGEMENT REVIEW
CoNtINUED
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
Completing our real estate activities on time and within budget
is a vital part of our business, and our ability to do so reflects on
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.
Optimising Capital Efficiency
Efficiently managing our combination of equity and debt
financing is pivotal to achieving a balance that allows for the
rapid growth of the Company, enhances medium-term
shareholder returns, and controls the inherent risk associated
with third-party debt.
Over the course of the year we completed two sizeable debt and
equity transactions, raising in total c.€890 million. This allowed us
to simplify our capital structure and de-risk our balance sheet,
while providing us with funds to facilitate further investment in
our development projects and new pipeline opportunities, and
thus the growth of the Company.
Debt Transactions
In June 2017, Globalworth successfully completed a €550 million
Eurobond raise with a fixed interest rate of 2.875%. Through this
transaction, Globalworth refinanced all but one of its existing
facilities at improved terms, reducing the weighted average
interest rate on debt financing at group level from 5.25% at 31
December 2016 to 2.62% at 31 December 2017.
We were delighted by the very positive response that this
transaction received from both national and international
investors, resulting in the offering being more than two times
oversubscribed and, considering that this was the first time we
had issued such an instrument, representing a great
achievement for the Company.
Following our investment in GPRE, our consolidated weighted
average interest rate on debt financing has further reduced to
2.62%, with our consolidated gross LTV remaining at moderate
level of 49.5% (Net LTV of 34.3%).
Additionally, in 2017 Globalworth set up a €30 million revolver
facility secured against one of its properties, which to-date has
not been used.
Equity Transactions
In December 2017, we completed a €340 million new equity
capital raise at a share price of €8.75 per share, subscribed to by
both existing and new investors.
The transaction follows on from the successful €200 million
equity capital raise undertaken in December 2016, which
resulted in Growthpoint Properties, South Africa’s leading REIT,
becoming the largest shareholder in the Company.
Active Asset Management to maintain a high
occupancy rate and high quality long-term leases
The ability to achieve high occupancy rates remains one of the
Company’s key strengths. In 2017, we once again performed
strongly in the Romanian market, successfully negotiating the
take-up or extension of 57.4k sqm of commercial GLA, increasing
our overall total since 2014 to c.295.5k sqm. This confirmed the
Company’s position as one of the most successful investors and
developers in the Romanian real estate market and the wider
CEE region.
New commercial leases signed in 2017 included some of
Romania’s best-known national and multinational corporates,
such as Amazon, Stefanini, Wipro and Microsoft and were signed
at a WALL of c.8.0 years, in line with the Company’s strategy of
agreeing long-term lease contracts.
We are pleased to see demand for office space increasing as the
performance of existing tenants continues to improve and new
corporates enter or expand in the market. This was reflected in
last year’s take-up, with the majority of our new leases being
agreed with tenants taking space in our properties for the first
time, demonstrating the quality of our portfolio and the
capability of our leasing team. In addition, a number of new
leases include expansion options, an indication of the positive
market environment in Romania and of the intention of these
corporates to grow their businesses.
Our expansion in Poland through GPRE has further enhanced
our tenant base by adding new corporates to our list of partners.
This list now includes corporates who are already tenants of ours
in Romania, an important feature for the overall effective asset
management of the portfolio.
At 31 December 2017, the average occupancy rate of the
standing commercial portfolio was c.93.3% (95.4% including
tenant options). Overall, at year end we had 747.9k sqm of
commercial space let or pre-let at a WALL of c.5.7 years.
The portfolio is occupied by a diversified, high quality mix of
tenants, comprising some 440 national and multinational
corporates from more than 28 different countries.
We believe that forming strong relationships with our partners
and having a thorough local knowledge of the market gives us
an advantage in identifying and investing in opportunities as
and when they become available, either publicly or off-market. In
addition, it allows us to identify and respond quickly to our
partners’ needs and closely monitor any changes in trends or the
overall market, which are key components for the future of our
business.
Next Steps
Management will continue to work intensively to source new
opportunities and facilitate further growth for the Company in
both Romania and Poland, aiming to fulfil our strategic goal of
becoming the reference office investor and landlord in the CEE
region.
We also aim to streamline our operations in and between the
two countries in which we operate in order to improve the way
we do business.
We look forward to an exciting year in 2018.
Dimitris Raptis
Deputy chief executive Officer, chief investment Officer
7 March 2018
Investment in environmentally friendly properties
Globalworth maintained its commitment to having a modern
portfolio of high quality and environmentally friendly real estate
properties, with the Company adding 3 green certified
properties in Romania and 7 in Poland through its investment in
GPRE in 2017. In Q1-2018 one additional property was green
certified in Poland.
We our particularly proud that our landmark class “A”
Globalworth Tower office in Bucharest was officially awarded the
Green certification of LEED Platinum, becoming the first building
in Romania and the broader SEE region to have received the
highest available Green accreditation.
Currently, 18 standing properties have received green
accreditations of BREEAM Very Good / LEED Gold or higher.
Green certified properties accounted for 57.3% of our standing
portfolio value and we are currently assessing the green
certification potential of our larger, non-certified office and
mixed-use properties, targeting certification levels similar to the
ones already obtained. We have already begun the green
certification or re-certification process for 8 of our properties
and are confident that we will adding them to our green certified
portfolio in the coming few months.
High quality team of professionals and
improved infrastructure
Over a relatively short period of time, Globalworth has
established a portfolio with current standing GLA of 791.0k sqm
and has further developments in progress in Romania and
Poland.
Having the right team of professionals to properly manage our
existing properties, as well as to facilitate growth, is key to the
success of our business. In 2017, we continued to invest for the
future through selected hires in our core and support teams, as
well as in technology which will allow us to operate more
efficiently and effectively.
At year end 2017, the Globalworth team comprised 75
professionals, the majority being located in Bucharest. Our local
presence in our core Romanian market has allowed us to build a
broad network of relationships over the years with owners,
occupiers, property specialists and community representatives,
as well as domestic and international investors and capital
providers.
Similar to Globalworth, GPRE has a team of 32 high quality
professionals in Poland, which we will seek to help complement
in the future as operations grow there.
22
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
23
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
CASE STUDY
Globalworth Shareholders
& Investor Engagement
As Globalworth continues building scale at both the
portfolio and balance sheet level, the increasing
international awareness of the Company’s commercial
activities and with a growing institutional investor base,
investor relations and managing the Company’s external
perception have become an important focus. In this respect,
Globalworth was pleased to strengthen its capability with
the appointment of a Director of Marketing and
Communications and a Head of Investor Relations &
Corporate Development in 2017.
Globalworth is now actively enhancing its investor
engagement program and will seek to be present at more
capital markets industry conferences, engage in more
investor outreach, both abroad and through welcoming
investors to visit its properties in Romania and Poland.
During Q4-2017 alone, in excess of 75 investor meetings
were held. The Company believes that through these
steps, market knowledge and awareness of the Globalworth
proposition will continue to grow further, which in turn
is beneficial for the Company’s share price rating and
market liquidity.
Our initiatives have been reflected in the strong share price
appreciation in 2017 and the ongoing improvement in
market liquidity.
Share Price Performance (€ / share)
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
)
€
(
e
c
i
r
p
e
r
a
h
S
37% total
Shareholder
return for 2017
6.0
Dec 16
Mar 17
Jun 17
Sep 17
Dec 17
GwI
FtSE EPra/NarEIt Europe Index1
1 FTSE EPRA/NAREIT Europe Index rebased to GWI share price
average Daily Share trading Volume €
600
500
400
0
0
0
’
€
300
200
100
0
555,100
271,000
199,600
127,200
70,500
10,500
2015
2016
2017
h1-17
h2-17
Dec 17
& Jan 18
Source: Bloomberg
CASE STUDY
Equity
Fundraising
In December 2017, following the successful completion of its
strategic investment in GPRE, which was funded from existing cash
resources, Globalworth issued further equity via a non-pre-emptive
placing of 38.9 million new ordinary shares at a price of €8.75 per
share. The placement raised €340.0 million of gross proceeds, which
was in excess of the Company’s target and oversubscribed at this
level.
The net proceeds of the Placing are to be used to fund further
attractive investment opportunities in both Poland (through GPRE)
and Romania, as well as for general corporate purposes, and will also
assist Globalworth in managing its gearing strategy to a target loan
to value ratio of 35.0%.
The placing attracted a wide range of new and existing
institutional investors, which increased the Company’s free float
and is expected to broaden the liquidity of Globalworth shares
ahead of the planned move to the Main Market of the London
Stock Exchange in 2018.
“We are delighted by the strong
interest shown by investors in the
Placing. We are now in a position to
further expand our portfolio in
Poland and Romania through the
attractive investment opportunities
we have identified.”
Dimitris Raptis
Deputy chief executive Officer,
chief investment Officer
24
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
25
INVESTMENT REVIEW
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
Expanding our footprint to deliver high quality
space, to satisfy strong tenant demand in the region.
construction, with the investment in Wroclaw currently
97.7% pre-let (100.0% including Master Lease) and
expected to be completed in Q2-2018, while the ones in
Warsaw are expected to be delivered between Q3-2018
and Q4-2019.
Green Court A
2017 was a milestone year for Globalworth, investing for the first
time in two countries, romania and Poland, the two largest
markets in the cee region. we realised a number of asset
purchases, completed a corporate transaction and made further
progress with our development and modernisation programmes.
in total, Globalworth invested over €694.4 million in 2017, the
largest deployment of capital since its inception.
New Investments
The majority of the new investments made in 2017 were in
Poland, where the Company acquired 71.7% of the
Warsaw-listed GPRE for €145.7 million, valuing the
targeted company at €539.9 million (100% of firm value).
At the time of the investment, GPRE held a portfolio of
nine real estate investments (with 15 properties) valued at
€509.2 million and following Globalworth’s investment,
acquired a portfolio of 3 high quality investments (with 5
properties) in Wroclaw, Gdansk and Katowice for a total
of c.€160.0 million.
Globalworth, through GPRE, owns a portfolio of 12
investments in Poland, nine of which are offices and three
are mixed-use, with total GLA of 242.6k sqm.
The Company invested a further €92.6 million in Romania,
where it completed the acquisition of two standing
properties, entered into a joint-venture with the Elgan
Group for the development of Groupe Renault’s new
headquarters in Bucharest, currently under construction,
and acquired 30 hectares of light-industrial / logistics
land in Timisoara (TAP II).
New standing properties included:
¡ Building “C” of the award winning Green Court
class “A” office complex developed by Skanska
in Bucharest.
¡ The modern warehouse (“Dacia Warehouse”)
facility in Pitesti, 100% long-term leased to Dacia,
Romania's largest corporate.
New Deliveries
¡ TAP – Valeo: in March 2017, we delivered a new
built-to-suit light-industrial facility leased to Valeo
Lighting. This new 14.0k sqm facility increases Valeo’s
presence in Timisoara Airport Park (“TAP”) to 41.5k
sqm and marks the second time the tenant has
expanded in the park since its arrival in 2011, a
testament to the quality of the project and the service
offered by Globalworth.
¡ TAP – Litens: in October 2017, we delivered the
second facility under development in our TAP
complex. This 8.1k sqm facility, 100% leased to Litens
Automotive, is the fifth and newest facility in the park
which now offers total GLA of 103.4k sqm.
¡ Globalworth Campus Tower I: in September 2017, we
were particularly pleased to have delivered the first of
three new office buildings at our Globalworth
Campus project. Tower I, was completed in 24 months
following the commencement of works, offers total
GLA of 29.0k sqm and 273 parking spaces.
Under Development
Over the course of the year, Globalworth made further
progress with the development/construction of four
other buildings in Bucharest.
At Globalworth Campus project, construction of Tower II
is at an advanced stage and is expected to be completed
in Q1-2018. Similar to Tower I, on completion the property
will extend over 12 floors above ground and two
underground levels, offering GLA of 28.2k sqm and 180
parking spaces. The delivery of Tower II will mark the
completion of Phase A of the project, which comprises
Towers I and II with total GLA of 57.2k sqm and 453
parking spaces. In addition, further progress has been
made with the development of Phase II of the
Globalworth Campus project, with works expected to
start in H1-2018.
At the end of 2017, the Company’s Renault Bucharest
Connected (“RBC”) project was under construction. On
completion, RBC will house Groupe Renault’s new
Headquarters in Romania as well as a dedicated design
centre for the development of future models of cars, with
42.3k sqm of GLA and 1,000 parking spaces. The project
is progressing in line with its envisaged timeline, with all
preparatory activities completed and construction having
reached the third floor. RBC is expected to be delivered
in Q1-2019.
In Poland, Globalworth, through GPRE, has one
investment in Wroclaw under a forward purchase
agreement and two others in Warsaw under right of first
offer in which it owns a minority stake (25%). These
investments are currently under different phases of
Renovation and Maintenance Programme of
Standing Properties
The Company’s ongoing efforts to offer best-in-class real
estate space to its business partners continued in 2017,
with further implementation of its renovation and
maintenance programme at selected standing properties
in the portfolio. Over the course of the year, Globalworth
carried out improvement works on 6 standing properties.
Works on a further 2 are scheduled to start in 2018.
In total, €7.9 million was invested in renovation and
maintenance, principally at Globalworth Plaza (office),
City Offices (office), and the cluster of properties formed
by BOB (office), BOC (office) and Upground Towers
(residential), all situated in the same block. Works
involved primarily the upgrade of both indoor and
outdoor common areas.
The benefits of our renovation and maintenance
programme, combined with our ongoing leasing efforts,
were evidenced at two properties in particular,
Globalworth Plaza and City Offices, where occupancy
improved significantly in 2017 over the previous year.
¡ Globalworth Plaza works performed in 2017 included
the renovation and modernisation of the lobby and
upgrade of the building’s façade, with future works to
include the installation of external video walls and
other general upgrades.
¡ City Offices works included various repairs and
upgrades to the common areas of both the
commercial building and the multi-level parking.
Additional works planned for 2018, which include the
implementation of a new ticketing system in the
multi-level car park, are expected to further improve
the property’s marketability and revenue streams.
Our renovation and maintenance programme will
continue in 2018 as the Company works to maintain the
high-standards set for its real estate portfolio.
2018 Investments
In 2018 Globalworth, successfully completed the
acquisition of the two land plots located in the Gara
Herastrau/Barbu Vacarescu corridor of Bucharest's new
CBD, that it had previously announced for a total
consideration of €15.5 million. The first land plot is located
between the Globalworth Plaza and Green Court "B"
office properties owned by the Company, and is the last
remaining street facing land plot on Gara Herastrau
street. The second land plot adjacent to Globalworth’s
Green Court complex. The combined lands are
anticipated to allow for the development of c.40.0k sqm
of commercial (predominantly office) space.
26
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
27
New InvestmentsDevelopments – DeliveredDevelopments – Under ConstructionPortfolio ImprovementsGPRE (71.7%) EPP (through GPRE)Green Court “C”Dacia WarehouseRBC(1) TAP II(1)TAP – ValeoTAP – LitensGW Campus Tower IGW Campus Tower II & IIIRBCGlobalworth Plaza City Offices Other maintenance€642.6m€20.3m€23.6m€7.9m(1) Land for future development LEASING REVIEW
Driving sustainable income growth
through leasing
effective asset management of our portfolio is core to
Globalworth’s strategy, ensuring the sustainability of our
cash flows and performance of our properties. Over the past
four years, Globalworth has secured c.295.5k sqm of new
leases and extensions.
Globalworth’s strong leasing performance continued
through 2017, with the Company successfully
negotiating contracts with more than 41 different
national and multinational corporates, resulting in a
total take-up or extension of 57.4k sqm of commercial
space within its Romanian portfolio.
The success of last year’s leasing performance, combined
with the addition of five new commercial properties
through acquisition/delivery which were in varying phases
of lease-up, resulted in an overall occupancy rate for our
Romanian standing commercial portfolio of 90.8% as of
31 December 2017.
Occupancy rate on a like-for-like basis improved by 10.2%
to 91.6% at the end of 2017, enhanced through new leases
signed with tenants including Wipro, Microsoft and
Global Compass. The most notable change in occupancy
rate was at Globalworth Plaza, where occupancy at
year-end reached 81.5% (29.7% on 31 December 16),
representing an increase of more than two and a half
times compared to the previous year. Other notable
improvements in occupancy were achieved in our
flagship Globalworth Tower and City Offices properties,
which as of year-end 2017 were at 98.9% (up from 83.2%
as at 31 December 2016) and 49.4% (up from 21.8% as of
31 December 2016) respectively.
The delivery of our developments is key to growing
our portfolio and rental income. Having completed
Tower I at our Globalworth Campus project in
Bucharest, we are delighted to have been able to
partner with Amazon, who will become the largest
tenant in the property, as well as to continue our
long-standing relationship with Honeywell. Having
further expanded its operations in Bucharest,
Honeywell will be the second largest multinational
tenant in this property (agreement signed in 2018).
romania
Contracted Rent(1): €68.9 million
Poland
Contracted Rent(1): €45.5 million
Globalworth Combined
Contracted Rent(1): €114.4 million
4.0%
8.3%
7.7%
3.7%
3.1%
3.9%
16,5%
87.7%
multi
national
State Owned
29.0%
multi
national
State Owned
master lease
59.6%
76.5%
multi
national
State Owned
master lease
Occupancy(2): 90.8%
WALL(4): 6.4 years
Occupancy(2)(3): 98.5%
WALL(4): 4.6 years
Occupancy(2): 93.3%
WALL(4): 5.7 years
Note:
1. Contracted Rent comprises commercial standing properties and developments
2. Occupancy Rate comprises commercial standing properties only
3. Occupancy in Poland includes the positive impact of various rental guarantees, which range between 3 and 5 years, covering the majority of space which is
currently vacant
4. WALL refers to commercial standing properties and developments
5. Multinational, National and State Owned and Master Lease refers to rent contribution by tenant origin
6. All data is as of 31 December 2017
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
Occupancy in Tower I stood at 46.8% (73.6% including
tenant options) on 31 December 2017 and has
increased to 54.5% (88.9% including tenant options) in
2018. The Company is also pleased to announce the
first pre-lettings of nearly 7.9k sqm to Stefanini and
PC4Cards in Tower II (expected delivery Q1-2018) at
Globalworth Campus, which is now 28.0% pre-let.
Partnership with such large corporates is a testament
both to the quality of this project and to
Globalworth's standing and reputation as the leading
office investor and developer in the local market.
New contracts signed in Romania in 2017 included
well-known national and multinational corporates
such as Amazon (Globalworth Campus) for 13.5k sqm,
Stefanini (Globalworth Campus) for 6.6k sqm, Wipro
(Globalworth Tower) for 3.9k sqm, Microsoft
(Globalworth Plaza) for 3.6k sqm, Global Compass
(City Offices) for 3.3k sqm, RCS-RDS (City Offices) for
2.6k sqm and Coface (Globalworth Plaza) for 2.4k
sqm, as well as Amoma, Zara/Inditex Group, Printec,
PC4Cards, Cegedim, ACNielsen and others. Since the
beginning of 2014, the Company has successfully
negotiated the take-up of approximately 295.5k
(311.4k including tenant options) sqm of commercial
GLA within its buildings.
The Company following its expansion in Poland
through GPRE, has enhanced its tenant base by
adding new corporates to its list of partners, as well
as corporates who already have presence in its
Romanian portfolio, which is considered important for
the overall effective asset management of the
portfolio. Overall, in Romania and Poland the
portfolio is leased to approximately 440 national and
multinational corporates from 28 countries and 37
different sectors / industries, with a remaining WALL
on the commercial-leased space of approximately 5.7
years as 31 December 2017.
Globalworth’s occupancy rate for its commercial
standing portfolio at the end of 2017 was 93.3%
(95.4% including options).
tenant Contribution by origin –
Commercial Contracted rent
114.4m
3.1%
3.9%
16.5%
46.3m
5.6%
5.5%
88.9%
48.0m
5.8%
8.2%
86.0%
76.5%
120
90
m
€
60
30
0
2015
Multi
2016
2017
National
State owned
Master lease
tenant Contribution by origin –
Commercial Contracted areas (sqm)
750,000
562,500
)
s
’
0
0
0
(
m
q
S
375,000
187,500
747,913 sqm
2.1%
3.1%
12.3%
310,700 sqm
3.7%
4.5%
329,200 sqm
3.7%
6.1%
82.6%
91.8%
90.2%
0.0
2015
Multi
2016
2017
National
State owned
Master lease
Commercial Contracted rent Expiration Profile –
(% of total)
l
a
t
o
t
f
o
%
30
24
18
12
6
0
29.9m
2.4%
23.8%
30.1m
26.3%
11.6m
0.7%
9.5%
11.5m
10.1%
14.4m
12.6%
8.2m
7.2%
4.7m
4.2%
3.8m
3.4%
2018
2019
2020
2021
2022
2023
2024
≥2025
lease agreements
Master lease
28
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
29
FINANCIAL REVIEW
Impressive growth in results and NAV
2017 was another very successful year for Globalworth in
terms of growth in revenues and profitability.
Highlights
¡ Continued the growth in revenues and NOI
by 14.1%, and 17.3%, respectively, resulting
mainly from new lease agreements signed,
the addition of five leased properties to the
standing commercial portfolio in Romania
during 2017, as well the positive results of
our Polish operations since the acquisition
of a 71.7% shareholding in GPRE;
¡ Further growth in normalised EBITDA by
13.5%, compared to 2016;
¡ EPRA Earnings for 2017 increased by €8.2
million compared to 2016, and IFRS Earnings
per share for 2017 amounted to 26.40 cents,
as compared to 17.57 cents in 2016;
¡ Dividends declared and paid for the first
time in 2017 of 22 cents per share (44 cents
per share annualised);
¡ Overall increase in the OMV of the assets
portfolio by €837.9 million;
¡ EPRA NAV as at 31 December 2017
increased by 49.5% from 31 December 2016
(3.2% increase in EPRA NAV per share); and
¡ Significant level of cash and cash
equivalents of €273.3 million at 31 December
2017, €52 million higher than at
31 December 2016.
Revenues and Profitability
¡ Total revenue reached €77.9 million in 2017 (14.1%
or €9.6 million higher than in 2016);
¡ NOI also increased in 2017, following closely the
increase in total revenues and reaching a total of
€51.1 million (2016: €43.6 million), representing an
increase of 17.3% or €7.5 million compared to 2016;
¡ EBITDA1 amounted to €31.5 million (2016: €43.8
million), however, the decrease compared to 2016
is due to the higher level of acquisition costs and
non-recurring expense items in 2017;
¡ Normalised EBITDA2 amounted to €41.2 million
(2016: €36.3 million) and followed the growth trend
in revenues and NOI in 2017 with an increase of
13.5% over 2016;
¡ EPRA earnings amounted to €16.8 million in 2017
(2016: €8.6 million), representing an increase of
€8.2 million or 95.6% over 2016;
¡ Increased finance costs during 2017 by 19.4%
resulted from the full amortisation of unamortised
debt issue costs of c.€16.1 million, following the
successful refinancing of the Company’s debt with
the issuance of the €550 million Eurobond in June
2017 at a coupon of 2.875%; and
¡ Earnings before tax of €26.2 million increased by 115%
as compared to 2016 (€12.2 million), despite the
significant costs associated with the increased
investment and refinancing activities during 2017,
mainly as a result of the increase in operational results
(NOI) and the contribution of the c.€25.7 million
(unrealised) gain recorded on the acquisition of the
71.7% shareholding in the GPRE Group, Poland.
1 Earnings attributable to equity holders of the Company 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 (2017: €6.7
million; 2016: €6.7 million), non-recurring income (2017: nil; 2016:
€3.4 million); plus: acquisition costs (2017: €10.0 million; 2016: €0.1
million); plus: non-recurring administration and other expense
items (2017: €6.4 million; 2016: €2.5 million).
Portfolio Valuation, Shareholders Equity,
Total Assets and NAV
¡ The outstanding level of investment activity during
2017 (c.€328.8 million invested on new acquisitions and
advances made for further acquisitions, including the
71.7% shareholding in GPRE, and c.€69.4 million on
properties under development) led to an 82.7%
increase in the value of our investment property
portfolio at 31 December 2017, which reached
€1.8 billion (31 December 2016: 0.98 billion);
¡ Total assets at 31 December 2017 exceeded
€2.1 billion and increased by 75.4% from 31
December 2016; and
¡ EPRA NAV at 31 December 2017 (€1.17 billion)
increased by 49.5% from 31 December 2016
(€783.8 million), while EPRA NAV per share
increased by 3.2% to €8.84 per share (31 December
2016: €8.57 per share) and 6.5% over H2-2017
following completion of the GPRE transaction
(30 June 2017: €8.30 per share).
Cash Flows
¡ Cash generated from successful equity and debt
financing during 2017 of €897.8 million in total,
while €430.2 million was used on the repayment of
more expensive senior and corporate level debt
facilities;
¡ Cash used in investments made during 2017 of €388.0
million in total, including the acquisition of two
standing properties and the completion or further
advancing of the construction of properties under
development in Romania, the acquisition of the 71.7%
shareholding in GPRE in Poland, and the acquisition
by GPRE of three additional standing properties
towards the end of December 2017;
¡ Dividends paid during 2017 in respect of the
six-month period ended 30 June 2017 of €19.9
million; and
¡ Cash and cash equivalents at 31 December 2017
(€273.3 million) increased by €52 million compared
to 31 December 2016 (€221.3 million).
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
Revenues and Profitability
€77.9m
total revenue in 2017
€273.3m
Cash and cash equivalents
at 31 December 2017
2017 Evolution of NoI and revenue – Cumulative data by quarter
80
60
m
€
40
20
0
Q1 16
Q2 16
Q3 16
Q4 16
Q1 17
Q2 17
Q3 17
Q4 17
revenue
NoI
2017 Evolution of NaV/share and oMV by quarter
€
10
9
8
7
6
5
4
3
2
1
0
Dec 15
Mar 16
Jun 16
Sep 16
Dec 16
Mar 17
Jun 17
Sep 17
Dec 17
NaV – basic per share
NaV – Diluted per share
EPra NaV per share
EPra NaV
oMV
2,000.00
1,800.00
1,600.00
1,400.00
1,200.00
1,000.00
m
€
800.00
600.00
400.00
200.00
0
30
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
31
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
FINANCIAL REVIEW CoNtINUED
CASE STUDY
€550 million
Eurobond pricing
in June 2017, Globalworth successfully completed
a €550.0 million eurobond raise with a fixed
interest rate of 2.875%.
This was the Company’s inaugural issue of such an instrument
and we were delighted by the very positive response it received
from national and international investors.
As part of the marketing effort, management met with many
fixed income investors in eight European countries, which
included Romania, France, Germany and the UK, to establish a
strong and diverse investor base for this milestone transaction.
The issue was more than two times oversubscribed, resulting in
the Company increasing the size of the transaction by €50 million
and a tightening of the interest rate on the coupon.
The Eurobond carried a rating of BB+/Stable by Standard &
Poor's and Ba2/Stable by Moody's in recognition of the outlook
for growth, diversity and capital raising potential (targets
materialised in Q4-2017).
The instrument has a term of five years, expiring in June 2022,
and is traded on both the Irish and Bucharest stock exchanges.
“With this transaction we are greatly
simplifying our debt capital
structure, significantly reducing our
average cost of debt and further
increasing our war chest for the
next phase of our growth in
Romania and the broader CEE
region, predominantly in Poland.”
Dimitris Raptis
Deputy chief executive Officer,
chief investment Officer
Investor Distribution by Geography
5%
7%
8%
12%
43%
25%
UK 43%
Germany 25%
France 12%
Benelux 8%
romania 7%
Other 5%
Investor Distribution by Investor type
2%
7%
9%
82%
asset managers
Official institution
insurance
Banks
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33
FINANCING AND LIQUIDITY REVIEW
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
Robust liquidity and capital base
Gara Herastrau
Financing Achievements During 2017
2017 has been a cornerstone in the Group’s financing activity,
marked by the successful issuance in June 2017 of a €550 million
Eurobond at a coupon of 2.875% and its listing on the Irish and
Bucharest Stock Exchanges, as well as the successful €340 million
equity raise in December 2017.
The most significant achievements in this area during 2017 were
as follows:
Debt Structure as at 31 December 2017
Loans and borrowings maturity and short-term / long-term debt
structure mix
The Group has credit facilities and Eurobond with different
maturities, out of which 98% are due in the long term, while only
a very small portion of 2% mature in the short term, as presented
in the graph below (compared to 93% and 7%, respectively, at 31
December 2016):
Debt Financing/Refinancing:
The total debt portfolio of the Group at 31 December 2017
incorporates the senior debt of GPRE Group and ranges
between short and medium to long-term debt, denominated
mostly in EUR, with insignificant facilities denominated in
Romanian Leu ('RON') and Polish Zloty ('PLN').
¡ In June 2017, the Group issued a €550 million Eurobond. The
five-year euro-denominated Bond matures on 20 June 2022
and carries a fixed interest rate of 2.875 per cent. A significant
proportion of the net proceeds of the Eurobond were utilised
in the repayment of existing secured lending, contributing to
the very significant decrease in the weighted average interest
rate on debt financing to 2.62% at 31 December 2017 from
5.25% at the end of 2016; and
¡ In November 2017 the Group signed a €30 million revolving,
long-term facility with Erste Group Bank AG, secured on the
TAP property. The full amount of this facility was undrawn at
31 December 2017.
The majority of the Group’s debt (€550 million Eurobond) is
unsecured, while the remaining of the Group’s debt is secured
with real estate mortgages, pledges on shares, receivables and
loan subordination agreements in favour of the financing parties.
Equity Raising and Payment of Dividends:
In December 2017 we successfully raised €340 million,
diversifying further our equity investor base.
In July 2017 the Group had its first interim dividend payment of
22 cents per share (c.€19.9 million) in respect of the six-month
period ended 30 June 2017, while another interim dividend of
22 cents per share (c.€29.1 million) was paid in January 2018 in
respect of the six-month period ended 31 December 2017.
Servicing of Debt During 2017
In 2017 we have repaid in total c.€24 million loan capital
(excluding the refinancing of existing facilities using the
proceeds of the Eurobond), and c.€13.4 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.
As outlined above, in December 2017 €340 million additional
equity was raised, contributing to the significant increase in
available cash resources at year end to €273.3 million, while
additional available liquidity from undrawn loan facilities at
31 December 2017 amounted to €32.7 million.
loan maturities - Short term vs long term
2017
2016
0%
20%
40%
60%
80%
100%
Short term
long term
At 31 December 2017, the weighted average remaining duration
of the Group’s debt is 5.4 years (2016: 4.2 years).
Maturity by year of the principal balance outstanding
at 31 December 2017.
600
500
400
m
€
300
200
100
0
2018
2019
2020
2021
2022
2023-2034
Debt Covenants and Securities
The Group’s financial indebtedness is arranged with standard terms
and financial covenants, the most notable being:
¡ the debt service cover ratio ('DSCR') / interest cover ratio ('ICR'),
with values ranging from 100% to 300% (be it either historic or
projected);
¡ the Gross LTV ratio, with contractual values ranging from 60% to
83% (versus the significantly lower overall Gross LTV ratio of the
Group at 31 December 2017 of 49.5%; Net LTV at 31 December
2017 of 34.3%);
¡ the loan to cost ratio ('LTC') with a maximum value of 75%; and
¡ the secured leveraged ratio of 30%;
with no breaches of the aforementioned values occurring for the year
ended 31 December 2017.
The Group’s credit facilities concluded with local banks in Romania
and Poland are secured with real estate mortgages, pledges on
shares, receivables and loan subordination agreements in favour of
the financing banks.
Further details on the Group’s debt financing facilities are provided in
note 15 of the consolidated financial statements.
Debt Denomination Currency and Interest Rate Risk
Our long-term loan facilities are almost entirely Euro-denominated,
the Group’s loans are denominated in Euro, with insignificant portions
denominated in RON and PLN, 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 each
year.
The weighted average interest rate on debt financing as at 31
December 2017 amounted to 2.62% versus 5.25% at 31 December
2016. As outlined above, the significant decrease is mainly due to the
refinancing of all but one of the Group’s secured facilities using the
proceeds of the Eurobond.
In addition, as a result of the fixed coupon Eurobond, the most
significant portion of the Group’s indebtedness has a fixed interest
rate or it is hedged against interest rates fluctuations, which
minimises any interest rate risks for the Group.
34
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Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
THE TEAM
Top management with a strong track
record in the real estate sector
team structure
Ioannis Papalekas
Founder & CEO
¡ 20 yrs (18 yrs in Romania) real estate
track record
¡ Multi-sector real estate experience
in Romania and SEE
¡ Previously established one of the most
successful private real estate platforms in
Romania, acquiring, developing, asset
managing and selling assets worth over
€1bn between 2001-08
Andreas Papadopoulos
CFO
Dimitris Raptis
Deputy CEO/CIO
Adrian Danoiu
COO
¡ Chartered Accountant with over
¡ Over 20 yrs of experience in financial
25 yrs of experience in accounting &
financial management, audit and
transactions advisory
¡ 16 yrs with big 4 audit firms (EY and PwC)
¡ Joined Globalworth in 2014
services 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
¡ Over 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
Andrew Cox
Head of IR & Corp. Development
¡ 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
¡ 16 yrs of experience, mainly in listed real
estate investment. Former Portfolio
Manager at Ell Capital, having also been
at GIC Real Estate, Numis and Schroders
¡ Joined Globalworth in 2014
¡ Joined Globalworth in 2013
¡ Joined Globalworth in 2017
Construction and
Development
D. Pergamalis
Group Head
(+ 10 people)
Property Compliance
Asset Management
Leasing
G. Udroiu
Group Head
(+ 2 people)
c. Kolonias
Group Head
(+ 7 people)
e. iftimie
Group Head
(+ 5 people)
Marketing &
Communications
G. Oltenescu
Group Head
(+ 1 person)
Investments and
Capital Markets
Legal
Accounting
and Finance
Operations and
Administrations
S. andre
D.CIO
S.Sapkas
D.CIO
(+ 5 people)
c. tirziu
Group Head
(+ 2 people)
a. Papadopoulos
CFO
(+ 17 people)
a. Danoiu
COO
(+ 14 people)
Platform of 75 professionals highly skilled in their respective fields
36
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37
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
CORPORATE SOCIAL RESPONSIBILITY
Globalworth
Tower
Respecting our social and
environmental objectives
at Globalworth we believe that it is our duty to manage
responsibly the social, environmental and economic impact
of the way we do business and to contribute to the
community in which we live and work.
Our objectives
¡ Create value for shareholders by
¡ Positively impact and improve the
acting consistently in an ethical and
socially responsible manner.
future prospects of our local
community.
¡ Create an environment in which
people want to work and be
associated with.
FOCUS AREA
2017 INITIATIVES
BENEFICIARIES
SOCIAL
ENVIRONMENTAL
¡ Supported our selected charitable
¡ Hospice Casa Speranței (Hospice of
causes, contributing in excess of €500k
over the year.
¡ Continued encouraging our staff to divert
Hope), Save the Children, and United
Way were the main causes supported
by Globalworth in 2017.
part of their social contributions to
charitable causes.
¡ More than 10 other foundations and
NGO’s received our support.
¡ Staff actively contributed personal time
to charitable initiatives.
¡ Enhanced the range of ‘good cause’
events which Globalworth hosted or
participated in.
¡ Over 100 scholarships awarded
to children.
¡ Globalworth day camp grew bigger,
with 450 children hosted at Adunații
Copăceni (Hospice of Hope).
¡ Christmas Charity Days at Globalworth
hosted more than 1,200 children over
a four day period during the
festive season.
¡ Maintained our commitment to owning an
¡ local communities benefiting from
environmentally friendly real estate
portfolio, adding 11 green certified
properties in romania and Poland.
¡ Properties added to our environmentally
friendly portfolio included:
– brEEaM: Very Good or Excellent: 7
properties.
– lEED Gold or Platinum: 4 properties.
¡ Invested in the development of platform
that will allow us to better measure and
monitor the performance of our properties.
¡ Focused on energy efficient and sustainable
solutions for our development projects
which we seek to formally green certify
following their completion.
reduced carbon emissions.
¡ tenants benefiting from lower energy
costs, positively impacting their
profitability.
¡ People working or visiting our buildings
benefiting from improved “living”
conditions.
¡ our partners benefiting by assisting us
in developing and maintaining our
green buildings.
¡ our investors benefiting through the
creation of long term sustainable value
in our portfolio.
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39
CORPORATE SOCIAL RESPONSIBILITY
CoNtINUED
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
SOCIAL OUr PeOPle
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
male
Female
age
Under 25
41 – 50
length of service
25 – 40
Over 50
up to 1 year
3 – 5 years
1 – 3 years
Over 5 years
2016
2017
2016
2017
2016
2017
46%
46%
46%
44%
44%
44%
54%
54%
54%
29%
29%
29%
27%
27%
27%
11%
11%
11%
18%
18%
18%
6%
6%
6%
49%
49%
49%
11%
11%
11%
6%
6%
6%
15%
15%
15%
53%
53%
53%
40%
40%
40%
26%
26%
26%
56%
56%
56%
1
1
1
7
7
7
1
1
1
32
32
32
38
38
38
12
12
12
34
34
34
39
39
39
60%
60%
60%
9%
9%
9%
55%
55%
55%
12%
12%
12%
29%
29%
29%
54%
54%
54%
29%
29%
29%
63%
63%
63%
62%
62%
62%
31%
31%
31%
15%
15%
15%
60%
60%
60%
38%
38%
38%
25%
25%
25%
50%
50%
50%
25%
25%
25%
12%
12%
12%
38%
38%
38%
48%
48%
48%
6%
6%
6%
38%
38%
38%
23%
23%
23%
38%
38%
38%
3%
3%
3%
57%
57%
57%
23%
23%
23%
17%
17%
17%
board
board
board
Management
Management
Management
board
board
board
Management
Management
Management
board
board
board
Management
Management
Management
board
board
board
Management
Management
Management
board
board
board
Management
Management
Management
board
board
board
Management
Management
Management
40
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41
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
CORPORATE SOCIAL RESPONSIBILITY
CoNtINUED
Over the years, Globalworth has supported
many charitable actions with the power to
make a difference in the communities in
which we live and operate.
We firmly believe that being socially responsible, addressing
social issues such as education, the environment and
palliative care, can make a real contribution to the welfare of
society and, at the same time, help to modernise and shape
conditions for the future.
We are very pleased that in 2017 we were able to continue
supporting the social causes that we believe in, and together
with Hospice Casa Speranței, Save the Children, Renașterea
Foundation, Make a Wish, United Way and many others
NGOs, positively impact the lives of those in need.
It is important both for the Globalworth family and for its
founder that our involvement in causes goes beyond financial
contributions, and we actively invest our personal time and
efforts to support those who need it most. Being involved
and demonstrating to those in need that they are not
fighting their battles alone is for us as equally important as
the financial contribution that we have committed to make.
With this in mind, last year we organised eight charitable
events and participated in a number of others, as well as
visiting selected charities throughout the year.
5
Special Champions
Globalworth was the sponsor of the 10th edition of
Special Champions, a sports initiative dedicated to
children with various disabilities to show them how
capable they are and to encourage them to have an active
lifestyle. The event promoted both physical activity and
artistic events, including contests for running, tennis,
dancing and theatre. Globalworth provided special prizes
such as bicycles, scooters, water bottles and sweets.
Globalworth Camp Day 2017
The second Globalworth Camp Day at Adunații Copăceni,
one of HOSPICE's socio-medical centres, brought together
450 children from different NGOs such as Hospice Casa
Speranței, Make-a-Wish Romania, the Foundation for the
Hearing Impairment, the Association for Equal
Opportunities and Saint Dimitrie Foundation. Over 150
volunteers participated in the event and spent time with
their young guests. The volunteers and children
collaborated in specially organised workshops and
together they played football, learned how to make toys,
enjoyed origami, and participated in fun activities designed
to bring smiles and happiness to the children’s faces.
Moreover, to everyone's delight, Romanian entertainment
and sport personalities attended the event and
entertained everyone present.
Edelweiss Gala
In 2017, Globalworth participated in the Edelweiss Gala, a
charity event held by Hospice Casa Speranței to raise
donations for those suffering from a life-limiting disease.
Illuminated in Pink
On October 1st, Globalworth Tower was lit up in pink, the
colour of hope, in honour of Breast Cancer Awareness
Month. The XVIIth Illuminated in Pink event, a campaign
designed to draw attention to early detection of breast
cancer, was organised by Renasterea Foundation and took
place under the slogan “Art for Health”.
The Bucharest Marathon
Globalworth participated in the 2017 running of the
Bucharest Marathon as the official sponsor for Foundation
Hospice. In addition, 20 members our team ran as
TeamGlobalworth to raise awareness for those in
palliative care.
Diploma
Diploma is a project initiated by The Institute, designed to
offer a start to a new generation of artists, architects,
designers and creatives from Romania through an
impressive exhibition. Events are aimed at attracting
public interest in the arts, design and culture, as well as
generating a dialogue between graduates and senior
professionals from creative industries. The project, which
in 2017 celebrated its fourth anniversary, took place
between the 6th and the 15th of October.
Globalworth decided to support the Architecture section
as part of this project in line with the company’s ambition
to create pleasing work environments through modern
and sustainable solutions.
Christmas Tree Festival
Globalworth was one of the main partners of the 2017
Christmas Tree Festival charity event, an auction
organised by Save the Children Romania to support
school attendance for vulnerable children. The tree
purchased by our company together with Catena,
Carrefour, RBC and Club Med, was designed by Ștefania
Mircea & Save the Children Romania.
Christmas Charity Days
In 2017, Globalworth brought the magic of winter holidays
to over 1,200 children from various NGOs such as Hospice
Casa Sperantei, Save the Children Romania, United Way,
Make a Wish Foundation, Sf. Dimitrie Foundation, ‘Un
strop de Fericire’ Association and many others. One of
the largest events of its kind in Bucharest, Globalworth
Christmas Charity Days provides a perfect opportunity to
do something extra for the less fortunate.
For four days between December 18-21, the Globalworth
Tower lobby was transformed into a winter wonderland
where the children had the opportunity to sing, play and
enjoy themselves.
Each day, 300 children participated in creative workshops
where they learnt how to create their own wooden toys,
Christmas tree decorations, origami, dolls or globes. To
add a little bit of magic, carols and live music were
performed for most of the day. And, to make it better still,
a healthy breakfast and/or lunch for everyone was
included. Popcorn and cotton candy was also involved
and, of course, Santa Claus brought a big bag of gifts.
42
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CORPORATE SOCIAL RESPONSIBILITY
CoNtINUED
SOCIAL OUr cHaritY
SUPPortING
HOSPICE CASA SPERANTEI
hoSPICE Casa Speranţei (member of the hospices of
hope Network), established in 1992, is the largest non-profit
organisation in romania providing free specialist palliative
care services.
Since its inception and through its work, more than
22,000 patients and their families have received support
at the hospice and discovered that they are not alone in their
battle.
Palliative care aims to improve the quality of life of
patients and their families when faced with the problems of
an incurable illness through medical care and social support,
as well as through psycho-emotional and
spiritual counselling.
www.hospice.ro
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
Globalworth & Hospice –
Casa Speranței Foundation
¡ 4.0k children and adults received free treatment.
¡ 4.8k consultations in out-patient clinics - care without
admission.
¡ 6.7k attendances in day centre activities; counselling
and creative / recreational activities.
¡ 1.2k Hospice in-patient unit admissions.
¡ +110k visitors provided online assistance.
The Hospice Centre at Adunații-Copaceni
the hospice Centre at adunaţii-Copaceni is a new socio-
medical therapy centre for children with rare or life-limiting
illnesses and
their families.
located 15km from bucharest in adunaţii Copaceni, hospice
is developing a centre which, once completed, will be used
for medical respite care and therapeutic sessions for families,
as well as training courses in paediatric palliative care for
medical professionals. In addition, it will include a day centre
(educational-therapeutic activities for children), shelter for
families in crisis situations and an educational centre (for
parents and palliative care specialists), as well as family
accommodation and recreational areas.
During the last few years, hospice Casa Speranţei has
organised residential summer trips at adunaţii Copaceni for
children and teenagers suffering from life-limiting illnesses,
recent bereavement or needing respite.
¡ The land was donated to HOSPICE Casa Speranție 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 (five apartments) and an
educational centre (for parents and palliative care
specialists).
SAVE THE CHILDREN
(Salvații Copiii)
UNITED WAY
United way worldwide is a non-profit organisation that
works with almost 1,800 local United way offices in over
45 countries and territories in a coalition of charitable
organisations to pool efforts in fundraising and support.
United way romania was established in 2004, since which
time it has supported social programmes and initiatives that
improve the lives of children, adults and elders at risk.
Its work focuses on the three building blocks of a thriving
community: access to quality education, good health and
sufficient income to support a family.
www.unitedway.ro
Globalworth & United Way
¡ Helped 11k children, families and elders whose issues
stem from education, health or finance.
¡ Over 7k children from disadvantaged environments
have been encouraged to continue their studies and
not abandon education.
¡ Supported 5k children from poor communities to go to
school and kindergarten.
¡ c.1.5k youth and adults that were facing difficulties
received help to better integrate into society, both
socially and professionally.
¡ Over 2k children, adults and elders received social and
medical care needed for a decent life.
¡ More than 4.7k children from poor communities were
supported through school and kindergarten.
Save the Children is an international non-governmental
organisation that promotes children's rights, provides relief
and helps support children in developing countries. It was
established in the United Kingdom in 1919 to improve the
lives of children through better education, healthcare, and
economic opportunities, as well as providing emergency aid
in natural disasters, war, and other conflicts.
the Save the Children community comprises Save the
Children International and 28 member organisations working
to deliver change for children in 120 countries.
In romania, the Save the Children foundation (“Salvaţi
Copiii”) has been one of the most active NGo’s supporting
the welfare of children in a number of ways including
equipping hospitals and neonatal units in over 20 counties,
offering direct counselling and parenting services, providing
educational support to children from disadvantaged
communities and information services on online protection,
and promoting actions for the rights of children.
www.salvaticopiii.ro
Globalworth & Save the Children
(Salvații Copiii)
¡ +65 healthcare units equipped in Romania, estimated
to have contributed to the rescue and optimal
treatment of more than 24k babies over a 5-year
period.
¡ Direct counselling and parenting services for 3.7k
children and 2.2k parents, and training for 530
specialists to prevent children abuse.
¡ Quality educational support for 2.4k children from
disadvantaged communities and help for 1.2k children
to cope with the period of separation from their
parents.
¡ Educated 60k children and 15k specialists and teachers
on the protection of children online.
¡ Involved more than 150k children in actions regarding
the promotion of the rights of the child.
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CORPORATE SOCIAL RESPONSIBILITY
CoNtINUED
Overview
StrateGic review
POrtFOliO Overview
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.
¡ 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
We target principally properties which have BREEAM Very
Good / LEED Gold or higher green certification or with the
potential to achieve this, and currently 18 of our standing
properties are certified as environmentally-friendly.
In Romania we own 10 green certified offices, four of which
were certified prior to acquisition and six were certified
following their acquisition or development by the
Company. These include the landmark Globalworth Tower,
which was the first property in the SEE to be awarded with
a LEED Platinum certification. In Poland we have a further
seven other offices with green accreditation.
We consider investment in energy efficient properties as a
business advantage, as it 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).
sustainable value in the portfolio.
In-line with our commitment to a “greener” portfolio, we
have already begun the green certification or re-
certification process for 8 of our properties and are
confident that we will adding them to our green certified
portfolio in coming few months.
At Globalworth, as part of our effort to make our portfolio
more energy efficient and improve tenant awareness of
energy consumption and conservation, we have developed
a platform together with Honeywell, a prime tenant in our
portfolio, which can be used to measure and monitor:
¡ Comfort levels in office space by measuring
temperature, CO2 and humidity.
¡ Energy consumption and how this compares to other
buildings in our portfolio.
¡ The level of water conservation through recycling rain
and reusing grey water.
¡ The efficiency of all electrical and mechanical equipment,
allowing us to ensure that this is working optimally.
¡ Any areas where conditions fluctuate, indicating that
equipment is not functioning or being used correctly.
We are currently in the testing phase of this control
platform which we will be looking to incorporate initially
into our Bucharest portfolio and, soon after, to the
remainder of the portfolio.
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 in the future.
¡ Developments are designed to be energy
efficient and sustainable, aiming to achieve
lEED Gold or brEEaM Very Good or
higher accreditations.
We are pleased to report that since the beginning of 2017, 11 of our portfolio properties
were certified with BREEAM Very Good / LEED Gold or higher accreditation.
Green additions (2017 - Q1-2018):
Properties owned or
developed by Globalworth
Properties acquired
active manaGement
explore and implement alternatives to improve the
environmental footprint of properties
Globalworth platform developed with Honeywell.
Romania
¡ Globalworth Tower:
LEED Platinum
¡ Globalworth Plaza:
BREEAM Excellent
Romania
¡ Green Court “C”: LEED Gold
Poland
¡ Green Horizon (two properties): LEED Gold
¡ A4 Business Park (three properties): BREEAM
Very Good
¡
Tryton: BREEAM Excellent
¡ West Gate: BREEAM Excellent
¡ Hala Koszyki: BREEAM Very Good (Q1-2018)
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.
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47
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
CORPORATE SOCIAL RESPONSIBILITY
CoNtINUED
ENVIRONMENTAL FOCUS
We have 18 buildings currently green certified.
our awards
(lEED)
“Building a sustainable portfolio is
also a commitment to our partners
and our shareholders to create value
for the long term.”
our awards
Platinum
Gold
Excellent
UNDER CERTIFICATION/
RECERTIFICATION
LEED Gold/BREEAM
Very Good or Higher
Globalworth
Tower
Green Court
"A"
Green Court
"B"
Green Court
"C"
BOB
BOC
Globalworth
Plaza
TCI
Globalworth
Campus
City Offices
Green Horizon
Gara Herastrau
Tryton Business
House
West Gate
Renoma
CB Lubicz I/II
BOB/DB Space
Unicredit HQ
A4 Business Park
Hala Koszyki (retail)
Very Good
Hala Koszyki (office)
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49
CORPORATE SOCIAL RESPONSIBILITY
CoNtINUED
ENVIRONMENTAL FOCUS Overview OF tHe new GlOBalwOrtH mOnitOrinG PlatFOrm:
in conjunction with Honeywell, Globalworth is
developing a customised platform which
analyses data from more than 5000 sensors in
Globalworth tower (the pilot property) in
order to assess and maintain its performance
to the highest standards.
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
Facility Summary
Comfort Performance
Comfort Zone Summary
Average Daily Site Comfort
the platform’s mainframe provides a snapshot of the
property’s energy consumption by monthly average and
performance by type of equipment. this enables our internal
team to evaluate energy consumption and monitor whether
equipment is performing within the parameters of the design
criteria. In the upcoming release, additional features will be
incorporated. these will allow us to improve our monitoring
not only of the property’s criteria but also its performance
against other properties in our portfolio and other buildings
with the same green certifications.
It provides an overview of the overall comfort levels of
the property by zone and by floor. the platform currently
indicates the temperature of each zone, which will be
complemented by Co2 and humidity censoring levels when
incorporated in the next release.
It provides a detailed view of the comfort levels of each zone
and floor monitored by the platform, allowing a review of the
property’s performance at a micro level. this means we can
identify and resolve any discomfort experienced by tenants
due to improper use or potential malfunction of equipment
in an effective and efficient way. orderly resolving of such
issues improves the life of equipment and reduces energy
consumption.
Monitoring the average site comfort levels both at
specific intervals (typically on an hourly basis) and over a
period of time, allows our internal teams to analyse the
temperature of the building against the tenant settings for
the corresponding operated areas. this allows us to ensure
that the tenant’s comfort level is maintained throughout
operating hours.
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51
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
identify
evaluate
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 105-107 of the Annual Report.
During the last few years 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.
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
53-57 of the Annual Report.
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
Indexation of Principal risks
Internal control
h
g
H
i
t
c
a
p
m
I
10
6
13
7
1
2
11
4
12
8
w
o
L
3
9
5
Less
Probability
More
e
r
u
s
o
p
x
E
The diagram above 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.
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53
RISK REPORT PRINCIPAL RISKS & UNCERTAINTIES
CoNtINUED
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
Key
The following key is used in the table below to highlight the
changes in risk exposures during the year ended 31 December
2017:
In addition, the risks marked with
relevant for the Viability Statement analysis.
have been considered
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
Risk
Impact
Mitigation
4
counterparty
credit risk
loss of income may result from
the possible default of tenants.
the Group has a diversified tenant base (c.440 tenants), the vast
majority of which 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.
Risk
Impact
Mitigation
Business risks
1
2
exposure to the
economic
environment in
romania and
Poland
a negative trend in the
economic activity in romania
and Poland 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 and Polish 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.
changes in the
Political or
regulatory
Framework in
romania, Poland
or the european
Union
the Group was set up to carry
out investments in the Central
and South-Eastern Europe
region, focusing on property
investments in romania and
Poland. It is therefore exposed
to political and regulatory
framework changes that may
occur in this region.
the Group has recently initiated its first investments outside romania
(independent EU bodies place it among the most rapidly growing
economies in Central and South-Eastern Europe), namely in Poland
with the acquisition of a 71.66% shareholding in GPrE, a Group of
companies holding real estate investments in Poland and listed on
the Polish Stock Exchange.
the Group’s Executives frequently monitor political or regulatory
developments in the romanian and Polish market through their own
observation and also by frequent reviews of available third-party
reports on the developments in romania and Poland. In cases when
changes in regulations occur, appropriate action is taken so as to
maintain compliance with applicable regulations in romania and
Poland.
Despite the recent frequent changes in members of government in
romania and some international criticism the Polish government has
attracted as a result of certain decisions, Management believes that
both economies continue to have a stable outlook for the medium to
long term.
Property risks
3
acquisition of
Properties
Inability to execute the Group’s
plan of investing in high-quality
properties 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 properties, 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 and Poland 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.
Change from
prior year
Decrease due
to the
continuous
growth of
GDP in
romania and
Poland.
Decrease due
to the
expansion of
operations in
the Polish real
estate market,
one of the
largest in
Europe in
terms of
availability of
high-quality
properties.
5
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 2017, the Group’s weighted average interest
rate on debt financing amounted to 2.62% at 31 December 2017,
representing a significant decrease as compared to 31 December
2016 (5.25%) as a result of the refinancing of the Group’s debt In June
2017 with the issuance of the €550 million Eurobond at a fixed coupon
of 2.875% and with a five year duration. the Group explores on a
continuous basis new refinancing options so as to reduce further its
average debt financing costs.
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.
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.
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 2017), 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.
Change from
prior year
Decrease due
to further
improvements
in the tenant
mix in its
property
portfolio,
focusing
increasingly
on blue-chip
multinationals
with significant
operations in
romania and /
or in Poland.
Decrease due
to the
refinancing of
most of the
Groups senior
debt with the
issuance of
fixed coupon
Eurobond in
June 2017.
the majority
of the Group’s
debt at 31
December
2017 carried
fixed interest
charges.
Decrease due
to the
improvement
of the
occupancy
rates on the
Group’s
properties in
romania.
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55
RISK REPORT PRINCIPAL RISKS & UNCERTAINTIES
CoNtINUED
Risk
Impact
Mitigation
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.
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.
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 holds frequent meetings with current
and potential equity investors and bond holders, as well as
continuous discussions with leading global, European, Polish and
romanian financing institutions in connection with its financing
requirements.
Since admission, the Group has raised c.€2 billion in equity and debt
(including new loan facilities and rolled-over loan facilities on the
acquisition of subsidiaries) to meet its financing requirements.
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.
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.
Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
Change from
prior year
Risk
Impact
Mitigation
11 Foreign exchange
risk
Significant fluctuations,
especially in the romanian leu
to Euro and the Polish Zloty to
Euro exchange rates, may lead
to significant realised foreign
exchange losses. whereas the
romanian leu displays a
gradual devaluation trend
against the Euro, in the recent
few months the Polish Zloty has
appreciated against the Euro.
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 and the Polish Zloty to Euro exchange rates
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 and Polish Zloty 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.
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.
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, Poland
and Cyprus) in relation to oECD/bEPS recommendations.
Even though there have been significant changes in the romanian
and Polish corporate taxation legislation in recent months, these
changes were required in order to comply with the EU anti tax
avoidance Directive.
the Group has a specialised department dealing on a daily basis with
matters related to compliance with such regulations in romania and
Poland, 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.
13 compliance with
Fire, Structural or
Other Health and
Safety
regulations
Non-compliance with related
regulations in romania and
Poland 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.
Decrease due
to the
increasing
ability of the
Group to
attract equity
investors and
bond holders.
Examples are
the €550
million
Eurobond
issued in June
2017 and the
€340 million
equity raise in
December
2017
Change from
prior year
Increase due
to the
additional
exposure to
the Polish
Zloty to Euro
exchange rate
fluctuations as
a result of the
expansion into
the Polish real
estate market.
Increase due
to the recent
more frequent
changes in the
taxation
legislation and
practices in
romania and
Poland.
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Overview
StrateGic review
POrtFOliO Overview
GOvernance
Financial StatementS
VIABILITY STATEMENT
in accordance with provision c2:2 of the 2016 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 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 and Poland, 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 and Poland. 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; 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 2017, 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 53-57.
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 2021.
It should be noted that this assessment is based on the
following assumption which is 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.
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59
PORTFOLIO
REVIEW
Introduction
romania properties map
Globalworth tower
Globalworth Plaza
Globalworth Campus
bob
boC
Green Court Complex
Unicredit hQ
renault bucharest Connected
taP
Dacia warehouse
Poland properties map
hala Koszyki
Cb lubicz I/II
Green horizon
a4 business Park
tryton business house
62
68
70
71
72
74
75
76
78
79
80
81
82
84
86
87
88
89
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61
PORTFOLIO REVIEW
Overview
Strategic review
POrtFOliO Overview
gOvernance
Financial StatementS
Best-in-class real estate portfolio
romania: Portfolio Value by Property type
romania: Portfolio Value by location
a high quality portfolio with properties positioned in
prime locations within their respective sub-markets in
romania and Poland, with a total consolidated appraised
value of €1.8 billion.
Globalworth’s real estate portfolio continued to grow in 2017, with
the Company maintaining its strong momentum in Romania while
investing for the first time outside its primary operating market and
into Poland.
As at 31 December 2017, the Company’s combined portfolio
comprised 29 investments with a total of 47 properties in
Romania and Poland, two of the largest real estate markets in the
CEE region respectively, with an appraised value of €1.8 billion,
an increase of 85.7% compared to 2016.
Asset Focus
Globalworth’s primary focus is to invest in standing or development
office properties, which are subsequently actively managed by the
Company. Such properties accounted for c.70.7% of our combined
portfolio value as of year-end 2017.
In addition, through its investment in GPRE, the Company now
controls three high-street mixed-use properties in Poland, which
account for c.17.0% of our combined portfolio value. These multi-
functional, high quality properties are centrally located within their
respective submarkets and combine high street retail and class “A”
office space.
Over the course of the year, Globalworth further increased its
exposure to Romania’s light-industrial / logistics sector, encouraged
by the strong demand for high quality space in the sector and the
opportunity of providing a holistic real estate solution for our
corporate partners. The success of our TAP light-industrial park in
Timisoara, which was further developed in 2017 following the
completion of two new facilities, and the addition of the Dacia
Warehouse resulted in the Company’s light-industrial / logistics
portfolio rising to an appraised value of €103.4m as of 31 December
2017. In addition, recognising the overall demand for high quality
light-industrial / logistics space in Timisoara and the attractiveness of
TAP’s location, we have acquired 30 hectares of land (valued at €7.4m)
close to the park which we aim to develop in the short / medium
term.
The remainder of our portfolio is located in Bucharest / Romania and
includes 346 residential units which form part of the Upground
complex, other auxiliary premises and two land plots held for future
development, accounting for 6.2% of our combined portfolio value.
Geographic Focus
Our real estate portfolio in Romania grew during the year, mainly
through the addition of 5 standing properties, further progress in our
development projects and the acquisition of 30 hectares of industrial
land for future development. As a result, our Romanian combined
portfolio reached €1,135.3 million as at 31 December 2017, accounting
for 62.5% of Globalworth’s total portfolio.
In December 2017, the Company acquired a controlling stake in
GPRE, following which its exposure to the Polish market consisted
primarily of a portfolio of 20 standing properties with an appraised
value of €680.1 million (as of 31 December 2017).
Real estate investments in Poland, as at 31 December 2017,
accounted for c.37.5% of our total combined portfolio value. Given
that the properties are located in six different cities, exposure to a
single city / market does not exceed c.10.0% of the total consolidated
portfolio value of the Company. Wroclaw (two investments) and
Warsaw (five investments) account for 10.0% and 9.4% of combined
portfolio value, offering total GLA of 106.3k sqm.
The greatest concentration of our portfolio remains in the new
Central Business District (CBD) of Bucharest (Romania) where we have
10 standing properties and a development project, accounting for
69.6% of the combined value of our Romanian portfolio and
representing 259.7k sqm of standing commercial GLA and 346
residential units as of 31 December 2017.
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.
Key investments in the new CBD include the Class “A" flagship office
Globalworth Tower (54.7k sqm), the Green Court complex (54.3k
sqm), the Class “A” BOC office property (57.0k sqm) and, finally, our
Globalworth Campus project from which Tower I (29.0k sqm) was
delivered in 2017.
The remainder of our Romanian portfolio is spread across the capital
and in two of the country’s prime logistics hubs, Timisoara and Pitesti,
which account for 20.6%, 5.5% and 4.2%, respectively, of our
combined portfolio value.
10,6%
9.1%
80.3%
Office
light industrial/logistics
residential & Other
9.8%
90.2%
Bucharest
romania Other
Poland: Portfolio Value by Property type
Poland: Portfolio Value by location
45.4%
54.6%
Office
mixed Use
25.1%
74.9%
warsaw
Poland Other
Combined Portfolio Value by Property type
Combined Portfolio Value by location
6.6%
5.7%
17.0%
70.7%
Office
mixed Use
light industrial/logistics
residential & Other
28.1%
9.4%
6.1%
56.4%
Bucharest
romania Other
warsaw
Poland Other
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63
PORTFOLIO REVIEW
CoNtINUED
Standing Properties
Globalworth’s portfolio of standing properties almost tripled in
number in 2017, with the addition of 22 properties through acquisition
and 3 properties which were under construction at the beginning of
the year and were subsequently delivered to the market. As of
year-end there were 39 standing properties in Romania 19 and Poland
20.
Our standing portfolio, as of 31 December 2017, comprised 25 Class
“A” offices and three mixed-use investments (with 7 properties in
total) in central locations in Bucharest (Romania) and 6 major office
markets/cities of Poland. In addition, we own a light industrial park
with 5 facilities in Timisoara (Romania), a modern warehouse in Pitesti
(Romania), and part of a residential complex in Bucharest (Romania).
Globalworth’s total standing GLA at the end of 2017 had almost
doubled to c.791.0k sqm, of which c.748.1k sqm was commercial
space, while the appraised value of our standing properties rose to
c.€1.7 billion (as at 31 December 2017), representing a c.1.9x increase
on the previous year.
Most notable additions to our portfolio this year include Tower I of
our Globalworth Campus development project in Bucharest, Hala
Koszyki in Warsaw and the A4 Business Park in Katowice.
The Globalworth Campus project is a large-scale development
situated in the new CBD of Bucharest, which on completion will offer
three Class “A" office towers, retail spaces and other supporting
amenities including a conference centre. Tower I (left tower), part of
Phase A, was delivered in September 2017, offering 29.0k sqm over 12
floors and two underground levels. The property, which is currently in
its lease-up phase, as of end-of January 2018 was already 54.5%
leased (88.9% incl. options) to high quality tenants such as Amazon
and Honeywell. Occupancy for the property as of 31 December 2017
was 46.8% (73.6% incl. options)
Hala Koszyki, is a multi-tenanted mixed-use revitalisation /
development project in Warsaw, completed in 2016, combining
commercial and entertainment features with three modern class “A”
office properties (and a smaller secondary office). The project’s
centrepiece is the former ‘Koszyki’ market hall, commonly known as
the ‘People’s bazaar’ built between 1906 and 1908, which has been
renovated and complements the three recently completed modern
office buildings, offering 22.2k sqm of high quality commercial space.
The property is pre-certified with BREEAM 'Very Good' green
certification and is 100% leased to tenants such as Mindspace. In
Q1-2018 the retail component of Hala Koszyki received BREEAM 'Very
Good' certification, and we are currently in the process of certifying
the office component.
The A4 Business Park is a modern, multi-tenanted class “A” office
park in the southern part of Katowice (Poland). The park comprises
three properties, delivered between 2014 and 2016, offering total
GLA of 30.6k sqm. A4 is 100% leased to tenants including the
well-known international corporates IBM, Rockwell Automation and
PKP Cargo.
All our properties are modern and have been completed or
refurbished since 2011, with c.66.7% of our GLA and c.66.5% of our
standing combined portfolio value having been delivered within the
past 7 years. It is worth noting 37 of our properties have been
delivered or significantly refurbished in the past 5 years, and following
the delivery of our development projects (Globalworth Campus
- Towers II and III, Renault Bucharest Connected) and other future
completions, the proportion of modern office stock in our portfolio
will further increase in the next two years.
The number of ‘green’ properties owned by the Company has also
increased since the beginning of 2017, with the most notable addition
being our landmark class “A” Globalworth Tower office in Bucharest,
which was officially awarded the Green certification of LEED Platinum,
becoming the first building in Romania and the broader SEE region to
have received the highest available Green accreditation. In addition,
Globalworth Plaza in Bucharest received BREEAM Excellent
certification in 2017, while 8 of the properties added in our portfolio
through acquisition are green certified with BREEAM Very Good or
higher and LEED Gold accreditations, including Green Court “C”
(Bucharest), Green Horizon (Lodz), Westgate (Wroclaw), Tryton
(Gdansk) and the A4 Business Park (Katowice).
Our portfolio now includes 18 green accredited properties,
accounting for 57.3% of the standing consolidated portfolio value. We
have commenced the process for certifying or re-certifying 8 of our
properties and in addition we are assessing the green certification
potential of our larger, non-certified office and mixed-use properties,
targeting green accreditations of BREEAM Very Good / LEED Gold or
higher, thus aiming to further increase the number of green certified
properties in our portfolio over the next 12 months.
Occupancy of our standing commercial portfolio as of 31 December
2017 had significantly improved to 93.3%, representing a 12.2%
increase compared to the same period last year (83.1% as of 31
December 2016) or a 10.2% increase on a like-for-like basis. In total we
have c.697.8k sqm of commercial GLA leased to c.440 tenants, the
majority of which is tenanted to national and multinational corporates
which are well-known within their respective markets. This high level
of occupancy is underpinned by the fact that 32 (of 38) of our
commercial properties had an occupancy rate in excess of 95%, and
we are in active discussions with a number of tenants for the
remaining vacant space in our portfolio.
In addition to our commercial portfolio, Globalworth owns 346
apartments in Upground Towers, a modern two-tower residential
complex centrally situated in the new CBD of Bucharest, with a total
of 571 apartments. The property benefits from fine views of the
nearby Tei lake and adjacent to our BOB, BOC and Globalworth
Campus investments and in close proximity to 6 other offices in our
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.
Globalworth’s exposure to the residential sector further decreased in
2017 and accounted for c.4.3% of our combined portfolio value at
year end (from 9.5% in 2016), mainly as a result of the new additions in
our portfolio and the sale of 75 residential units during the year. At 31
December 2017, 195 apartments in Upground Towers were leased,
generating c.€1.5 million of annual rental income.
Overview
Strategic review
POrtFOliO Overview
gOvernance
Financial StatementS
Developments
Globalworth continued with its active development programme in
Romania in 2017, delivering to market Tower I of the class “A"
Globalworth Campus development and two light-industrial facilities
in TAP, with total of 51.0k sqm of commercial GLA. As at the end of
the year, we had 2 other properties in Bucharest under construction
which, upon completion, will further increase our footprint of high
quality office standing GLA by 70.5k sqm.
Tower II (right tower) of the Globalworth Campus development
project is in progress, with structural works and the façade almost
completed. The majority of the remaining works involves the interior
areas of the building. On completion, Tower II will offer GLA of 28.2k
sqm and 180 parking spaces, with 12 floors above ground and two
underground levels. The building is expected to be completed at the
end of Q1-2018 and its delivery will mark the completion of Phase I of
the project, comprising Towers I and II.
In addition, construction of Phase II of the Globalworth Campus
development is expected to commence in H1 2018 and will include a
class “A” office building, conference facilities and other auxiliary
areas. During 2017, the Company improved the design of Phase II and
we are currently undertaking the tender process for the appointment
of the general contractor responsible for its development. Phase II is
expected to be completed within 22 months from commencement
and, on completion, will contribute additional GLA of approximately
34.8k sqm and 506 parking spaces.
At the end of 2017, Globalworth’s development project known as
Renault Bucharest Connected ('RBC') was under construction. RBC,
which is jointly owned by the Company and the Elgan Group, will
house Groupe Renault’s new headquarters in Romania as well a
dedicated design centre for the development of future models of
cars. On completion, RBC will offer 42.3k of GLA and 1,000 parking
spaces. The project is progressing in line with its envisaged timeline,
with all preparatory activities completed and construction having
reached the third floor. The development is expected to be delivered
in Q1-2019.
Globalworth according with the terms of its agreement with the Elgan
Group will be funding 100% of the development cost and upon
completion of construction will have a right of first offer for the
acquisition of its non-controlling stake in the project.
The Company has adopted several environmentally friendly
principles for its development projects and, as such, anticipates these
projects to be awarded Green certification following their
completion.
Elsewhere, following the delivery of two new light-industrial facilities
at TAP in 2017, the size of the park has reached 103.4k sqm of GLA,
with the potential for further development which would increase GLA
to 131.9k sqm if the extension options currently available to its
existing tenants are taken up.
The “As Is” value of the Development Projects as of 31 December
2017 was approximately €79.4 million. On completion, the projects are
expected to deliver approximately 133.8k sqm of new office and
light-industrial space, with an appraised value of c.€202.1 million
Land for Future Development
Globalworth owns land plots in two prime locations in Bucharest
(Herastrau Lake and the historical CBD), covering a total surface of
9.8k sqm, in which office or mixed-use properties can be developed.
We have prioritised the land in the historical CBD for future
development, and we anticipate constructing a mix-use property of
c.27.0k sqm space, subject to relevant approvals.
In 2017 the Company acquired 30 hectares of land near the TAP
light-industrial park in Timisoara. This land can be developed in
phases delivering c.139.8k sqm of new high-quality light-industrial /
logistics space in the area.
We are currently performing planning and/or permitting activities for
Globalworth’s land bank in order to be able to develop it in the
future. The total appraised value of our land for future development
as of 31 December 2017 was c.€25.7 million.
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Commercial Standing Properties31 Dec. 1631 Dec. 17Number of Investments11 24 Number of Properties13 38 GLA (sqm)370,033 748,143 "As Is" Valuation (€m)788.6 1,632.6 Occupancy83.1% 93.3% Contracted Rent (€m)46.9 107.6 WALL (years)6.4 5.3 Total Standing Properties31 Dec. 1631 Dec. 17Number of Investments1225 Number of Properties1439 GLA (sqm)419,986790,967 "As Is" Valuation (€m)881.5 1,710.3 Contracted Rent (€m)48.5 109.1 PORTFOLIO REVIEW
CoNtINUED
Overview
Strategic review
POrtFOliO Overview
gOvernance
Financial StatementS
Portfolio structure
globalworthTM
rOmania
POlanD
Office
mixed Use
(High street
Office &
retail)
light-
industrial /
logistics
residential
& Other
land for
Future
Development
Standing
Properties
Developments
Forward
Purchase
Developments
rOFO
Properties
Properties
Y
H
P
A
R
G
O
E
G
S
S
A
L
C
T
E
S
S
A
S
U
T
A
T
S
Conditional investments not
included in portfolio value
• Colour split based on appraised value of the properties and country
• Portfolio in Poland owned through GPRE
Overview of Selected Current and Future Developments
Development
Globalworth Campus
Asset
Status
Tower II
Tower III
Renault
Bucharest
Connected
TAP
Extension
Timisoara
Land in
Bucharest
CBD
TAP II
Timisoara
Under
construction
Future
development
Under
construction
Future
development
Future
development
Future
development
Expected Delivery
Q1–2018E
2020E
Q1–2019E
GLA (sqm)
28.2 k
34.8 k
42.3 k
Capex to 31 Dec 17 (€m)
As Is Value (€m)
Estimated Capex (€m)
Completion Value (€m)
Est. Yield on Development Cost
16.9
37.6
15.8
51.2
12.2%
6.6
16.7
45.0
66.6
18.4
24.4
39.8
74.0
9.5%
2020E
27.0 k
2018-2020E
134k sqm in
phases
7.0
12.6
35.0
12.6
13.8%
4.7
7.4
56.4
–
10.0%
28.5 k
0.8
0.7
7.4
10.3
11.5%
1. Renault Bucharest Connected (reflected with 100% ownership).
2. Estimated capex based on contracted and company estimates.
Forward Purchase and Right of First Offer Portfolio
Globalworth, through GPRE, has a portfolio of three investments in Poland which are at different phases of construction and which it has either
prefunded or in which it owns a minority stake (25%), with the right to acquire the remaining interest once certain conditions have been
satisfied.
Forward Purchase
¡ West Link is a class “A” office project located in west part of Wroclaw next to the West Gate office building owned by the Company. The
property, which is expected to be completed in Q2-2018, will offer on completion c.14.4k sqm of GLA over six floors above ground and 266
parking spaces. West Link, on acquisition, will be fully occupied, and is currently 97.7% pre-let mainly to Nokia, with a 5-year master lease
on available spaces
Right of First Offer (25% current ownership)
¡ Beethovena Business Park is a class “A” office project located in Warsaw comprising two, five-floor offices, which on completion will offer
total GLA of 34.2k sqm. Beethovena I and II are of similar size and are expected to be delivered in Q3-2019 and Q4-2019 respectively
¡ Browary J is a class “A” office project located in Warsaw comprising a stepped shaped “main” building extending over 11 floors and the
lower 7th floor wing. The project is expected to be delivered in Q4-2018 and, on completion, will offer 15.0k sqm of GLA, of which c.45%
has been pre-leased to a blue-chip tenant. Browary J will be part of Browary Warszawskie (Warsaw Brewery) a mixed-use (office, residential
and retail) development in the Wola district which has become one of the most dynamic commercial and residential areas of Warsaw
Beethovena I
Beethovena II
Browary J
Total ROFO
West Link
Estimated
Completion
Date
Location
Warsaw Q3-2019
Warsaw Q4-2019
Warsaw Q4-2018
GLA
17,845
16,380
14,979
Wroclaw Q2-2018
14,362
Total ROFO and Forward purchase
63,566
For the ROFO properties 50% LTV is assumed.
*
* West Link “As Is” value, represents the estimated completion value of the property.
Remaining
Amount (€)
to be
invested for
100%
As Is Value
(31 Dec
2017)
Value on
Completion
(31 Dec
2017)
Amount
Invested (€)
2.9
2.8
4.2
18.0
27.9
16.5
14.4
19.4
–
50.3
6.9
3.9
14.0
36.4
61.2
42.1
36.9
54.3
36.4
169.7
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67
PORTFOLIO REVIEW
CoNtINUED
ROMANIA
our locations
Properties in bucharest
Overview
Strategic review
POrtFOliO Overview
gOvernance
Financial StatementS
17 Investments in prime locations
within their respective submarkets
valued at €1.1 billion, primarily
comprising of Class “A” offices.
GLOBALWORTH TOWER
GLOBALWORTH PLAZA
GLOBALWORTH CAMPUS
BOB
BOC
GREEN COURT COMPLEX
UNICREDIT HQ
RENAULT BUCHAREST CONNECTED
TCI
GARA HERASTRAU
CITY OFFICES
UPGROUND TOWERS
BUcHareSt
TAP
timiSOara
DACIA WAREHOUSE
PiteSti
UNICREDIT HQ
See on page 78
TCI
GLOBALWORTH PLAZA
See on page 71
GARA HERASTRAU
GLOBALWORTH TOWER
BOB
See on page 70
See on page 74
BOC
See on page 75
GLOBALWORTH CAMPUS
See on page 72
UPGROUND TOWERS
GREEN COURT COMPLEX
See on page 76
citY OFFiceS
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PORTFOLIO REVIEW (OUR OFFICE PROPERTIES)
CoNtINUED
Globalworth Tower
BUCHAREST, ROMANIA
Overview
Strategic review
POrtFOliO Overview
gOvernance
Financial StatementS
Globalworth Plaza
BUCHAREST, ROMANIA
Excellent
GLOBALWORTH TOWER
Bucharest, Romania
LEED 2009
CORE AND SHELL DEVELOPMENT
January 2017
Location
Status
Description
Bucharest / New CBD
Standing Property
Class “A” multi-tenanted
office building
Ownership
Year of completion
100%
2016
Appraised value "As Is"
€173.0 million
GLA
Occupancy
54,686 sqm
98.9%
Contracted Rent
€11.3 million
WALL
7.9 years
”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 at a height of 120m, extending over 26 floors above
ground and three underground levels.
Selected Tenants
Bunge, Delhaize Group,
Huawei, Nestle, NNDKP,
Vodafone, Wipro, Zara
Globalworth
The project was acquired in December 2013, developed by
Globalworth and following its delivery in February 2016, offers
c.54.7k sqm of GLA and 636 parking spaces. Globalworth Tower
is the first building in the SEE region to receive LEED Platinum
accreditation, the highest possible Green accreditation.
Note: All data as of 31 December 2017.
Location
Status
Description
Bucharest / New CBD
Standing Property
Class “A” multi-tenanted
office building
Ownership
100%
Year of completion
2010 (partial
refurbishment and
upgrade works 2014/17)
Appraised value "As Is"
€60.7 million
GLA
Occupancy
24,061 sqm
81.5% (96.3% incl. options)
Contracted Rent(1)
€3.7 million
WALL(1)
4.8 years
Selected Tenants
ACNielsen, Amoma,
Bayer, Cegedim,
Coface, Microsoft, Patria
Bank, Printec
Note: All data as of 31 December 2017.
(1) Figures do not include the impact of tenant options.
'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.
The property was delivered in 2010 and partially refurbished in
2014/15, with additional works carried out as part of our
Renovation and Maintenance programme in 2016/17, and
received BREEAM Excellent certification in 2017.
Globalworth Plaza was acquired by Globalworth in March 2015
and offers 24.0k sqm of GLA and 336 parking spaces. The
property extends over 21 floors above ground and has three
underground levels.
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PORTFOLIO REVIEW (OUR OFFICE PROPERTIES)
CoNtINUED
Globalworth Campus
BUCHAREST, ROMANIA
Under certification
Overview
Strategic review
POrtFOliO Overview
gOvernance
Financial StatementS
“A state-of-the-art development, balancing
Class “A” office, retail and other supporting
amenities over 92.0k sqm in the new CBD
of Bucharest.”
'globalworth campus' is a class “a” office project
located in the northern part of Bucharest on Dimitrie
Pompeiu street.
Phase “A”, currently under development, will comprise two (side)
towers facing Dimitrie Pompeiu Street (main street) offering on
completion a total GLA of c.57.2k sqm. The first tower was
completed in Q3-2017 and the second one is expected to be
delivered in Q1-2018, extending over 12 floors above ground with
two underground levels.
Phase “B” will comprise a third tower offering an additional GLA
of c.34.8k sqm. Construction is expected to start in H1-2018.
Globalworth Campus is expected to receive BREEAM Very Good
/ Excellent certification.
Location
Status
Description
Bucharest / New CBD
Tower I: Standing
Tower II: Under
construction
Tower III: Construction
not commenced
Class “A” multi-tenanted
office campus
Ownership
100%
Year of completion
2017–2020E
Appraised value "As Is"
€105.9 million
Note: All data as of 31 December 2017.
(1) Figures do not include the impact of tenant options.
GLA
Occupancy
Contracted Rent(1)
WALL(1)
Selected Tenants
92,026 sqm
Tower I:
- 46.8% (73.6% incl.
options)
- 54.5% (88.9% incl.
options) at 31 Jan. 18
Tower II: 28.0% (pre-let)
€3.0 million
10.8 years
Amazon, Honeywell,
PC4Cards, Stefanini
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PORTFOLIO REVIEW (OUR OFFICE PROPERTIES)
CoNtINUED
BOB
BUCHAREST, ROMANIA
Excellent
BUCHAREST, ROMANIA
Excellent
BOC
Overview
Strategic review
POrtFOliO Overview
gOvernance
Financial StatementS
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
Location
Status
Description
Bucharest / New CBD
Standing Property
Class “A” multi-tenanted
office building
Ownership
Year of completion
100%
2008
Appraised value "As Is"
€50.8 million
GLA
Occupancy
22,391 sqm
97.3%
Contracted Rent
€3.6 million
WALL
3.9 years
Selected Tenants
Deutsche Bank,
Clearanswer Europe,
NBG Group, NX Data,
Stefanini
Note: All data as of 31 December 2017.
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, with additional works carried out
as part of our Renovation and Maintenance programme in 2016/17.
BOB was acquired by Globalworth in 2014 and received both
BREEAM In-use /Excellent and LEED Gold certifications (for part
of the property) in the same year.
The property offers 22.4k sqm of GLA over seven floors above
ground and 142 parking spaces and is part of a wider building
complex developed between 2006 and 2011, which includes BOC
and Upground Towers.
Location
Status
Description
Bucharest / New CBD
Standing Property
Class “A” multi-tenanted
office building
Ownership
Year of completion
100%
2009
Appraised value "As Is"
€141.8 million
GLA
Occupancy
Contracted Rent
WALL
Selected Tenants
56,962 sqm
97.2%
€9.6 million
4.8 years
Deutsche Telekom, EADs,
GfK, Honeywell, Hewlett
Packard, Mood Media,
NBG Group, Nestle,
Stefanini
Note: All data as of 31 December 2017.
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, with additional works carried
out as part of our renovation and Maintenance programme in
2016/17.
boC was acquired by Globalworth in March 2014 and received
brEEaM In-use / Excellent Green certification the same year. It
was nominated in the category for the best Green 'office: In-Use'
property in the 2015 brEEaM awards and was the first property in
romania to be rated “Excellent” for asset Performance (Part 1) and
building Management (Part 2).
boC offers 57.0k sqm of Gla and 864 parking spaces over eight
floors above ground and three underground levels, and forms part
of a wider building complex developed between 2006 and 2011,
which includes bob and Upground towers.
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PORTFOLIO REVIEW (OUR OFFICE PROPERTIES)
CoNtINUED
Green Court Complex
BUCHAREST, ROMANIA
Overview
Strategic review
POrtFOliO Overview
gOvernance
Financial StatementS
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
“Award winning complex comprising of
3 Green certified Class “A” offices in the
new CBD of Bucharest.”
Location
Status
Description
Bucharest / New CBD
Standing Property
Class “A” multi-tenanted
office building
Ownership
100%
Year of completion
2014–2016
Appraised value "As Is"
€142.7 million
GLA
54,328 sqm
Occupancy
99.2%
Contracted Rent
€9.9 million
WALL
4.2 years
Selected Tenants
ABB, Abbott, Adecco,
Capgemini, Carrefour,
CITR, Colgate, Ericsson,
GM, Legrand, Merck,
Nordic, Orange, Sanofi,
Schneider Electric
Skanska, Softelligence,
Tradeshift
Note: All data as of 31 December 2017.
green court is a class “a” multi-tenanted office
complex located in the northern part of Bucharest
on gara Herastrau Street.
Green Court is an award winning complex developed by Skanska in
three phases, with the properties completed between 2014 and 2016.
Globalworth acquired the three class “A” offices in subsequent
transactions in June 2015, December 2015 and August 2017 and is
now the sole owner of the Green Court complex.
All three properties are LEED Gold certified and offer total GLA of
c.54.3k sqm and 834 parking spaces, with each building extending
over 12 floors above ground and 3 underground levels.
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PORTFOLIO REVIEW
CoNtINUED
Unicredit HQ
BUCHAREST, ROMANIA
Overview
Strategic review
POrtFOliO Overview
gOvernance
Financial StatementS
Renault Bucharest Connected
BUCHAREST, ROMANIA
Location
Status
Description
Ownership
Year of completion
Bucharest / North
Bucharest
Standing Property
Class “A” single-
tenanted office building
100%
2012
Appraised value "As Is"
€53.0 million
GLA
15,500 sqm
Occupancy
100%
Contracted Rent
€3.8 million
WALL
4.4 years
Selected Tenants
UniCredit Bank
Note: All data as of 31 December 2017.
'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.
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, offering
c.15.5k sqm of Gla and 156 parking spaces. the property extends
over 14 floors above ground and has two underground levels.
Location
Status
Description
Ownership
Year of completion
Bucharest / West
Bucharest
Development Property
Class “A” single-
tenanted office building
50.0%
2019
Appraised value "As Is"
€24.4 million
GLA
Occupancy
42,261 sqm
100.0%
Contracted Rent
€5.5 million
WALL
11.0 years
Selected Tenants
Automobile Dacia
Notes:
1) Data reflects 100% ownership (Globalworth owns 50% stake in RBC).
2) All data as of 31 December 2017.
'renault Bucharest connected' ('rBc') is a modern
office complex development, located in the western
part of Bucharest on Preciziei Boulevard.
the development is leased to Groupe renault romania for a
minimum of 11 years, and will host the tenant’s headquarters in
bucharest as well as a dedicated design centre.
rbC is under construction and expected to be delivered in Q1-
2019. on completion it will offer c.42.3k sqm of Gla and 1,000
parking spaces.
the project is jointly owned by Globalworth and the Elgan Group.
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PORTFOLIO REVIEW: OUR LOGISTICS / LIGHT-INDUSTRIAL PROPERTIES
CoNtINUED
TAP
TIMISOARA, ROMANIA
Dacia Warehouse
PITESTI, ROMANIA
Overview
Strategic review
POrtFOliO Overview
gOvernance
Financial StatementS
Location
Status
Description
Ownership
Timisoara
Standing Property /
Development
Light-industrial complex
100%
Year of completion
2011–2017
Appraised value "As Is"
€55.5 million
GLA
103,441 sqm
Occupancy
97.9%
Contracted Rent
€4.5 million
WALL
9.9 years
Selected Tenants
Continental, Honeywell,
Litens, Valeo Lightning
Note: All data as of 31 December 2017.
the timisoara airport Park (‘taP’) is a light-industrial
/ logistics complex located in the north-east of
timisoara.
the property is close to the international airport and benefits from
easy access to the fourth European Corridor.
the complex has been developed in phases, now comprising five
facilities with total Gla of 103.4k sqm.
taP is almost exclusively let to Valeo lightnings, Continental,
honeywell (originally Elster rometrics) and litens automotive
and has maximum capacity of c. 131.4k sqm Gla.
Location
Status
Description
Ownership
Year of completion
Pitesti / Central Romania
Standing Property
Modern Warehouse
100%
2010
Appraised value "As Is"
€47.9 million
GLA
68,412 sqm
Occupancy
100%
Contracted Rent
€4.1 million
WALL
7.6 years
Selected Tenants
Automobile Dacia
Note: All data as of 31 December 2017.
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 Groupe renault’s largest spare parts
and accessories distribution centres outside of France.
Globalworth acquired the Dacia warehouse in May 2017.
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Overview
Strategic review
POrtFOliO Overview
gOvernance
Financial StatementS
Properties in warsaw
PHILIPS HOUSE
BATORY BUILDING I
BLISKI CENTRUM
NORDIC PARK
HALA KOSZYKI
See on page 84
PORTFOLIO REVIEW
CoNtINUED
POLAND
our locations*
12 Class “A” office and mixed-use
investments, located in six of Poland’s
largest cities, valued at €680 million.
TRYTON BUSINESS HOUSE
gDanSK
BATORY BUILDING I
BLISKI CENTRUM
HALA KOSZYKI
NORDIC PARK
PHILIPS HOUSE
warSaw
GREEN HORIZON
lODZ
RENOMA
WEST GATE
wrOclaw
CB LUBICZ I/II
KraKOw
A4 BUSINESS PARK
SUPERSAM
KatOwice
*held via GPRE
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PORTFOLIO REVIEW (OUR MIX-USE PROPERTIES)
CoNtINUED
Hala Koszyki
WARSAW, POLAND
Overview
Strategic review
POrtFOliO Overview
gOvernance
Financial StatementS
“Landmark mixed-use revitalisation /
development project in Warsaw, offering
22.2k sqm of high quality office, commercial
and entertainment features.”
Location
Status
Description
Poland / Warsaw
Standing Property
Mixed-use property
(office and commercial)
Ownership(1)
71.7% (through GPRE)
Year of completion
2016 (refurbished)
Appraised value "As Is"
€108.4 million
GLA
22,246 sqm
Occupancy(2)
100%
Contracted Rent
€6.9 million
WALL
5.8 years
Selected Tenants
Mindspace, Multimedia,
Performante, Rossmann,
Symphar
Note: All data as of 31 December 2017.
(1) Investment 100% owned by GPRE
(2)Occupancy excluding rental guarantees (77.7%)
“Hala Koszyki” is a landmark multi-tenanted, mixed-
use revitalisation / development project in warsaw,
combining commercial and entertainment features
with three modern class “a” office properties
(and a smaller secondary office).
It is located near Plac Konstytucji, the Politechnika metro station, and
one of the main arteries of the city on al. Niepodleglosci, providing
easy access to the project.
Its centrepiece is the former ‘Koszyki’ market hall, commonly known
as the ‘People’s bazaar’ built between 1906-1908, which has been
renovated and complements the three recently completed modern
office buildings, offering 22.2k sqm of high quality commercial space.
Hala Koszyki was originally developed at the beginning of the 20th
century and, following its revitalisation, features the original Art
Nouveau façade and a functional complex with a total of 37
restaurants, cafés and other service units. In addition it offers 15.7k
sqm of office space and 202 parking spaces.
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PORTFOLIO REVIEW (OUR OFFICE PROPERTIES)
CoNtINUED
CB Lubicz I/II
KRAKOW, POLAND
Under certification
Green Horizon
LODZ, POLAND
Overview
Strategic review
POrtFOliO Overview
gOvernance
Financial StatementS
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
Location
Status
Description
Poland / Krakow
Standing Property
Class “A” multi-tenanted
office complex
Ownership (1)
71.7% (through GPRE)
Year of completion
2009 (refurbished)
Appraised value "As Is"
€70.7 million
GLA
23,986 sqm
Occupancy(2)
100%
Contracted Rent
€5.0 million
WALL
3.5 years
Selected Tenants
Avanade, BNP Paribas, BZ
WBK, Capita, Deutsche
Bank, International Paper
and PWC
Note: All data as of 31 December 2017.
(1) Investment 100% owned by GPRE
(2) Occupancy excluding rental guarantees (97.1%)
the larger building I extends over six floors above ground and two
underground levels, while building II extends over seven floors
above ground and an underground level, offering in total c.24.0k
sqm of office and 333 parking spaces.
the lubicz Business centre (“cB lubicz i/ii”) is a
modern class “a” multi-tenanted centre, comprising
two office buildings located close to the historic Old
town of Krakow on lubicz Street.
the centre was delivered in phases, with building I and II completed
in 2000 and 2009 respectively. In addition, over the past three years it
has undergone a quality upgrade with refurbishment and fit-out works
which are expected to continue in 2018.
Cb lubicz I/II, has been previously certified with brEEaM 'Very Good'
and we are currently undertaking its re-certification process.
the centre benefits from being close to the main train station of
Krakow, Galeria Krakowska shopping mall and university campuses.
Location
Status
Description
Poland / Lodz
Standing Property
Class “A” multi-tenanted
office complex
Ownership(1)
71.7% (through GPRE)
Year of completion
2012/2013
Appraised value "As Is"
€71.3 million
GLA
33,510 sqm
Occupancy(2)
100%
Contracted Rent
€5.2 million
WALL
5.6 years
Selected Tenants
Capita, Infosys,
McCormick, PKO BP,
PWC
Note: All data as of 31 December 2017.
(1) Investment 100% owned by GPRE (2)Occupancy excluding rental
guarantees 100.0%
green Horizon is a multi-tenanted modern office
complex located on Pomorska street in the north-
eastern part of lodz’s business district.
It was developed in phases by Skanska and comprises two Class “a”
offices delivered in 2012 and 2013 respectively.
the complex is easily accessible, situated in front of one of the principal
interchanges of lodz and close to the largest campus of the University
of lodz.
Green horizon extends over seven floors above ground and two
underground levels, offering c.33.5k sqm of office space and 407
parking spaces, and is lEED Gold certified.
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PORTFOLIO REVIEW (OUR OFFICE PROPERTIES)
CoNtINUED
A4 Business Park
KATOWICE, POLAND
Overview
Strategic review
POrtFOliO Overview
gOvernance
Financial StatementS
Tryton Business House
GDANSK, POLAND
Excellent
Location
Status
Description
Poland / Katowice
Standing Property
Class “A” multi-tenanted
office complex
Ownership(1)
71.7% (through GPRE)
Year of completion
2014-2016
Appraised value "As Is"
€68.5 million
GLA
30,556 sqm
Occupancy(2)
100%
Contracted Rent
€5.0 million
WALL
4.5 years
Selected Tenants
IBM, PKP Cargo, Rockwell
Automation
Note: All data as of 31 December 2017.
(1)
Investment 100% owned by GPRE.
(2) Occupancy excluding rental guarantees (96.4%)
the a4 Business Park is a modern, multi-tenanted
class “a” office park in Francuska street in the
southern part of Katowice.
the park comprises three offices delivered between 2014 and 2016,
which are all certified with brEEaM 'Very Good' accreditation.
the a4 business Park is within sight of the a4 motorway and is
close to residential and commercial buildings.
office I, II and III extend over six and nine floors respectively and
have one underground level, offering in total 30.6k sqm of Gla
and 605 parking spaces.
Location
Status
Description
Poland / Gdansk
Standing Property
Class “A” multi-tenanted
office building
Ownership(1)
71.7% (through GPRE)
Year of completion
2016
Appraised value "As Is"
€56.4 million
GLA
24,016 sqm
Occupancy(2)
100%
Contracted Rent
€3.8 million
WALL
4.0 years
Selected Tenants
Asseco, Ciklum, Intel,
Kainos, mBank, PGS
Software
Note: All data as of 31 December 2017.
(1) Investment 100% owned by GPRE (2) Occupancy excluding rental
guarantees (88.3%)
tryton Business House is a modern class “a” multi-
tenanted office building located in central gdansk
on Jana z Kolna and wały Piastowskie streets.
It has a characteristic “h” shape structure, comprising a front part
extending over six floors above ground and a rear part extending
over eleven floors above ground. both parts are linked through the
connection building, offering c.24.0k in Gla and 727 parking spaces.
the property is easily accessible by public and private transport and
is closely to the old town (historical centre) and the main railway station.
tryton business house was completed in 2016 and was accredited
with brEEaM Excellent certification in the same year.
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GOVERNANCE
board of Directors
letter from the Chairman
Corporate governance report
Directors’ report
remuneration committee report
audit committee report
92
96
98
100
103
105
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BOARD OF DIRECTORS
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
Ioannis Papalekas
Founder & Chief
Executive officer
Dimitris Raptis
Deputy Chief Executive
officer and Chief
Investment officer
Bruce Buck
Non-Executive Director
Norbert Sasse
Non-Executive Director
Founder of Globalworth, Ioannis Papalekas has nearly 20 years of
real estate investment and development experience, predominantly
in romania, having created one of the most successful real estate
development and investment groups in the romanian real estate
market. he has significant experience in the acquisition, master
planning, development, reconstruction, refurbishment, operation and
asset management of land and buildings across all major asset classes
in romania. before founding Globalworth, Ioannis was responsible for
the acquisition, development and successful disposal of more than
400,000 sqm of commercial (office, retail and logistics) space and 1,000
residential units in romania.
Dimitris raptis joined Globalworth in November 2012, following 15
years of experience in the financial services and real estate investment
management industries with Deutsche bank. the last 12 years were
spent 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.
bruce buck has been practicing law in Europe since 1983, and was
Managing Partner in Europe and latterly of Counsel for law firm
Skadden, arps, Slate, Meagher and Flom, until retiring from this role in
July 2017. he has been involved in work in Central and Eastern Europe
since 1990, comprising a broad range of mergers, acquisitions and
capital markets transactions, including IPos and high-yield transactions.
bruce is the Chairman and a Director of Chelsea FC PlC, and also
Senior Independent Non-Executive Director of Petropavlovsk PlC.
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 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. he was also 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.
Geoff Miller
Non-Executive Director,
Chairman of the board
and the remuneration
Committee
Eli Alroy
Non-Executive Director
and Senior Independent
Director
Andreea Petreanu
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. he
first moved to Moscow and from there 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 on the financials and technology sectors. he
is also a Director for a number of private companies.
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. Eli received a bSc
in Civil Engineering from the technion in Israel (Cum laude) 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.
andreea Petreanu is currently head of Credit risk Management at
Mizuho International in london. over the past 17 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.
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BOARD OF DIRECTORS
CoNtINUED
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
Akbar Rafiq
Non-Executive Director
John Whittle
Non-Executive Director,
Chairman of the audit
Committee
George Muchanya
Non-Executive Director
Peter Fechter
Non-Executive Director
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.
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), Chenavari
toro Income Fund limited (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, and
Guernsey investment funds. 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 Price
waterhouse 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 £20m
private equity acquisition of ora telecom. he was previously at John
lewis and was CFo of windsmoor (london lSE).
1. audit Committee Chair
2. audit Committee Chair and Senior Independent Director
3. Chairman
Alexis Atteslis
Non-Executive Director
alexis atteslis serves as a Portfolio Manager and Managing Director
at oak hill advisors. he shares portfolio management responsibilities
for European investments and serves on the board of various portfolio
companies. Prior to joining oak hill advisors he worked at Deutsche
bank and at 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.
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 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 front line deal negotiation and
execution team. 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.
Peter Fechter has deeply embedded entrepreneurial experiences of
all aspects of the property space. after graduating as a civil engineer
in 1968, he worked in South africa as a site agent and tendering
estimator, becoming CEo of a 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 a merger, acquisition and investment deals in South
africa and australia.
Richard van Vliet
Non-Executive Director
richard van Vliet is qualified as a Chartered accountant in South africa,
England and wales. on leaving Price waterhouse in South africa,
he became the sole proprietor of an audit practice in Johannesburg,
with work that focused on 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, an International Stock 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 the main board member of thames river Capital
holdings limited, a fund management company with $9 bn prior to its
disposal.
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INTRODUCTION TO GOVERNANCE
Letter from the Chairman
Highlights
¡ Strong supportive relationships with
shareholders and bond holders of the
Company, evidenced by our success in
capital markets
¡ 5 new Non-Executive Directors joined the
Board which now comprises 13 members
¡ Active involvement by the Board in
overseeing governance with 19 meetings
held during the year
¡ Continuous focus on high environmental
standards with 11 new green certified
offices added to our portfolio
¡ Outstanding health and safety record
Company’s ability to tap into the attractive lending
conditions available to it. As evidence to our scale,
this represented the largest corporate bond issue in
the history of the Bucharest stock exchange.
Following this progress, it was satisfying to see the
Company completed in December a €340 million new
equity capital raise, above target and oversubscribed
at a price of €8.75 per share, receiving good support
from our existing shareholders and, importantly, from
new shareholders to Globalworth.
It is with great satisfaction that we have seen the
considerable progress achieved in 2017 reflected in
the strong total return to shareholders through a
combination of share price performance and
dividend. An owner of our shares throughout 2017 will
have enjoyed a total return of 37%. The Company’s
improved traction in the capital markets has also
been seen by improved trading volumes of our shares
on the London Stock Exchange in recent months, with
average daily volume exceeding €400k/day in Q4
2017, compared to c.€75k/day in Q4 2016. Responding
to feedback from our investors, the Company has
expanded its investor relations and engagement
program, reflecting our commitment to build our
brand and market awareness in international capital
markets further. This places us in a good position, as
announced during the year, to progress our intention
to obtain a Premium Listing on the London Stock
Exchange's Main Market during the coming year.
Geoff Miller
chairman
Our growing momentum in the cee office sector is very
evident following the significant progress in 2017 in enlarging
our geographic footprint, portfolio size and our capital base.
alongside this, our commitment towards strong governance
and corporate sustainability and responsibility remains an
overriding priority.
Dear shareholders
I am pleased to introduce this Corporate Governance
report, in which we demonstrate our high standards
of corporate governance as we strive to voluntarily
meet the higher standards of the UK Corporate
Governance Code. 2017 has been a significant year
for Globalworth on a variety of fronts, and one which
we are confident we can further capitalise on in the
years ahead. The Board is grateful to all the
Company’s stakeholders for their ongoing
commitment and support.
I am delighted with the ongoing progress that the
Company continues to make, further extending the
impressive track record since IPO in 2013 and in-line
with our strategy and business model. While 2017 will
be marked by the Company’s expansion into Poland
which starts an exciting new chapter, the ongoing
underlying progress in Romania was also pleasing,
with growth in occupancy alongside the delivery of
new developments and acquisitions. The Company
successfully marked its debut in the debt capital
markets with a €550m Eurobond in June which was
more than 2x oversubscribed, and demonstrated the
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
The Board
The close relationship and open communication
between the Non-Executive and Executive Directors is
integral to our governance process, allowing the smooth
operation of the Board, and ensuring ongoing guidance
for the Company. This is evident through the 19 times the
Board convened in 2017, and I would like to thank all
members of the Board for their ongoing support. We
were pleased to welcome five new additions to our Board
of Directors over the course of the year, which now
comprises 13 members. Norbert Sasse, George
Muchanya, Peter Fechter, Richard van Vliet joined in
February 2017 following the enhancements to
governance announced at the end of 2016, and in
December 2017 we were pleased to be joined by Bruce
Buck. Together these additional members continue to
enhance the expertise and depth of knowledge from
which the Company benefits.
Geoff Miller
chairman
7 March 2018
Sustainability/Social Responsibility
All at Globalworth are committed to following strict
business ethics and in corporate social responsibility.
We are proud to place significant importance on this,
but firmly believe that this sustains long-term value
for the Company, our shareholders, the community
and environment.
Reflecting the importance not only for the
environment, but also as a key priority for many
prospective tenants, we continue to target buildings
offering strong green credentials, or scope where
environmental performance can be improved. Today,
we have a portfolio of 25 office properties in Romania
and Poland, of which 17 have received green
accreditation of BREEAM Very Good / LEED Gold or
higher. This was also recognised in the award of the
Best Leading Green Build Development & Developer
for Globalworth Tower at the CIJ Awards Romania. In
addition, in Q1-2018 the retail component of our Hala
Koszyki investment in Poland was green certified.
Giving back to the Community is a key principle in our
operations, both as a Company and through our
employees in a personal capacity. Over the years,
Globalworth has supported numerous local
communities, charities and hospitals both indirectly
and directly. Examples have included our efforts with
children and those in need of palliative care, but also
in education.
Health & Safety
Health and safety is of paramount importance to us,
with tens of thousands of people working at or
visiting our properties each day and across our
development sites. With c.791.0k sqm of standing
GLA in our property portfolio and an additional 70.5k
sqm under construction at the end of 2017, and we
work hard together with our partners to maintain an
outstanding record in this area. Across our portfolio,
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. 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.
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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’) issued by the
Financial Reporting Council in April 2016 which applies to
financial years beginning on or after 17 June 2016. The Board
believes that the Company has complied throughout the year
ended 31 December 2017 with the provisions set out in the UK
Code, subject to the statements made below in this section.
Board of Directors
Introduction
At the beginning of the financial year, 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, and on 12 December 2017
another Non-Executive Director was appointed.
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 2017, with the exception of the Company, the
Investment Adviser and Growthpoint Properties Limited, there
are no common directorships between members of the Board.
Chairman
The Chairman of the Board is Geoff Miller.
Senior Independent Director
Eli Alroy holds the role of Senior Independent Director.
Directors
Directors’ Duties and Responsibilities
The roles of Chairman and Chief Executive are separate. The
Chairman leads Board meetings and Board discussions and has
responsibility for the Board’s overall effectiveness. The Chief
Executive is responsible for the achievement of the Group’s
strategic and commercial objectives, within the context of the
Group’s resources and the risk tolerances laid down by the
Board.
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 and experience of the Executive and
Non-Executive Directors are set out on pages 92-95 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 103-104 and pages 105-107,
respectively, of the Annual Report.
The Investment 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 properties 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 properties 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 properties and
letting enterprises;
¡ annual budgets for capital expenditure;
¡ annual valuations of physical properties and letting
enterprises;
¡ philosophy, policies and strategy in respect of investment in
physical properties 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.
Shareholder Communications
A report on shareholder communications is considered at each
quarterly 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.
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
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 2017 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
Norbert Sasse
George Muchanya
Peter Fechter
Richard van Vliet
Bruce Buck
4
4
4
4
4
4
4
4
4
4
4
4
–
4
4
4
4
4
4
4
4
4
4
4
4
–
8
8
8
8
8
8
8
8
6
6
6
6
1
6
7
7
8
7
4
5
5
3
3
5
5
1
7
7
7
7
7
7
7
7
7
7
7
7
–
–
1
7
1
5
–
1
1
1
1
1
4
–
19
19
19
19
19
19
19
19
17
17
17
17
1
10
12
18
13
16
8
10
10
8
8
10
13
1
–
–
–
–
3
–
–
3
–
–
–
3
–
–
–
–
–
3
–
–
2
–
–
–
3
–
–
–
3
3
–
–
–
–
–
–
3
–
–
–
–
3
3
–
–
–
–
–
–
3
–
–
* Even though all Directors were eligible to attend the board Committee meetings, quorum was formed with the participation of 2 or 3 Directors at each
Committee meeting, as applicable depending on the case.
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 Zakiono Enterprises Limited (entity
beneficially owned by Ioannis Papalekas) 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). The Guernsey resident directors are
Geoff Miller, John Whittle and Richard van Vliet.
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.
An evaluation of the performance of the Board members who
served during the entire year ended 31 December 2017 has been
undertaken. The performance of the Chairman of the Board was
also evaluated by the other Directors. 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 considers the independence of each member of the
Board at each quarterly Board meeting and has concluded that
the majority of the Board comprises Directors who are
independent of the Company and free from any relationship
which could interfere materially with the exercise of their
independent judgement.
Tenure and Re-election of Directors
In accordance with the Company’s Articles of Incorporation, the
Company’s Non-Executive Directors, except Bruce Buck
(nominated and appointed by the Founder, Ioannis Papalekas),
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 40 of the Annual Report.
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99
DIRECTORS’ REPORT
The Directors present their Annual Report and the audited
consolidated financial statements of the Group for the year
ended 31 December 2017.
Directors’ Indemnities
The Company maintains a Directors’ and Officers’ insurance
policy for the benefit of its Directors, which applied throughout
the year and remains in force at the date of this report. There are
also third party indemnity provisions in place for the Directors in
respect of liabilities incurred as a result of their office, as far as is
permitted by law, which were approved at the quarterly Board
meeting held in December 2017.
Investing Policy
The Group’s investing 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 investing policy are
presented below:
Profile of Underlying Investments
¡ Focus on commercial properties (existing or to be
developed);
¡ Geographically located in Central Eastern Europe with a
primary focus on Romania and Poland;
¡ 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 investing policy of the Company can be found on
its website under Investor Relations/AIM Rule 26 disclosures and
on page 164 of the Annual Report.
Results and Dividends
The results for the year are set out in the consolidated statement
of comprehensive income on page 112 of the Annual Report.
The Company has already distributed in July 2017 and in January
2018 interim dividends of €0.22 per share for each interim
dividend distribution or €0.44 per share in total, in respect of the
year ended 31 December 2017, to holders of Shares. In addition,
the Company, consistent with the target of a sustainable and
growing dividend, has also announced a prospective dividend in
respect of the six-month financial period ending on 30 June 2018
of not less than €0.27 per share (or not less than €0.54 per share
annualised), which is anticipated to be paid in August 2018.
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.
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
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. Investment advice and opportunities are presented
for consideration/approval to the Investment Committee (or
directly to the Board if above certain thresholds).
Subject to any applicable law, the Investment Adviser complies
with all reasonable instructions issued by Investment Committee
or the Board, if above certain thresholds (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).
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.
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
Substantial Interests
At 31 December 2017, 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
Altshuler Shaham Ltd
European Bank for Reconstruction and Development
Gordel Holdings Limited
Number of
shares
% of issued
share capital of
the Company
38,371,429
25,129,187
20,335,697
13,099,680
7,180,580
5,714,286
5,203,712
29.0%
19.0%
15.4%
9.9%
5.4%
4.3%
3.9%
Directors’ Interests
At 31 December 2017 and 2016, Directors held (either directly or through companies controlled by them) the following declarable
interests in the Company:
Ioannis Papalekas
Dimitris Raptis
Geoff Miller
Eli Alroy
John Whittle
Akbar Rafiq
Alexis Atteslis
Andreea Petreanu
Norbert Sasse
Peter Fechter*
George Muchanya
Richard van Vliet
Bruce Buck
Number of shares held
Number of warrants held
2017
2016
2017
2016
25,129,187
527,834
21,000
698,814
11,900
–
–
–
114,286
60,000
–
–
–
23,277,101
352,407
11,000
398,814
9,000
–
–
–
–
–
–
–
–
2,830,020
–
11,000
–
9,000
–
–
–
–
–
–
–
–
4,245,030
110,000
11,000
260,000
9,000
–
–
–
–
–
–
–
–
* Shares held by a family trust of which Peter Fechter is a trustee and not a beneficiary.
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.
In December 2017 having received total subscription funds of €
8,775,050 from the warrant holders, the Company has issued and
allotted 1,755,010 Warrant Shares. In addition, in January 2018
the Company having received further subscription funds of
€150,000 from the warrant holders has issued and allotted
additional 30,000 Warrant Shares. Following this exercise, a
further 20,000 Warrants held at 31 December 2017 (11,000 held
by Geoff Miller and 9,000 held by John Whittle) are eligible to be
exercised under the same terms at the Warrant holders'
discretion.
As stipulated in the Founder warrant agreement, 2,830,020
warrants held at 31 December 2017 by Ioannis Papalekas remain
unvested in two further tranches. They 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. As outlined
above, 2,830,020 warrants remain unvested in two further
tranches.
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. The warrants held by Dimitris Raptis and Eli Alroy have
vested and have been exercised, while the warrants held by
Geoff Miller and John Whittle, have also vested but have not yet
been exercised.
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DIRECTORS’ REPORT CoNtINUED
rEMUNEratIoN CoMMIttEE rEPort
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
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 7 March 2018.
Richard van Vliet
Director
Auditors
The auditors, Ernst & Young Cyprus Limited, 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. During the year ended 31
December 2017 the Board exercised its power and on July 2017
acquired 56,623 shares in the market so as to satisfy awards
made under the share award plan in place for employees of the
Company's subsidiaries. 20,910 of these shares have already
been transferred to their beneficiaries under the share award
plan, while 35,713 shares are still held in treasury and will also be
utilised to satisfy awards made under the same share award plan.
Annual General Meeting
The AGM of the Company will be held on 18 June 2018 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 Group and to prevent and detect fraud and other
irregularities.
Composition of the Committee
From 1 January 2017 until 27 February 2017 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 reports at least annually to the Board in relation to its activities and
recommendations. The emoluments of the Directors is a matter for the Board, considering the recommendations received from the
Remuneration Committee. 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 fee arrangement plan for the Investment Adviser (the ‘Plan’).
During the year ended 31 December 2017, three meetings of the Remuneration Committee were held.
Directors’ Emoluments
The Directors’ emoluments during the year ended 31 December 2017 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 2017 the emoluments of the Directors were as follows and refer to note 32 to the financial
statements for other transactions with Directors:
Company
Subsidiaries1
Dividends2
Amounts in €‘000
Ioannis Papalekas
Dimitris Raptis
Geoff Miller
Eli Alroy
John Whittle
Akbar Rafiq
Alexis Atteslis
Andreea Petreanu
Norbert Sasse
Peter Fechter
George Muchanya
Richard van Vliet
Bruce Buck
Fees
–
–
56
200
56
–
–
46
–
37
–
38
6
Fees
Salary
–
–
29
–
29
–
–
–
–
–
–
–
–
869
150
–
–
–
–
–
–
–
–
–
–
–
Total
869
150
29
–
29
–
–
–
–
–
–
–
–
Total3
emoluments
2,469
875
85
200
85
–
–
46
–
37
–
38
6
1,600
725
–
–
–
–
–
–
–
–
–
–
–
439
58
1,019
1,077
2,325
3,841
1. Globalworth Investment Advisers Limited (‘GIAL') and Aserat Properties SRL for Ioannis Papalekas, and GIAL for Dimitris Raptis, Geoff Miller and John Whittle.
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 €1.6 million
(€0.8 million to be settled in cash and €0.8 million by the issuance of shares of the Company); and for Dimitris Raptis dividends include an accrual of c.€0.53
million (c.€0.26 million to be settled in cash and c.€0.26 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 c.€2.14 million was payable to the Directors as of 31 December 2017. An additional amount of €48,302 was due to the
Directors as of 31 December 2017 for out-of-pocket expenses incurred, which was settled subsequent to 31 December 2017.
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rEMUNEratIoN CoMMIttEE rEPort
CoNtINUED
aUDIt CoMMIttEE rEPort
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
During the year ended 31 December 2016 the emoluments of the Directors were as follows:
Company
Subsidiaries1
Dividends2
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
Fees
Salary
871
150
–
–
–
–
–
–
–
–
30
–
30
–
–
–
60
Total
871
150
30
–
30
–
–
–
Total3
emoluments
2,271
750
180
200
91
–
–
49
1,400
600
–
–
–
–
–
–
1,021
1,081
2,000
3,541
1. GIAL and Aserat Properties SRL for Ioannis Papalekas, and GIAL for Dimitris Raptis, Geoff Miller and John Whittle.
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 of31 December 2016 for out-of-pocket expenses incurred, which was settled subsequent to 31 December 2016.
Founder and Director Warrant Agreements
Please refer to page 101 of the Annual Report for details on the Founder and Director Warrant Agreements concluded on 24 July
2013.
Performance Incentive Scheme
The Company since 1 January 2016 has in place a performance incentive scheme for the Investment Adviser. 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
7 March 2018
Introduction
We present below the Audit Committee (‘the Committee’) Report for
the year ended 31 December 2017.
Structure and Composition
From 1 January 2017 until 27 February 2017 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.
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 94).
Principal Duties of the Committee
The role of the Committee includes the following:
¡ Financial Reporting:
– monitoring the integrity of the consolidated financial
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;
– 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.
Activities of the Committee
During the year ended 31 December 2017 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
2016 and 31 December 2017 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 2017 prior to
their approval by the Board.
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 valuations;
¡ accounting for business acquisitions and disposals;
¡ revenue recognition;
¡ use of the going concern principle as a basis for preparation of the
financial statements;
¡ 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 external valuers. 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.
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105
aUDIt CoMMIttEE rEPort CoNtINUED
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
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. During the year ended 31 December 2017
the Group made very significant acquisitions in Poland (investment in
GPRE) and Romania. The Committee focused its attention on the
acquisition of a controlling interest (71.66%) in GPRE and has ensured
that the Audit Committee meetings of GPRE are also attended by
one of its members. At this acquisition was completed in December
2017, the Committee considered the planning and execution of the
work of the Auditor in connection with the audit of the financial
position of GPRE as of the acquisition date (6 December 2017) and
the year end, as well the audit of the results and cash flows for the
period from acquisition date to the year end. There were no disposals
of core properties during the year ended 31 December 2017.
Revenue recognition
The Committee understands the importance of recognising
accurately the revenue generated as a result of the rental contracts
the Group has entered with tenants of its properties. This includes
the correct accounting under IFRS of lease incentives and any other
special clauses contained in lease agreements. The Committee is
updated by the Auditor annually on the results of the specific audit
procedures performed in this area.
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 2019 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 2021, 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 58.
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.
The Committee has reviewed the Company’s Annual Report and
financial statements for the year ended 31 December 2017 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 2017, presented on
pages 52-57 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 updated 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 has not identified to date an imminent need for
an internal audit function, however, it continues to evaluate this
requirement on a regular basis, considering also the significant
increase in the size of the Group as a result of the very
significant investments concluded towards the end of 2017 in
Poland.
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 2017.
¡ At the planning stage of the audit for the year ended 31
December 2017, the Chairman of the Committee met the auditor
in September 2017. 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;
– accounting for business combinations; and
– risk of misstatement due to fraud and error (associated to the
significant risks).
In addition, the Chairman of the Committee met in February 2018
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 2017, prior to submission of the draft Annual
Report to the Board for formal approval.
The Committee has also met with the external auditor to discuss in
detail the audit plan and the findings and recommendations based
on their audit for the year ended 31 December 2017.
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. On 29 January 2018 the Board
of Globalworth, following the resignation of Ernst & Young LLP so as
to facilitate the appointment of Ernst & Young Cyprus Limited as the
auditor of the Company, has proceeded with the appointment of
Ernst & Young Cyprus Limited. This appointment will be subject to
approval by shareholders at the next Annual General Meeting of the
Company.
Ernst & Young LLP, Guernsey has confirmed to the Board that
there are no circumstances in connection with its resignation
which it considers need to be brought to the attention of the
Company's members or creditors. The Board would like to thank
Ernst & Young LLP for the services that they have provided to the
Company in the past.
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, special
purpose audits, assurance non-audit services related to raising of
bond notes, periodic reviews of financial information, and pre-
acquisition due diligence reviews, are normally permitted to be
performed by the independent auditor.
Audit Fees and Non-Audit Services
The table below summarises the remuneration of Ernst & Young Cyprus Limited (2016: Ernst & Young LLP) and other entities of EY during the
years ended 31 December 2017 and 31 December 2016:
Audit of financial statements
Other assurance services
Other non-audit services
Audit fees €‘000
Non-audit fees €‘000
2017
586
–
–
586
2016
416
–
–
416
2017
–
11
397
408
2016
–
–
276
276
The Committee has reviewed the level of non-audit fees of the external auditor for the year ended 31 December 2017 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 2017 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 June 2017. In addition, the Chairman
of the Audit Committee discussed with the external auditor in mid-February 2018 their preliminary findings on the audit of the consolidated
financial statements for the year ended 31 December 2017. Furthermore, the Chairman of the Audit Committee discussed with the external
auditor at the end of February 2018 their final findings on the audit of the Annual Report and consolidated financial statements for the year
ended 31 December 2017 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, EY
Netherlands, EY Poland and EY Cyprus carry out these audits in Romania, the Netherlands, Poland and Cyprus, respectively.
Following this review, the Committee recommended to the Board that Ernst & Young Cyprus Limited be reappointed as external auditors for
the year ending 31 December 2018.
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
7 March 2018
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107
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
A selection of Globalworth and
GPRE properties
108
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109
FINANCIAL
STATEMENTS
Consolidated 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
additional information
Schedule of properties
Investing policy
Glossary
Company directory
112
113
114
115
116
118
122
128
138
141
146
154
158
160
164
165
168
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111
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For thE YEar ENDED 31 DECEMbEr 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
aS at 31 DECEMbEr 2017
Overview
Strategic review
POrtfOliO Overview
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
Share of profit of joint venture
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income
Profit attributable to:
– Equity holders of the Company
– Non-controlling interest
Earnings per share
– Basic
– Diluted
EPRA earnings per share
– Basic
– Diluted
Note
7
8
9
26
3
26
24
31
10
28
11
12
12
12
12
2017
€’000
77,866
(26,772)
51,094
(10,231)
(10,809)
6,727
28,897
–
(143)
(150)
(4,091)
5
(317)
9,888
60,982
(38,465)
1,447
(37,018)
2,188
26,152
(2,405)
23,747
–
23,747
24,426
(679)
2016
€’000
68,231
(24,678)
43,553
(7,707)
(105)
6,710
–
272
(14)
(183)
(1,857)
3,111
(119)
108
43,661
(32,222)
749
(31,473)
–
12,188
(873)
11,315
–
11,315
11,315
–
Cents
Cents
26.40
26.04
18.17
17.92
17.57
17.56
13.34
13.33
ASSETS
Non-current assets
Investment property
Goodwill
Advances for investment property
Investments in joint-ventures
Other long-term assets
Other receivables
Prepayments
Available for sale financial assets
Long-term restricted cash
Current assets
Debentures
Available for sale financial assets
Trade and other receivables
Guarantees retained by tenants
Income tax receivable
Prepayments
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Total equity
Issued share capital
Treasury shares
Unissued share capital
Share-based payment reserve
Retained earnings
Equity attributable to equity holders of the Company
Non-controlling interest
Total equity
Non-current liabilities
Interest-bearing loans and borrowings
Deferred tax liability
Guarantees retained from contractors
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
2017
€’000
2016
€’000
3 1,792,414
27
12,349
5
3,355
28
21,939
689
416
1,578
5,897
2,958
17
20
19
1,841,595
18,389
4,346
22,419
304
295
325
273,272
319,350
980,892
12,349
2,454
–
722
1,183
1,022
–
–
998,622
–
–
10,807
277
411
348
221,337
233,180
2,160,945 1,231,802
894,509
(270)
–
2,240
172,405
1,068,884
67,572
1,136,456
834,044
99,574
2,616
8,931
1,509
946,674
36,360
1,057
35,635
2,638
–
1,256
869
77,815
538,114
–
8,584
2,139
166,557
715,394
–
715,394
375,570
70,575
33
2,261
2,188
450,627
38,665
2,394
20,726
3,574
4
374
44
65,781
2,160,945 1,231,802
Cents
809
807
884
Cents
791
782
857
18
17
19
20
22
24
23
24
15
11
16
15
16
21
13
13
13
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113
The financial statements were approved by the Board of Directors on 7 March 2018 and were signed on its behalf by:
Richard van Vliet
Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For thE YEar ENDED 31 DECEMbEr 2017
CONSOLIDATED STATEMENT OF CASH FLOWS
For thE YEar ENDED 31 DECEMbEr 2017
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
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
As at 31 December 2016
Shares issued for cash
Transaction costs on issue of
shares
Transaction costs on issue of
shares settled in shares
Fair value of option warrants
issued for executive share
scheme
Shares issued under Executive
share option plan
Shares issued to the Executive
Directors and other senior
management employees
Interim dividend payment during
the year
Acquisition of own shares
Shares granted under the
subsidiaries’ employees share
award plan
Shares granted to Executive
Directors and other senior
management employees
Shares vested under the
subsidiaries’ employees share
award plan
Acquired through business
acquisition
Acquisition of minority interest
Profit for the year
Note
Issued
share
capital
€’000
341,784
200,000
(22,191)
8,584
–
–
–
3,937
6,000
–
538,114
22 340,000
22
22
24
(2,271)
8,584
–
24.1
8,950
24.2
22.2
24.3
24.3
24.2
24.3
26
29
1,132
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(428)
–
–
158
–
–
–
Equity attributable to equity holders of the Company
Treasury
shares
€’000
Unissued
share
capital
€’000
Share-
based
payment
reserve
€’000
Retained
earnings
€’000
Non-
controlling
interests
€’000
Total
€’000
–
–
–
–
8,584
–
–
–
–
–
2,655
155,242
499,681
–
–
–
–
14
3,407
(3,937)
–
–
–
–
–
–
–
200,000
(22,191)
8,584
8,584
14
3,407
–
–
–
–
11,315
6,000
11,315
8,584
2,139
166,557
715,394
–
–
–
–
–
–
–
–
–
–
–
– 340,000
– 340,000
–
–
–
17
(175)
(1,132)
–
–
–
–
–
(2,271)
–
17
8,775
–
–
–
(19,933)
–
(19,933)
(428)
126
1,423
(158)
–
–
–
126
1,423
–
–
–
(8,584)
–
–
–
–
–
–
–
–
–
–
–
–
Total
equity
€’000
499,681
200,000
(22,191)
8,584
8,584
14
3,407
–
6,000
11,315
715,394
–
–
–
–
–
–
–
–
–
–
(2,271)
–
17
8,775
–
(19,933)
(428)
126
1,423
–
As at 31 December 2017
894,509
(270)
–
–
–
–
1,355
24,426
–
1,355
24,426
77,306
(9,055)
(679)
77,306
(7,700)
23,747
2,240 172,405 1,068,884
67,572 1,136,456
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
Share of profit of joint ventures
Net financing costs
Operating profit before changes in working capital
(Increase)/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
Payments for the acquisition of non-controlling interests
Proceeds from sale of investment property
Investment in available for sale financial assets
Investment in and loans to joint ventures
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
Purchase of own shares
Proceeds from interest-bearing loans and borrowings1
Repayment of interest-bearing loans and borrowings
Payment of interim dividend
Payment of loan arrangement fees and other financing costs
Change in restricted cash reserve
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 €2.3 million (2016: €2.9 million) cash reserve, see note 20.
Note
3
26
24
28
26
29
17
18
22
24.3
22.2
20
20
2017
€’000
26,152
(6,727)
(28,897)
3,807
–
143
150
129
317
(2,188)
37,018
29,904
(3,027)
(3,010)
(13,352)
170
(614)
10,071
(50,076)
(317,653)
–
(7,700)
10,392
(3,464)
(19,360)
(117)
(387,978)
348,775
(3,896)
(428)
548,989
(430,213)
(19,933)
(15,702)
2,971
430,563
52,656
218,366
271,022
2016
€’000
12,188
(6,710)
–
1,421
(272)
14
183
(98)
119
–
31,473
38,318
4,174
1,364
(23,171)
22
(795)
19,912
(51,688)
(1,894)
11,000
-
3,327
–
–
(244)
(39,499)
200,000
(1,099)
–
222,703
(203,017)
–
(11,670)
–
206,917
187,330
31,036
218,366
114
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
115
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
On 6 December 2017, the Group acquired controlling shareholding in Griffin Premium RE.. N.V., (GPRE or GPRE Group or acquiree),
as disclosed in note 26. Although until acquisition date GPRE prepared its financial statements with Zloty ('PLN') as functional
currency and Euro as the presentation currency, it has also performed a re-assessment of its functional currency in light of recent
developments (including the acquisition by the Group and the funding received from the Group in December 2017 after acquisition)
and has decided to change the functional currency to Euro from 1 January 2018. Consequently, the Group has already considered
Euro as the functional currency of GPRE since the acquisition date of 6 December 2017.
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;
¡ Available for sale financial assets and debentures, see notes 17 and 18;
¡ Trade and other receivables, see note 19;
¡ Business Combinations, see note 26;
¡ Goodwill, see note 27;
¡ Investment in Joint venture, see note 28;
¡ Investment in Subsidiaries, see note 29.
SECTION I: BASIS OF PREPARATION
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 2 to 33, 60 to 89 and 168 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 2019. 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 2019, 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 available
for sale financial assets 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 33, which were adopted on 1 January 2017. 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 29) from the date of acquisition, being the date on which the Group
obtains control, 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. 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 Euro (€) 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.
116
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
117
SECTION II: INVESTMENT PROPERTY
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 60 to 89 of the Annual Report.
3. Investment Property
1 January 2016
Subsequent expenditure and net lease incentive movement
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
1 January 2017
Business acquisition
Subsequent expenditure and net lease incentive movement
Other operating lease commitment
Capitalised borrowing costs
Disposal during the year
Fair value movement on investment property
Transfer to completed investment property
31 December 2017
Completed
investment
property
€’000
Investment
property
under
development
€’000
Land bank
for further
development
€’000
Note
Total
€’000
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
26
767,190
15,323
(1,003)
18
(13,614)
(3,401)
56,129
–
31,921
–
138
–
7,300
(56,129)
–
4,822
–
–
–
2,828
–
767,190
52,066
(1,003)
156
(13,614)
6,727
–
1,712,364
54,350
25,700 1,792,414
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 flows projections and recent market comparable 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.
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
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 €2.3 million (2016: €3.4 million) as of 31 December 2017 (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.
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 property portfolio for Romania was valued by CBAR Research & Valuation Advisors SRL ('Coldwell Banker')
and for Poland by Knight Frank and CBRE, 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, Level 2 and Level 3) is analysed at each reporting date or as of the date of the event or variation in the
circumstances that caused the change. 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 105 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 flows, 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.
118
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
119
SECTION II: INVESTMENT PROPERTY CoNtINUED
4. Fair Value Measurement and Related Estimates and Judgements continued
Key information about fair value measurements using significant unobservable inputs (Level 3) are disclosed below:
Class of property
Completed
Carrying value
2017
€’000
2016
€’000
Valuation technique
Country
Input
2017
2016
Range
investment property
680,130
-
Discounted cash flows
Poland Rental value (sqm)
947,869
790,511 Discounted cash flows Romania
€12–€28
Discount rate 5.85%–8.58%
€2.77–€65
–
–
€2.77–€65
7.20%–9.20% 7.10%–9.70%
Exit yield 6.65%–8.75% 6.65%–9.20%
Rental value (sqm)
Discount rate
1,627,999
84,365
1,712,364
790,511
101,211
891,722
Sales comparison Romania
Sales value (sqm)
€1,192
€1,192
Investment property
under development
54,350
71,120
Residual method Romania
Rental value (sqm) €3.33–€17.00
€3.33–€17.00
Discount rate 8.00%–8.90% 8.00%–9.00%
7.25%–8.75% 7.25%–8.75%
€19.4
Exit yield
Capex (€m)
€33.96
Land bank – for further
development
25,700
18,050
Sales comparison Romania
Sales value (sqm) €1,819–€1,896 €1,819–€1,864
TOTAL
1,792,414
980,892
On 27 November 2017 the amendment of Poland’s Corporate Income Tax Law has been introduced, effective from 1 January 2018.
One of the changes refers to implementation of a so-called 'minimum levy' on the owners of shopping malls, large shops, office
buildings worth more than PLN 10 m (equivalent of €2.4 million translated at PLN/EUR 4.1709), at the level of 0.035% per month
(ca.0.42% per year) of the excess of the initial tax value of the building over PLN 10 m (equivalent of €2.4 million translated at PLN/
EUR 4.1709). The abovementioned change is new and has no precedence in Polish taxation regime. As of 31 December 2017, the
investment property portfolio in Poland was valued at €680.1 million.
On 30 January 2018 the President of Poland signed a bill gradually introducing Sunday retail trade ban, starting with two working
Sundays per month as of 1 March 2018. As of January 2019 retail trade will be possible on one Sunday a month, while as of 2020 retail
trade will be fully banned on Sundays. As of 31 December 2017, the high street mixed use investment property portfolio (comprising
high street retail, class “A” office space office and retail revenue components) in Poland was valued at €309.1 million.
The above mentioned changes are not reflected in the value of investment properties as the potential impact is unknown as of the
date of these consolidated financial statements.
All class of property portfolio were categorised as Level 3 under fair value hierarchy. The fair value movement on investment
property recognised, as gain, in the income statement includes an amount of €6.7 million (2016: €6.7 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 2017 and 2016, 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.
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 60 to 89 of the Annual Report.
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:
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
Investment
Property
Year
Country
Increase
€’000
Decrease
€’000
Increase
€’000
Decrease
€’000
Increase
€’000
Decrease
€’000
Increase
€’000
Decrease
€’000
Increase
€’000
Decrease
€’000
€0.5 change in rental
value per month, per sqm
25 bps change in
market yield
5% change
in Capex
€50 change in sales
prices per sqm
2.5% change in vacancy
in Perpetuity1
– completed 2017
Poland
(16,184)
2017 Romania 39,820 (40,020)
16,148
(26,128) 28,237
(22,530) 23,870
2016
Poland
2016 Romania
–
26,640
–
(26,750)
–
(19,310)
–
20,470
–
–
–
–
–
–
–
1,931
–
2,251
–
(1,930)
–
(17,450)
–
(2,250)
–
(15,460)
– under
development
– further
development
Poland
2017
2017 Romania
2016
Poland
2016 Romania
Poland
2017
2017 Romania
2016
Poland
2016 Romania
–
3,280
–
5,460
–
(3,370)
–
(5,460)
–
(3,120)
–
(4,290)
–
3,230
–
4,630
–
(2,880)
–
(3,200)
–
2,880
–
3,200
–
–
–
–
–
–
–
–
–
(1,900)
–
(3,210)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,150
–
500
–
(1,330)
–
(480)
–
–
–
–
–
17,720
–
14,980
–
1,950
–
2,990
–
–
–
–
1. The vacancy in perpetuity sensitivity analysis is not followed for the Polish properties portfolio as it is not considered a significant valuation variable at present
due to the existence of rental guarantees.
5. Advances for Investment Property
Advances for land and other property acquisitions
Advances to contractors for investment properties under development
2017
€’000
2,000
1,355
3,355
2016
€’000
2,000
454
2,454
6. Commitments
Commitments for Investment Property Under Construction
As at 31 December 2017 the Group had agreed construction contracts with third parties and is consequently committed to
future capital expenditure in respect of completed investment property €3.4 million (2016: €1.0 million), investment property
under construction of €13.6 million (2016: €37.1 million), and had committed with tenants to incur fit-out works of €7.3 million
(2016: €1.1 million).
The Group’s Joint venture was committed for the construction of investment property for the amount of €37.2 million at 31 December 2017.
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 (2016: 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
2017
€’000
117,290
366,182
126,849
610,321
2016
€’000
47,335
179,354
94,156
320,845
120
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121
SECTION III: FINANCIAL RESULTS
The section quantifies the financial impact of the operations for the year; further analysis on operations is described in the Financial
Review section on pages 30 to 33 of the Annual Report. 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.
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.
Contracted Rent
Adjustment for lease incentives
Rental income
Service charge income
Fit-out services income (formerly property development services)
Marketing and other income
2017
€’000
59,055
(5,199)
53,856
19,107
4,616
287
77,866
2016
€’000
49,331
(3,165)
46,166
14,825
7,240
–
68,231
The total contingent rents and surrender premiums recognised as rental income during the year amount was €0.8 million (2016:
€0.1 million) and €0.3 million (2016: €5.8 million) respectively.
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.
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.
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
Property management, utilities and insurance
Fit-out services costs (formerly 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
2017
€’000
21,927
3,995
850
26,772
2017
€’000
22,777
–
3,995
26,772
2016
€’000
17,331
6,848
499
24,678
2016
€’000
17,712
118
6,848
24,678
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.
Directors’ emoluments (pages 103-104)1
Salaries and wages1
Accounting, secretarial and administration costs
Legal and other advisory services
Audit and non-audit services (page 107)
Corporate social responsibility costs
Travel and accommodation
Marketing and advertising services
Post, telecommunication and office supplies
Stock exchange expenses
2017
€’000
2,779
4,003
483
458
1,003
514
184
224
166
417
10,231
2016
€’000
2,056
3,048
377
261
777
357
118
217
177
319
7,707
1 Costs of €0.5 million (2016: €1 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 (2016: €0.5 million) was capitalised as
debt issue costs and €nil (2016: €0.4 million) as transaction costs on issue of shares.
During the year, the Group contributed €0.6 million (2016: €0.3 million) and €0.1 million (2016: €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
Interest on Fixed rate Bond
Debt cost amortisation and other finance costs
Other financial expenses
Bank charges
2017
€’000
11,367
–
8,427
17,683
237
751
38,465
2016
€’000
18,640
4,453
–
8,421
584
124
32,222
122
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123
SECTION III: FINANCIAL RESULTS CoNtINUED
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.
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.
Income tax expense
Current income tax expense
Deferred income tax expense
2017
€’000
870
1,535
2,405
2016
€’000
711
162
873
The income tax rate applicable to the Company in Guernsey is nil. The subsidiaries in Romania, the Netherlands, Poland,
Luxembourg and Cyprus are subject to income taxes in respect of local sources of income. The current income tax charge of €0.9
million (2016: €0.7 million) represents tax charges on profit arising in the subsidiaries in Poland, Romania and Cyprus (2016: Romania,
the Netherlands and Cyprus). Tax charges on profit arising in Poland, Luxembourg, Romania, the Netherlands and Cyprus are subject
to corporate income tax at the rate of 19% (15% for small entities where revenue is less than €1.0 million for taxpayers starting a new
business for their first tax year in operation), 27.08% (nominal rate of 26.01% for 2018 and lower tax rate for small entities if taxable
profit does not exceed €30,000) 16%, 25% (20% for tax on profit up to €0.2 million), and 12.5%, respectively.
The Group’s subsidiaries registered in Luxembourg, 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 (excluding
Luxembourg), 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% and 27.08% in Cyprus and the Netherlands and Luxembourg, 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 and Poland 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 and Poland, the tax position is open to further verification for
five years and no subsidiary in Romania and Poland have had a corporate income tax audit in the last five years.
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
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 2017 and the year ended 31 December 2016 is as follows:
Profit before tax
At Company’s income tax rate 0% (2016: 0%)
Effect of higher tax rates in foreign jurisdictions
Tax in Romania
– Corporate income tax
– Deferred tax expenses/ (income) for taxable temporary differences
–related to current year
–related to prior years (tax losses)
Tax in Cyprus
– Corporate income tax
Tax in Poland
– Corporate income tax
– Deferred tax expenses for taxable temporary differences related to current year
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 (note 26):
Deferred tax asset
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
2017
€’000
26,152
–
2016
€’000
12,188
–
120
644
2,492
(2,816)
4,016
(3,854)
748
2
1,859
2,405
9.2%
3.0%
67
–
–
873
7.2%
6.0%
Consolidated statement
of comprehensive income
2016
€’000
2017
€’000
–
–
–
4,954
1,966
(229)
–
144
(5.300)
1,535
–
–
–
3,876
179
147
–
53
(4,093)
162
Consolidated statement
of financial position
2017
€’000
27,464
5,087
32,551
82,075
1,678
82
(7)
(428)
(11,290)
99,574
2016
€’000
–
–
–
77,121
(288)
311
(7)
(572)
(5,990)
70,575
The Group has unused assessed tax losses carried forward of €103.1 million (2016: €73.5 million) and €76.7 million (2016. nil)
respectively that are available for offsetting against future taxable profits of the respective entity in Romania and Poland, in which
the losses arose, within seven years and five years from the year of origination, respectively. As of the statement of financial position
date the Group had recognised deferred tax assets of €12.9 million (2016: €5.9 million) in Romania and Poland out of the total
available deferred tax assets of €31.1 million (2016: €11.8 million) calculated at the corporate income tax rate of 16% in Romania and
19% or 15% in Poland, respectively.
Expiry year
Available deferred tax assets (€m)
2018
1.3
2019
2.8
2020
2.6
2021
2.2
2022
14.3
2023
2.6
2024
5.3
TOTAL
31.1
At 31 December 2017, there were no temporary non-deductible interest expenses and net foreign exchange losses related to
intercompany loans of (2016: €11.2 million) as all subsidiaries in Romania reached the required minimum debt-to-equity tax ratio in
the range from nil to 3 and temporarily non-deductible accounted for as fully tax deductible in fiscal year 2017.
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 and considering the recent changes in fiscal code in
Romania during 2017, the Group recognised an additional €5.3 million (2016: €4.0 million) deferred tax asset, mainly due to changes in
fiscal regulations and also partly 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.
124
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SECTION III: FINANCIAL RESULTS CoNtINUED
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:
Note
Number of
shares issued
(in thousand)
62,617
% of the
period
Weighted
average
(in thousand)
62,617
Date
2016
Event
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
Shares to be issued for transaction costs on issue of shares
2016
2017
July 2017
August 2017
December 2017
December 2017
December 2017
April-Dec. 2017
Shares in issue at year end (diluted)
At the beginning of the year
Shares issued for:
– Subsidiaries’ Employee Share Award Plan (treasury shares)
– Subsidiaries’ Employee Share Award Plan (vested and exercised)
– cash
– transaction costs on issue of shares
– Executive share option plan (vested and exercised)
– the Executive Directors and other senior management employees
24.3
24.3
22
23
24.1
24.2
2017
Shares in issue at year end (basic)
January 2017
April 2017
August 2017
November 2017
November 2017
December 2017
Dilutive effect of:
– transaction costs on issue of shares
– Shares issued for Executive share option plan
– Shares purchased for Subsidiaries’ Employee Share Award Plan
(unvested)
– Shares issued to Executive share option plan (vested and exercised)
– Share warrants vested but not exercised during the year
– Shares to be issued for Executive share option plan
407
1,000
270
25,000
1,073
30
90,397
1,073
91,470
90,397
(57)
21
38,857
1,073
1,755
137
132,183
–
69
17
–
50
165
93.4
56.4
22.5
3.0
3.0
2.0
380
564
61
753
32
1
64,408
3.0
32
64,440
90,397
(28)
8
2,028
27
43
52
92,527
1,046
48
7
154
6
–
48.4
39.8
5.2
2.5
2.5
38.0
97.5
69.8
39.8
8.8
11.3
–
2017
Shares in issue at year end (diluted)
132,484
93,788
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 2017, 30,000 shares were issued.
2017
€’000
24,426
cents
26.40
26.04
2016
€’000
11,315
cents
17.57
17.56
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
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
Deferred tax charge in respect of above
Acquisition costs
Adjustments in respect of joint ventures for above items
Non-controlling interest in respect of the above
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 liability1
Fair value of interest rate swap instrument
Goodwill as a result of deferred tax
Adjustment in respect of joint venture for above items
Minority interest effect on above adjustments
EPRA NAV attributable to equity holders of the Company
EPRA NAV per share
Note
4
26
26
2017
€’000
24,426
(6,727)
3,807
(80)
(28,897)
15,247
1,218
10,809
(2,528)
(467)
16,808
cents
18.17
17.92
2016
€’000
11,315
(6,710)
1,657
(265)
–
1,522
969
105
–
–
8,593
cents
13.34
13.33
2017
€’000
2016
€’000
1,068,884
715,394
Cents
809
807
Cents
791
782
Note
2017
€’000
2016
€’000
1,068,884
715,394
21
112,092
2,638
(5,697)
533
(6,983)
70,575
3,574
(5,697)
–
–
1,171,467
783,846
Cents
884
Cents
857
1 Deferred tax liability for 2017 relates to investment property, whereas for 2016 it represents the net deferred tax liability. Due to the increased significance of
deferred tax assets at 31 December 2017 it was considered more appropriate to include only the effect of deferred tax liability related to investment property,
which more closely reflects the related guidance issued by EPRA.
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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127
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
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 derecognition 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.
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 21.
Current
Current portion of secured loans and accrued interest
Accrued interest on unsecured fixed rate bond
Sub-total
Non-current
Secured loans
Unsecured fixed rate bond
Sub-total
TOTAL
2017
€’000
2016
€’000
27,795
8,565
36,360
296,641
537,403
834,044
38,665
–
38,665
375,570
–
375,570
870,404
414,235
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, debentures and available for sale financial assets.
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.
Long-term restricted cash is held in separate debt service reserve accounts for the obligation resulting from bank loans in Poland
and not available to the Group for general business use.
Trade and Other Receivables and Debentures
Trade and other receivables and debentures (being loans and receivables category in accordance with IAS 39) 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 or debentures 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 and debentures, 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.
Available for Sale Financial Assets
Available for sale assets are those non-derivative financial assets that are designated as available for sale or are not classified as
(a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss. These assets are
initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured
at fair value and changes therein, other than impairment losses, are recognised in other comprehensive income and accumulated in
the fair value reserve. When these assets are derecognised, the gain or loss accumulated in equity is reclassified to profit or loss.
For available for sale financial assets, the Group assesses at each reporting date whether there is objective evidence that an
investment or a group of investments is impaired.
Impairment losses on available for sale financial assets are recognised by reclassifying the losses accumulated in the fair value
reserve to profit or loss. The amount reclassified is the difference between the acquisition cost (net of any principal repayment and
amortisation) and the current fair value, less any impairment loss previously recognised in profit or loss. If the fair value of an
impaired available for sale debt security subsequently increases and the increase can be related objectively to an event occurring
after the impairment loss was recognised, then the impairment loss is reversed through profit or loss; otherwise, it is reversed
through other comprehensive income.
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SECTION IV: FINANCIAL ASSETS AND LIABILITIES CoNtINUED
15. Interest-Bearing Loans and Borrowings continued
Terms and conditions of outstanding loans were as follows:
Facility
Loan 6
Loan 8
Loan 9
Loan 11
Loan 15
Loan 16
Loan 17
Loan 18
Loan 21
Loan 22
Loan 23
Loan 24
Loan 25
Loan 26
Loan 27
Loan 28
Loan 29
Loan 30
Loan 31
Loan 32
Loan 33
Loan 34
Loan 35
Loan 36
Total
Currency
Nominal interest rate
Maturity date
EUR
EUR
EUR
EUR
EUR
EUR
RON
RON
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
PLN
EUR
EUR
EUR
Mar 2019
EURIBOR 3M+ margin
Dec 2018
EURIBOR 3M+ margin
Dec 2018
EURIBOR 3M+ margin
Oct 2032
EURIBOR 3M+ margin
Dec 2017
EURIBOR 1M+ margin
Jun 2022
EURIBOR 1M+ margin
Apr 2019
ROBOR 1M+ margin
Aug 2018
ROBOR 3M+ margin
Mar 2031
EURIBOR 3M+ margin
Nov 2026
EURIBOR 3M+ margin
Jun 2019
Fixed rate
Dec 2026
EURIBOR 3M+ margin
June 2022
Fixed rate bond
April 2019
EURIBOR 3M + margin
March 2020
EURIBOR 3M + margin
EURIBOR 3M + margin
June 2018
EURIBOR 3M + margin January 2034
June 2018
EURIBOR 3M + margin
July 2034
EURIBOR 3M + margin
June 2034
NBP rate less social indicator
June 2018
WIBOR 1M + margin
August 2026
EURIBOR 1M + margin
June 2026
EURIBOR 1M + margin
June 2027
EURIBOR 3M + margin
2017
2016
Face value
€’000
–
–
–
–
–
19,142
400
–
–
–
–
–
558,565
34,817
45,127
6,221
7,471
7,177
13,694
4,320
251
53,804
96,393
39,334
Carrying
value
€’000
–
–
–
–
–
19,142
400
–
–
–
–
–
545,968
34,647
44,846
6,216
7,284
7,171
13,466
4,320
251
52,148
95,650
38,893
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
–
–
–
–
–
–
–
–
–
–
–
–
886,716
870,402
423,792
414,235
Unsecured Corporate Bond
In June 2017, the Group issued a €550 million unsecured Eurobond. The five-year euro-denominated Bond matures on 20 June 2022
and carries a fixed interest rate of 2.875%. The net proceeds were used for refinancing existing debt (loan# 6, 8, 9,11,15,18,21,22,23
and 24) and the remaining balance will be used for general corporate purposes including acquisitions.
Secured facilities
As disclosed in note 26, as part of the business acquisitions of Elgan A, Epsilon and GPRE, the Group consolidated existing long-
term facilities (secured bank loans 26 to 36) with a total outstanding balance of €304.9 million. The facilities carry variable interest
rates and are secured with mortgages on the respective investment properties acquired under business combinations.
Secured bank loans are secured by investment properties with a carrying value of €796.0 million at 31 December 2017 (2016:
€902.0 million) and also carry pledges on rent receivable balances of €9.6 million (2016: €6.1 million), tenant deposits of €6.1 million
(2016: €2.6 million), VAT receivable balances of €1.3 million (2016: €0.4 million) and a moveable charge on the bank accounts
(see note 20).
Other Disclosures
All 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 2017. Financial covenants mainly include the gross loan-to-value ratio (“LTV”) with ranges from 65% – 78%,
the loan to cost ratio (“LTC”) with a maximum value of 75%, and the debt service cover ratio (‘DSCR’) / interest cover ratio (“ICR”) with
ranges from 100% – 120%. LTV is calculated as the loan value divided by the market value of the relevant property (for a calculation
date), LTC is calculated by dividing the value of drawdowns by the total project cost and DSCR (historical and/or projected, as the
case may be, for a 12-month period) and ICR are mainly calculated as net operating income divided by the debt service / interest
As of 31 December 2017, the Group had undrawn borrowing facilities of €32.7 million (2016: €2.5 million).
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
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 payable
Non-current
Payable for tenant lease incentives
17. Available for sale financial assets
As at 31 December 2017
Project name
Beethovena I
Beethovena II
Browary Stage J
Note
3.1
26
2017
€’000
8,021
9,235
859
1,208
800
4,402
1,075
857
2,327
4,725
1,040
1,086
2016
€’000
1,415
7,371
1,183
–
1,161
4,553
396
418
1,129
2,806
294
–
35,635
20,726
3.1
1,509
37,144
2,188
22,914
Interest rate
Project
completion date
fixed December 2018
March 2019
fixed
June 2019
fixed
Total
€’000
Long-term
€’000
Short-term
€’000
4,346
3,002
2,895
–
3,002
2,895
4,346
–
–
10,243
5,897
4,346
As disclosed in note 26, the Group acquired the following financial instruments under business combination, which have been
classified as available for sale financial assets.
The fair value of the available for sale financial assets is individually determined by taking into account number of factors e.g.
percentage of completion ('PoC'), leasing progress. The maturity dates presented in the table above are stated in the agreements,
however the planned repayment dates of debentures would take place upon completion of ROFO project.
Right of First Offer Agreements ('ROFO')
As of the 31 December 2017 (as well as of 6 December 2017) the fair value of the ROFO projects was slightly higher compared to the
nominal value of the bonds and related accrued interest, and the Group decided that no fair value gain should be recorded given
that the stage of completion of the ROFO projects was below 50 %.
Prior to acquisition date, GPRE (GPRE and its subsidiaries) signed an agreement for the acquisition of 25% stakes in ROFO projects
being developed by Echo. Total office GLA of these projects to be completed in 2018-2019 is 49,200 sqm.
Under the agreement, GPRE (the “Bondholder”) will purchase bonds issued by the respective limited partners of all of the respective
ROFO SPVs (the “ROFO Agreement”). The ROFO Agreement covers all of the ROFO Assets. Echo indirectly holds 100% of the shares
or interest in the ROFO SPVs and the ROFO SPVs are developing the ROFO Assets. GPRE intended to invest (indirectly through the
Bondholder), on the terms and conditions set out in the ROFO Agreement, in each of the ROFO Assets the amount of 25% of the
funds required by each of the ROFO SPVs (less the external construction bank financing at a loan to construction ratio of 60%) to
complete the development of each respective ROFO Asset. Based on the construction budget presented by Echo to the Issuer in
connection with the execution of the ROFO Agreement, the amount of the contribution (the investment) to be made by the
Company under the ROFO Agreement amounts to €9.8 million.
Prior to acquisition, GPRE subscribed bonds for a nominal value of €6.4 million issued by the subsidiaries of Echo (“ROFO Bonds”).
On 22 December 2017 the additional series of bonds in the amount of €3.5 million was subscribed.
The redemption date for all the series of the ROFO Bonds is 12 June 2032, and the ROFO Bonds will be redeemed by way of the
payment of a sum equal to the nominal value of each of the bonds. The ROFO Bonds accrue interest at a fixed interest rate in the
amounts of and on the conditions provided in the terms and conditions of the ROFO Bonds. Final amount of interest will be adjusted
by accompanied option agreement so that it reflects actual development profit realised on each of the projects. The ROFO Bonds
have been issued as unsecured bonds.
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SECTION IV: FINANCIAL ASSETS AND LIABILITIES CoNtINUED
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
18. Debentures
As disclosed in note 26, the Group acquired the following financial instruments under business combination. Debentures are loans
valued at amortised cost using effective interest rate method under IAS 39.
20. Cash and Cash Equivalents
As at 31 December 2017
Unsecured
Interest
rate
Maturity
Total
€’000
Long-term
€’000
Short-term
€’000
Cash at bank and in hand
Short-term deposits
Forum 60 Fundusz Inwestycyjny Zamknięty
fixed December 2018
18,389
18,389
–
–
18,389
18,389
The debentures have been acquired in connections with Forward Purchase Agreements described below.
Forward Purchase Agreement
Prior to GPRE acquisition, GPRE and its subsidiaries acting as the purchaser (the 'Purchaser'), and subsidiaries of Echo Investment
S.A. ('Echo') acting as the sellers (the 'Sellers') concluded the preliminary forward purchase agreement for West Link office building
in Wroclaw with GLA of 14,362 under construction to be completed in April 2018 by Echo ('SPA').
The parties to the SPA agreed to undertake actions to complete the acquisition of the rights and obligations of the company owning
the Forward Purchase Asset by the buyer by way of the acquisition by the buyer of 100% of the shares in the limited partner and
general partner of the company owning the Forward Purchase Asset (the 'Project Companies') after the satisfaction or waiver of the
conditions precedent specified therein and the preliminary purchase price for the shares in the Project Companies amounts to €18
million.
The consideration payable by the Purchaser for the shares under the SPA shall amount to the sum of: (i) the quotient of NOI (the sum
of money equal to the annual rental income from the lease of the Forward Purchase Asset minus non-recoverable operating costs)
and a yield of 6.873%, which, as of the date of the execution of the SPA, amount to EUR 36 million; (ii) the working capital of the
companies being purchased; and (iii) the cash held by such companies, which sum shall be decreased by the amount of debt
(primarily comprised of external bank financing) of such companies.
In connection with the SPA, the Purchaser also subscribed for bonds with a total nominal value of €18 million issued by a subsidiary of
Echo (the 'West Link Bonds'). In exchange for the subscription for the West Link Bonds and the payment of €18 million by the
Purchaser to one of the Sellers, the Sellers granted the Purchaser irrevocable powers of attorney authorising the Purchaser to
conclude the final agreement concerning the purchase of 100% of the shares in the Project Companies (the 'Final Agreement') in
performance of the SPA (the 'Powers of Attorney'). The Purchaser will be authorised to use the Powers of Attorney: (i) if the Final
Agreement is not concluded despite the conclusion thereof being requested; and (ii) in the event of a breach of the terms included in
the documentation regarding the West Link Bonds.
The payment of the price for the shares in the Project Companies will be conducted by way of remittances between the Sellers and
the Purchaser and a set-off of a receivable of one of the Sellers on account of the payment of the price for the shares in the Project
Companies against the Purchaser’s receivable in respect of the redemption of the West Link Bonds. The redemption date for the
West Link Bonds is 31 December 2018.
19. Trade and Other Receivables
Current
Rent and service charges receivable
VAT and other taxes receivable
Consideration receivable from the seller
Advances to suppliers for services
Sundry debtors
Non-current
VAT and other taxes receivable
2017
€’000
2016
€’000
15,316
5,683
290
92
1,038
22,419
416
22,835
6,209
3,987
290
211
110
10,807
1,183
11,990
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 21). For the terms and conditions for related party receivables, see note 32.
Note
15
15
2017
€’000
158,773
112,249
271,022
–
2,250
273,272
2,958
2016
€’000
217,467
899
218,366
2,971
–
221,337
–
Cash and cash equivalents as per statement of cash flows
Matisse Facility – restricted cash reserve
Guarantee deposits– cash reserve
Cash and cash equivalents as per statement of financial position
Long-term restricted cash balance
Details of cash and cash equivalents denominated in foreign currencies are disclosed in note 21.
Short-term deposits are made for varying periods depending on the immediate cash requirements of the Group and earn interest
at rates ranging from minus 0.60% to 0.25% (2016: 0.02% to 0.15%) per annum. Cash at bank and in hand includes restricted cash
balances of €9.7 million (2016: €5.2 million) and short-term deposits includes restricted deposits of €9.3 million (2016: €nil).
21. 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.
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 and Poland.
Therefore, the Group is exposed to foreign exchange risk, primarily with respect to the Romanian Lei (RON) and Polish Zloty (PLN).
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):
Amounts in €’000 equivalent value
RON
PLN
GBP
USD
RON
PLN
GBP
USD
2017
Denominated
2016
denominated
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
16,224
14,487
291
15,460
6,928
1
31,002
22,389
400
11,265
15
2,824
4,571
13,308
–
5,037
14,504
22,916
15
–
–
15
–
36
–
–
36
16,498
(527)
(21)
3
–
–
3
–
–
–
–
–
3
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
132
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133
SECTION IV: FINANCIAL ASSETS AND LIABILITIES CoNtINUED
21. Financial Risk Management – Objective and Policies continued
Foreign Currency Sensitivity Analysis
As of the statement of financial position date, the Group is mainly exposed to foreign exchange risk in respect of the exchange rate
of the RON and PLN. The following table details the Group’s sensitivity (impact on income statement before tax and equity) to a 5%
devaluation in RON, PLN, USD and GBP exchange rates against the Euro, 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 Euro against other currencies.
All amounts in €’000
RON
PLN
GBP
USD
2017
Profit and
(loss)
(825)
26
1
–
Equity
(825)
26
1
–
2016
Profit and
(loss)
(737)
–
11
(5)
Equity
(737)
–
11
(5)
A 5% devaluation of the Euro 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 2017, 37.3% (2016:
58.8%) of the total outstanding borrowings carried variable interest rates (including the 1M and 3M EURIBOR, 1M ROBOR, National
Bank Poland reference rate less social indicator and 1M WIBOR as bases) which expose the Group to cash flow interest rate risk. In
order to minimise this risk, the Group hedged 5.9% (2016: 14%) 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 2017, an increase or decrease of 25
basis points in the WIBOR, EURIBOR or ROBOR will result in an increase or decrease (net of tax) in the result for the year of €9.3
million (2016: €1.0 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 Euro denominated long-term borrowings Loan 25 (2016: Loan 23) at fixed rates which constitute 62.7% (2016: 41.2%) of
total debt portfolio. The facility is payable in June 2022; 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 2017, the fair value was
higher by €33.7 million (2016: €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.
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.
Available for sale financial assets
Debentures
Loan receivable from joint venture
Restricted cash long term
Trade receivables – net of provision
Other receivables
Guarantees retained by tenants
VAT and other taxes receivable
Income tax receivable
Cash and cash equivalents
Note
17
18
28
19
19
20
2017
€’000
10,243
18,389
19,721
2,958
15,316
1,328
304
6,099
295
273,272
347,925
2016
€’000
–
–
–
–
6,209
123
277
5,170
411
221,337
233,527
Available for sale financial assets and debentures
The Group places funds in financial instruments (available for sale financial assets and debentures) issued by the reputable real
estate companies with high creditworthiness.
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
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 pages
28-29 of the Annual Report. For related parties, including the joint venture, 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
Acquired through business combination
Closing balance
Note
26
2017
€’000
2,009
33
–
–
1,279
3,321
2016
€’000
2,542
200
(298)
(435)
–
2,009
The analysis by credit quality of financial assets, cumulated for rent, service charge and property management, is as follows:
2017 (€’000)
2016 (€’000)
Neither past
due nor
impaired
Past due but not impaired
<90 days
<120 days
<365 days
TOTAL
9,457
5,051
4,007
936
350
145
1,502
77
15,316
6,209
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 €1.0 million (2016: €0.1 million) and consideration receivable from the seller of €0.3 million
(2016: €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 international banks
having long-term credit rating range of A+ and short term credit rating of A-1 and in Romania in local branches of reputable
international banks with credit rating of BBB and in Poland surplus funds from operating activities are deposited only for short-term
period, which are highly liquid with reputable institutions.
Loan receivable from joint venture
Loan receivable from joint venture is neither past due nor impaired.
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.
134
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135
SECTION IV: FINANCIAL ASSETS AND LIABILITIES CoNtINUED
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
21. Financial Risk Management – Objective and Policies continued
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments.
Contractual payment
All amounts in €’000
2017
<3 months
3 months–
1 year
1-5 years
>5 years
Total
Difference
from
carrying
amount
Carrying
amount
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
17,779
27,856
768,883
201,494 1,016,012 (145,608) 870,404
7,188
3,159
–
332
869
17,810
644
–
390
–
6,626
–
–
5,063
–
537
–
–
4,603
–
32,161
3,803
–
10,388
869
–
–
–
(201)
–
32,161
3,803
–
10,187
869
29,327
46,700
780,572
206,634 1,063,233 (145,809)
917,424
Other current financial liabilities
Other current financial liabilities represent the mark-to-market value of an interest rate swap, obtained from the counterparty
financial institution, at €2.6 million (2016: €3.6 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 €19.47 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 €1.0 million (2016: €0.3 million).
As at 31 December 2017, the Group also held an interest rate cap instrument, acquired through GPRE business combination as
disclosed in note 26, valued mark-to-market at €nil (2016: €4,000 for secured loan 21 under which the Group had capped EURIBOR at
1.25% for 50% of the notional loan facilities), for which the cap option has not been executed due to favourable market interest rates.
Only premium has been paid and it is included in the amortised cost valuation of the loan.
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.
Contractual payment
Reconciliation of liabilities arising from financing activities in cash flows
Description
Interest-bearing loans and borrowings
Other current financial liabilities
Non-cash changes movement
2016
€’000
414,235
3,574
Net Cash
flows
€’000
118,776
Acquisition
€’000
330,475
(936)
Foreign
exchange
€’000
Debt cost
amortisation
€’000
2017
€’000
(183)
–
7,101 870,404
2,638
–
All amounts in €’000
2016
<3 months
3 months–1
year
1-5 years
>5 years
Total
Difference
from
carrying
amount
Carrying
amount
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
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
Total
14,662
62,647
366,241
68,267
511,817
(75,272)
436,545
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
Debentures
Available for sale asset
Fair value hierarchy
Carrying
amount
Level 1
Level 2
Level 3
TOTAL
870,404
414,235
571,137
–
–
–
328,189
424,075
899,326
424,075
2,638
3,574
–
4
18,390
–
10,243
–
–
–
–
–
–
–
–
–
2,638
3,574
–
4
–
–
–
–
–
–
–
–
18,390
–
10,243
–
2,638
3,574
–
4
18,390
–
10,243
–
Year
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
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. Specifically for the Eurobond, its fair value is calculated on the basis of its
quoted market price. The own non-performance risk at the statement of financial position date was assessed to be insignificant.
136
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137
SECTION V: SHARE CAPITAL AND RESERVES
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.
22. 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 – transferred
Shares issued to the Executive Directors and other senior management
employees – not transferred
Shares issued for cash
Transaction costs on issue of shares
Transaction costs on issue of shares settled in shares
Shares issued under executive share option plan
Balance at 31 December
2017
2016
Note
€’000
Number
(’000’)
538,114
90,397
–
–
€’000
341,784
6,000
Number
(’000’)
62,617
1,000
24.2
24.2
22.1
22.1
23
24.1
1,132
137
3,937
707
–
340,000
(2,271)
8,584
8,950
69
38,857
–
1,073
1,755
894,509
132,288
–
200,000
(22,191)
8,584
–
538,114
–
25,000
–
1,073
–
90,397
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.
22.1 Shares Issued for Cash
On 1 December 2017, an additional 38.9 million Ordinary shares were issued at €8.75 each (€340 million) following the completion of
the fundraising, which was announced on 14 November 2017. The Group recognised an amount of €2.3 million as transaction costs
for the fundraising. The funds raised from the subscription will be used to take advantage of a pipeline of attractive investment
opportunities in both Poland and Romania and for other general corporate purposes.
22.2 Dividends
Policy
The Company recognises a liability to pay a dividend when the distribution is authorised and the distribution is no longer at the
discretion of the Company. As per the articles of association of the Company and Guernsey Company law, a distribution is
authorised when it is approved by the Board of Directors of the Company. A corresponding amount is recognised directly in equity.
Interim cash dividend: 22 cents per share (2016: nil)
2017
€’000
19,933
2016
€’000
–
In July 2017, following approval by its Board of Directors in June 2017, the Company paid an interim cash dividend in respect of the
six month financial period ended 30 June 2017 of €0.22 per Ordinary share. There are no income tax consequences attached to the
payment of dividends in 2017 by the Group to its shareholders.
23. Unissued Share Capital
Under the terms of equity fundraising completed in December 2016, the Company issued an additional 1.07 million Ordinary shares
on 31 December 2017 as a second tranche of Fee Shares to settle remaining equity settled transaction costs in shares. The second
tranche of Fee Shares were accounted as dilutive shares for the calculation of weighted average outstanding number of shares
during the year for earnings per share, see note 12. The first tranche of Fee Shares was issued on 20 December 2016.
Overview
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POrtfOliO Overview
gOvernance
financial StatementS
24. 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. The following table analyses the components of
share-based payment reserve and total cost outstanding at year end.
Share-based payments reserve
Executive share option plan
Shares granted to Executive Directors and other senior management
employees – not transferred
Subsidiaries’ Employee Share Award Plan
Share-based payments expense
Executive Share Option Plan
Subsidiaries’ Employee Share Award Plan
Closing balance
Note
24.1
24.2
24.3
2017
€’000
161
1,911
168
2,240
Note
24.1
24.3
Treasury
shares
Number
(‘000)
–
(69)
(36)
(105)
Treasury
shares
Number
(‘000)
–
–
–
–
2016
€’000
14
-
14
2016
€’000
319
1,820
–
2,139
2017
€’000
17
126
143
24.1 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 101 of the Annual Report.
The following table analyses the total cost of the executive share option plan (Warrants), together with the number of
options outstanding.
2017
2016
At the beginning of the year
Share-based payment expense during the year
Warrants vested and exercised during the year
At 31 December
Weighted average remaining contractual life (years)
Warrants vested and exercisable at 31 December
Warrants exercised subsequent to the yearend 31 December
Cost
€’000
319
17
(175)
161
Number
(‘000)
4,635
–
(1,755)
2,880
5.58
50
30
Cost
€’000
305
14
–
319
Number
(‘000)
4,635
–
–
4,635
6.58
–
–
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. The weighted average market share price at date of exercise and vested was €8.50
and €7.71, respectively. On 22 December 2017 the vested warrants were exercised at €5.00 per share under the contractual terms for
an amount of €8.775 million and corresponding €0.175 million share based payment reserve was also transferred to share capital.
24.2 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
Transferred to subsidiaries’ employee share award plan
Shares issued to the Executive Directors and other senior management employees
Closing balance
2017
€’000
1,820
1,423
(200)
(1,132)
1,911
2016
€’000
2,350
3,407
–
(3,937)
1,820
138
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Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
139
SECTION V: SHARE CAPITAL AND RESERVES CoNtINUED
SECTION VI: BUSINESS COMBINATIONS AND RELATED DISCLOSURES
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
24. Share-Based Payment Reserve continued
Shares issued to the Executive Directors and other senior management employees
On 21 April 2017, the Company issued 0.2 million Ordinary shares (Ordinary shares of no par value), out of which 0.07 million Ordinary
shares were delivered 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 Globalworth Investment Advisers Limited (“GIAL”), in
order to settle part of the liability of €1.82 million owed by the Company to its subsidiary, related to the fees charged by GIAL to the
Company pursuant to the Investment Advisory Agreement (refer page 100 for details ) concluded between the Company and GIAL.
The 0.2 million new shares rank pari passu with the existing shares of the Company. The Ordinary shares have been issued at €8 per
Ordinary share (market price on the issue date being €7.5 per Ordinary share) and are subject to the vesting conditions set out in the
performance incentive scheme for the Investment Adviser.
On 15 December 2017, pursuant to the above decision, GIAL transferred the second tranche of 0.07 million Ordinary shares to the
Executive Directors and certain other preference shareholders of GIAL, comprising one-third of the Ordinary Shares that were
allotted to GIAL in part settlement of the fee due to GIAL by the Company for the year ended 31 December 2016. 0.07 million shares,
held by GIAL and not transferred yet are accounted for as treasury shares as at 31 December 2017.
24.3 Subsidiaries’ Employee Share Award Plan
Opening balance related to subsidiaries employees
Transfer from Shares granted to Executive Directors and other senior management employees –
not transferred
Share-based payment expense during the year
Shares vested and excercised during the year
Closing balance
Weighted average remaining unvested period (years)
Per share price for vested and exercised share
2017
€’000
–
200
126
(158)
168
0.5
€7.55
2016
€’000
–
–
–
–
–
–
Under the share award plan, the subsidiaries’ employees required to remain in service for one year period since the date of
acceptance of the share offer letter, by the employees, of the shares assigned under the scheme. Therefore, as of 31 December 2017
a total of 35,713 Ordinary shares were held by the Company as treasury shares.
During the year, the Company recorded €0.14 million as share based payment expense in the income statement for the lapsed vested
period and remaining €0.12 million will be expensed over the remaining unvested period until August 2018. The Company estimated
that all employees will remain in service until the expiry of the unvested period.
Treasury shares
Shares purchased under subsidiaries' employee share award plan
Shares vested and exercised under subsidiaries' employee share award
plan
Shares held in treasury under subsidiaries' employee share award plan
2017
2016
Amount
€’000
Number
(‘000’)
Amount
€’000
Number
(‘000’)
(428)
158
(270)
(57)
21
(36)
–
–
–
–
–
–
25. 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 an 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 2017 the gross LTV ratio was
49.5% (2016: 43.4%) and the net LTV ratio amounted to 34.3% (2016: 20.7%).
This section includes details about Globalworth’s subsidiaries, new business acquired, investment in joint venture, goodwill and
related impact on the income statement and cash flows.
26. Business Combinations
Policy
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of
the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree.
For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at
the proportionate share of the acquiree’s identifiable net assets. The Group continues to measure the non-controlling interest at the
proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs, transfer duties, legal fees and other ancillary
costs are expensed as incurred and included in Acquisition costs.
The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to
the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value
of any asset or liability resulting from a contingent consideration arrangement.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.
This includes the separation of embedded derivatives in host contracts by the acquiree. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
If the total of consideration transferred, non-controlling interest recognised and previously held interest measured at fair value is less
than the fair value of the net assets of the subsidiary acquired the difference is recognised directly in the income statement as
bargain purchase gain on business combination. Goodwill is measured in accordance with the policy set out in note 27.
Judgements and assumptions used for Business combinations
At the time of acquisition, the Group considers whether each acquisition represents an acquisition of a business or an acquisition of
an asset. Where an integrated set of activities are acquired in addition to the property more specifically the consideration is made of
the extent to which significant processes are acquired, the transaction is accounted for as a business combination. Moreover, the
Group considers when two or more transactions are linked (by common counterparties, contractual clauses, funding etc.) whether
they are part of a single business combination.
When the acquisition of subsidiary or property does not represent a business, it is accounted for as an acquisition of a group of
assets and liabilities. The cost to acquire the entity is allocated between the identifiable assets and liabilities of the entity based
upon their relative fair values at acquisition date and no goodwill or deferred tax is recognised.
The Group acquired controlling interest in the following entities during the year. The existing strategic management functions and
associated processes were acquired with the properties and, as such, the management considered these transactions as acquisitions
of a business rather than an asset acquisitions.
As a consequence of the desire for GPRE’s largest shareholder to exit their remaining position, having initially sold at IPO,
Globalworth launched and successfully completed a tender offer for between 50.01% and 67.90% of the issued share capital, at a
price that represented a discount of approximately 20% to the Company’s reported EPRA NAV per share at 30 September 2017. A
further off-market purchase subsequently increased this to 71.7%.
Through GPRE, the Company also contracted to acquire a further three high quality office properties in Wroclaw, Gdansk and
Katowice from Echo Polska Properties (“EPP”). The acquisition of the EPP portfolio was, amongst other things, conditional on
Globalworth completing the GPRE transaction. Moreover, the EPP transaction was closely linked to the GPRE transaction (negotiated
at the same time as part of the Group’s strategy to invest in the Polish real estate market, funding for EPP acquisition being provided
by the Group to GPRE, close proximity of timing) and management concluded that they form a single business combination.
The details about the nature of their activities and respective acquisition date are presented below:
Acquiree
Acquisition date
Activity
Interest
Location
Elgan Automotive Kft
(“Elgan A”)
SPC Epsilon Property
Development Company
SRL (“Epsilon”)
GPRE Group
Griffin Premium RE.. N.V.
EPP
4 May 2017
9 August 2017
6 December 2017
22 December 2017
Industrial Facility
Office Building
Office and High street
mixed use Multiple
Buildings
Multiple Office
Buildings
100%
100%
67.9%
71.66%
Pitesti, Romania Bucharest, Romania
Multiple Cities
Poland
Multiple Cities,
Poland
140
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Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
141
SECTION VI: BUSINESS COMBINATIONS AND RELATED DISCLOSURES CoNtINUED
26. Business Combinations continued
The revenue and profit contributed by each subsidiary, since acquisition date, and the impact on the Group’s results had these
companies been acquired at the beginning of the year are disclosed below:
All amounts in €’000
Subsidiary’s contribution
Revenue
Profit/(Loss) after tax
Pro-forma Group’s results if acquisition took place on 1 January (proforma unaudited)
Consolidated revenue
Consolidated profit after tax
Elgan A
Epsilon
3,071
2,141
1,459
1,368
GPRE
Group
4,905
(565)
Total
9,435
2,944
79,451
24,700
79,057
131,266
23,494
60,034
134,042
60,734
Judgements and assumptions used for the fair value assessment of assets acquired and liabilities assumed
The fair value of investment property at acquisition date in accordance with related IFRS 3 “Business Combinations” provisions, was
determined based on the most recent independent valuation (for GPRE and EPP as of 31 December 2017) available at acquisition
date. The Group concluded that the fair value of the investment property did not change since the last revaluation was performed by
the independent valuer and, therefore, the Group recognised it at fair value at acquisition date under IFRS 3 “Business
Combinations”.
The bargain purchase gain represents the purchase price discount on the value of the property acquired in accordance with the
respective Share Sale and Purchase Agreement. The identifiable net assets acquired do not include loans payable and related
accrued interest (in the case of Epsilon of €31.5 million payable to former shareholders and in case of EPP of €156.6 million payable to
former shareholders and banks) which were undertaken by the Company and repaid immediately on acquisition date as part of
consideration paid to the sellers. For purchase price allocation purposes such loans payable are considered to be part of the equity
of the acquiree. Therefore, the purchase consideration, as disclosed below, includes the price paid both for the shares of the
acquiree and for such loans settled with former shareholders to the Company. The Group has elected to measure the non-controlling
interest in GPRE (28.34% of the acquiree) at the proportionate share of GPRE’s net identifiable assets.
The deferred tax liability disclosed in the below table for each subsidiary comprises the tax effect of the difference between the tax
base and the fair value of the property at acquisition date.
The following table describes the provisional estimate of fair value of assets acquired, liabilities assumed and the consideration paid
for these companies at the respective date of acquisition for each subsidiary:
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
All amounts in €’000
Completed investment property
Available for sale financial assets
Gross trade receivables
Provision for doubtful trade receivables
Income tax receivable
Debentures
Other receivables
Cash and cash equivalents
GPRE Group
Elgan A
47,760
–
99
–
33
–
69
1,243
Epsilon
39,300
–
464
(103)
9
–
242
180
GPRE
EPP
Sub-total
TOTAL
513,360
6,678
6,053
(1,100)
–
18,369
527
33,617
166,770
1,404
(76)
–
–
733
5,904
680,130
6,678
7,457
(1,176)
–
18,369
1,260
39,521
767,190
6,678
8,020
(1,279)
42
18,369
1,571
40,944
ASSETS
49,204
40,092
577,504
174,735
752,239
841,535
Interest-bearing loans and borrowings
Deferred tax liability
Guarantees retained from contractors
Deposits from tenants
Trade and other payables
Income tax payable
23,541
3,527
–
–
2,302
–
1,851
3
99
590
306,934
17,292
–
5,578
6,871
–
4,794
–
980
3,390
733
306,934
22,086
–
6,558
10,261
733
330,475
27,464
3
6,657
13,153
733
LIABILITIES
29,370
2,543
336,675
9,897
346,572
378,485
Total identifiable net assets at fair value
Non-controlling interest
Bargain purchase gain on acquisition of subsidiaries
**19,834
–
(2,639)
37,549 **240,829 **164,838
–
(77,306)
(1,008)
(24,643)
–
(607)
405,667
(77,306)
(25,651)
463,050
(77,306)
(28,897)
Purchase consideration transferred
17,195
36,942
138,880
163,830
302,710
356,847
Purchase consideration transferred
Cash paid
Consideration payable to the seller
17,137
*58
36,942
–
138,880
–
162,680
*1,150
301,560
1,150
355,639
1,208
TOTAL
17,195
36,942
138,880
163,830
302,710
356,847
Cash flows on acquisition:
Cash paid
Cash acquired under the acquisition of subsidiaries
Long-term restricted cash
(17,137)
1,243
–
(36,942)
180
–
(138,880)
33,617
(2,958)
(162,680)
5,904
–
(301,560)
39,521
(2,958)
(355,639)
40,944
(2,958)
Net cash outflow on acquisition
(15,894)
(36,762)
(108,221)
(156,776)
(264,997)
(317,653)
* Provisional estimate pending finalisation of the final purchase price.
** Provisional fair value estimate of net assets acquired and thus bargain purchase gain arising on acquistion.
Acquisition costs
Incidental costs of €10.81 million, incurred in connection with the above business acquisitions, have been expensed and are included
in the operating results under the line acquisition costs.
27. 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.
142
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143
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
Investments
Equity of Joint venture at acquisition date
Cost of investment in Joint venture at acquisition date
Goodwill
Share of profit during the year
Sub-total
Loans receivable from joint venture
Loan given to the joint venture
Interest income for the year
Sub-total
TOTAL
2017
€’000
(17)
30
17
2,188
2,218
19,330
391
19,721
21,939
In February 2017, the Group’s subsidiary Minory Investments Limited entered into a joint venture agreement with Diti Holding
Limited and through which it acquired a 50% shareholding interest in Elgan Offices SRL (“Elgan O”), an unlisted company in Romania,
currently owning an investment property under development in Bucharest, Romania. Upon completion, the property will become
Groupe Renault Romania’s new headquarters in Bucharest. The joint venture is funded by loans from venture partners which carry
fixed interest rate and used for the construction of the building.
The joint venture had no other contingent liabilities or commitments as at 31 December 2017, except construction commitments as
disclosed in note 6. Elgan O cannot distribute its profits without the consent from the other venture partner.
SECTION VI: BUSINESS COMBINATIONS AND RELATED DISCLOSURES CoNtINUED
27. Goodwill continued
Balance at 31 December
Note
2017
€’000
2016
€’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 opening balance represents goodwill 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 flows 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 flows model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.
At 31 December 2017, the goodwill related to property management activity with a carrying value of €6.7 million (2016: 6.7 million)
was tested for impairment. No impairment charge arose as a result of this assessment at year end. Management believes that as of
31 December 2017 no reasonable change in the main assumptions could result in an impairment charge (31 December 2016: same).
At 31 December 2017 and 2016 respectively, the value-in-use of the property management activity was determined based on the
following main assumptions:
¡ budgets for 4 years; (2016: 4 years)
¡ discount rate of 6.7% p.a. as of 31 December 2017 (2016: 12.0% p.a.) and
¡ extrapolation in perpetuity from year 4 onwards, considering a growth rate of 1.0% p.a. (2016: 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.
28. Investment in Joint venture
Policy
The Group’s investments in its joint venture is accounted for using the equity method in the consolidated financial statements. Under
the equity method, the investment in a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted
to recognise the change in the Group’s share of net assets of the joint venture since the acquisition date. Goodwill relating to the
joint venture is included in the carrying amount of the investment and is not tested for impairment separately.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its
investment in its joint venture. The Group’s share of the results of operations of the joint venture is recorded in the income statement
after adjusting the transaction between the Group and the Joint venture to the extent of the interest in the joint venture. The Joint
venture has been assessed as immaterial for the Group as a whole for the purpose of disclosures required under IFRS 12 “Disclosure
of Interests in Other Entities”.
Judgements and assumptions used for Joint ventures
Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require the unanimous consent of the parties sharing control. The considerations made in determining significant influence
or joint control are similar to those necessary to determine control over subsidiaries. Following such assessment as disclosed in note
29, the Group’s investment was classified as a joint venture.
As at 31 December 2017, the Group determined that there is no objective evidence that the investment in the joint venture is
impaired. The financial statements of the joint venture are prepared for the same reporting period as the Group.
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145
SECTION VII: OTHER DISCLOSURES
This section includes segmental disclosures highlighting the core areas of Globalworth’s operations in the office, High street mixed
use 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.
29. 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
2017 and 2016, are disclosed in the table below.
As of 31 December 2017, the Group held a 100% shareholding interest (31 December 2016: 100%) in the following subsidiaries, being
holding companies as principal activities.
Subsidiary
Place of incorporation
Globalworth Investment Advisers Limited, Globalworth Finance Guernsey Limited
Guernsey, Channel Islands
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, Kinolta Investments Limited,
Minory Investments Limited, Circolo Holding Limited
Netherlands
Cyprus
As of 31 December 2017, the Group held a 100% shareholding interest (31 December 2016: 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, SPC Beta Property Development Company SRL,
SPC Gamma Property Development Company SRL, Globalworth Asset Managers SRL, Globalworth
Building Management SRL, Elgan Automotive SRL, SPC Epsilon Property Development Company
SRL
Romania
In prior year, the Group disposed Mycre Investment S.A., an asset holding company, incorporated in Greece. There were no
disposals during the year.
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
As disclosed in note 26, during the year the Group acquired a 100% shareholding interest in following entities
¡ Elgan Automotive Kft., an unlisted holding company based in Hungary and its subsidiary Elgan Automotive SRL, an unlisted
company in Romania owing a real estate asset.
¡ SPC Epsilon Property Development Company SRL, an unlisted company in Romania owning a real estate asset.
As disclosed in note 26, on 6 December 2017, the Group acquired a 67.9% shareholding interest in Griffin Premium RE.. N.V. (GPRE),
being principal holding company registered in The Netherlands. GPRE owns and manages yielding real estate assets throughout
Poland in office and High-street mixed-use properties. Griffin Premium RE.. N.V. was incorporated on 21 December 2016 in the
Netherlands and listed on Warsaw Stock Exchange. On acquisition date the GPRE Group was composed of following entities:
Subsidiary
Holding companies
IB 14 FIZ Aktywów Niepublicznych, Akka RE Sp. z o.o., Charlie RE Sp. z o.o., December RE Sp. z o.o.,
Nordic Park Offices Sp. z o.o., Lamantia Sp. z o.o., Dom Handlowy Renoma Sp. z o.o. , Wagstaff
Investments Sp. z o.o, Echo – West Gate Sp. z o.o., Wetherall Investments Sp. z o.o. Iris Capital Sp. z o.o,
Ormonde Sp. z o.o., Emfold investments Spółka z ograniczoną odpowiedzialnością Sp. k., GPRE
Management Sp. z o.o., Lima Sp. z o.o., Charlie RE Sp. z o.o.
Place of incorporation
Poland
Griffin Premium RE Lux S.á r.l. Akka SCSp, Charlie SCSp, December SCSp.
Luxembourg
Asset holding companies
Bakalion Sp. z o.o. , Centren Sp. z o.o. , Dolfia Sp. z o.o. , Ebgaron Sp. z o.o. , Hala Koszyki Sp. z o.o.
Lamantia Spółka z ograniczoną odpowiedzialnością Sp. k., Dom Handlowy Renoma Spółka z
ograniczoną odpowiedzialnością Sp. k., Dom Handlowy Supersam Sp. z o.o., Nordic Park Offices
Spółka z ograniczoną odpowiedzialnością Sp. k. , A4 Business Park „Iris Capital” Spółka z
ograniczoną odpowiedzialnością Sp. k., Emfold investments Sp. z o.o., Echo – West Gate Spółka z
ograniczoną odpowiedzialnością Sp. k.
Poland
On 22 December 2017, Griffin Premium RE.. N.V., now part of the Group, acquired 100% shareholding interest in following companies
who own three office properties in Poland (the “EPP acquisition”). The EPP acquisition was part of the same business combination as
GPRE from the Group’s perspective. Further details about acquisition are disclosed in Note 26.
Holding companies
Wagstaff Investments Sp. z o.o, West Gate Wrolaw Sp. z o.o., Wetherall Investments Sp. z o.o. Iris
Capital Sp. z o.o, Ormonde Sp. z o.o., Emfold investments Spółka z ograniczoną odpowiedzialnością
Sp. k.
Poland
Asset holding companies
A4 Business Park „Iris Capital” Spółka z ograniczoną odpowiedzialnością Sp. k., Emfold investments
Sp. z o.o., Echo – West Gate Spółka z ograniczoną odpowiedzialnością Sp. k.
On 29 December 2017, Circolo Holding Limited, a holding company, was incorporated in Cyprus as a wholly owned subsidiary of
the Group.
On 21 December, the Group increased its shareholding interest in Griffin Premium RE.. N.V., from 67.9% to 71.66% by acquiring an additional
3.76% of the shares from minority interest holders for a total consideration of €7.70 million. The carrying value of minority interest at acquisition
date was €9.055 million thus recording a gain of €1.355 million in retained earnings in statement of changes in equity.
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147
SECTION VII: OTHER DISCLOSURES CoNtINUED
30. Subsidiary with significant minority interest
As disclosed in note 26 and 29, during the year the Group acquired 71.66% interest in GPRE Group, being a material subsidiary
not fully owned by the Group as of 31 December 2017 where non-controlling interest had 28.34% interest in the GPRE Group
(the subsidiary).
The summary of key statements from GPRE’s consolidated financial statements as of 31 December 2017 is presented below.
The amounts are presented before inter-company eliminations.
Summarised statement of comprehensive income (for the period from 6 to 31 December)
Revenue
Operating expenses
Administrative expenses
Acquisition costs
Other net income
Net finance cost
Income tax expense
Loss for the period
Other comprehensive income
Loss attributable to non-controlling interest
Summarised statement of financial position
Non-current assets
Investment property
Available for sale
Other long-term assets
Long-term restricted cash
Current assets
Trade and other receivables and other current assets
Debentures and available for sale financial assets
Cash and cash equivalents
Non-current liabilities
Interest-bearing loans and borrowings
Other long-term liabilities and deferred tax liability
Current liabilities
Interest-bearing loans and borrowings
Intra-group loans
Other current-term assets
EQUITY
Attributable to:
Equity holders of parent
Non-controlling interest
Summarised statement of cash flow (for the period from 6 to 31 December)
Operating
Investing
Financing
Net increase in cash and cash equivalents
2017
€’000
4,905
(1,036)
(370)
(2,657)
814
(2,191)
(1,862)
(2,397)
–
(679)
31 December
2017
€ ‘000
680,130
5,897
116
2,958
10,695
22,735
34,685
(278,690)
(30,229)
(26,202)
(165,413)
(16,749)
239,933
172,361
67,572
2017
€’000
2,736
(157,583)
158,873
4,026
31. Segmental Information
Policy
The Board of Directors is of the opinion that the Group is engaged mainly in real estate business, comprising following Offices
investment property, High street mixed use office investment property, residential investment property and other, in two
geographical areas, Romania and Poland. 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.
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
Following the acquisition of Griffin Premium RE.. N.V, High street mixed use investment properties segment was added to 2017
reporting segments which was not existing in property portfolio held by the Group in prior year.
The Group is domiciled in Guernsey. The Group earns revenue and holds non-current assets (investment properties) in Romania and
Poland, 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 Operating 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, mixed use and other segments however residential segment is disclosed separately as it
meets the quantitative threshold of IFRS 8.
Consequently, the Group is considered to have four 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. Segment assets and liabilities
reported to executive management on a segmental basis are set out below:
2017
2016
Romania
Poland
Operating
expenses
Administrative
expenses
Acquisition costs
Change in fair
value of
investment
property
long-term
assets
Gain on
acquisition of
subsidiary
Other expenses
Other income
Foreign
exchange loss
Finance cost
High
Street
Mixed
use
€’000
Office
€’000
Residential
€’000
Other
€’000
Revenue-total
62,902
3,150
2,949 10,488
60,952
–
2,949 10,488
Inter-
segment
eliminations
€’000
Total
€’000
Office
€’000
(1,623) 77,866
(1,428) 72,961 59,725
–
1,950
3,150
–
–
(195)
4,905
(21,902)
(492)
(1,220)
(3,451)
Segment NOI
41,000
2,658
1,729
7,037
293 (26,772) (20,947)
(1,330) 51,094 38,778
(4,346)
(233)
(777)
(6,059)
1,184 (10,231)
(5,810)
(4,492)
–
(507)
– (10,809)
(3,529)
(14)
7,170
(84)
–
–
(3,801) 3,358
–
6,727
6,527
(64)
(2)
(150)
(119)
14,600 11,658
–
2,639
– 28,897
(153)
–
–
–
*(3,938)
5
–
–
–
–
(4,091)
(169)
5
2,910
(109)
(71)
(29)
(108)
(31,801)
(168)
(3,469)
(3,027)
Finance income
1,357
47
–
43
Segment results 21,824
9,399
(10,344) 3,374
(135)
–
(317)
– (38,465) (28,153)
748
1,447
(146) 24,107 16,844
–
Share-based
payment
expense
Gain on sale of
subsidiary
Share of profit of
joint ventures
Profit before
–
–
2,188
–
–
–
–
–
–
(143)
–
–
–
–
–
–
–
(143)
–
2,188
High
Street
Mixed
use
€’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Residential
€’000
Other
€’000
Inter-
segment
eliminations
€’000
–
–
–
Total
€’000
–
2,985
6,807
(1,286) 68,231
(944)
(3,156)
369 (24,678)
2,041
3,651
(917) 43,553
(599)
(4,478)
899
(7,707)
–
(91)
–
(105)
(1,277)
1,460
(62)
(2)
(1,688)
201
–
–
(17)
33
(2,644)
(1,425)
1
–
–
–
–
–
–
6,710
(183)
(1,857)
3,111
(119)
– (32,222)
–
749
(4,044)
(852)
(18) 11,930
–
–
(14)
272
–
–
(14)
272
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149
tax
24,012
9,399
(10,344) 3,231
(146) 26,152 16,844
–
(4,044)
(594)
(18) 12,188
* Other expenses represent loss on sale of non-core investment property (apartments).
SECTION VII: OTHER DISCLOSURES CoNtINUED
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
31. Segmental Information continued
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 2017 (2016: €nil).
The related party transactions are set out in the table below:
Income statement
Statement of financial position
Income/(expense)
Amounts owing (to)/from
2017
High
Street
Mixed use
€’000
Office
€’000
Residential
€’000
Other
€’000
Inter-
segment
eliminations
€’000
Total
€’000
Office
€’000
2016
High
Street
Mixed
use
€’000
Residential
€’000
Other
€’000
Inter-
segment
eliminations
€’000
Total
€’000
Segments
Segment
non-current
assets
Romania
Poland
1,331,727 309,197
84,719
116,102
(150) 1,841,595
951,823
–
84,719
116,102
(150) 1,152,494
379,904 309,197
–
–
–
689,101
844,752
844,752
–
Total assets
1,407,799 331,530
89,336 333,283
(1,003) 2,160,945 1,054,626
Total
liabilities
728,216 207,674
27,465
62,038
(904) 1,024,489
451,205
Additions to
non-current
Assets
– Romania
41,321
–
569
10,332
–
52,222
37,691
–
–
–
–
–
–
101,454 52,445
(29)
998,622
101,454 52,445
(29)
998,622
–
–
–
–
104,831 73,975
(1,630) 1,231,802
34,857 32,015
(1,669)
516,408
200
4,220
–
42,111
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
York Global Finance Offshore BDH
Corporate Loan facility
(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
2017
€’000
2016
€’000
2017
€’000
–
–
–
–
–
–
–
–
–
–
2016
€’000
(994)
(1,364)
(1,867)
(3,011)
(533)
(361)
(723)
(181)
1,667
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Mr. Ioannis Papalekas1
Elgan Offices SRL
Sale of residential completed property
Loan to Joint venture
391
–
19,330
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.
32. 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 101 of the
Director’s Report of the Annual Report.
1 In prior year, Globalworth Asset Managers SRL completed the sale, the terms of which had been agreed in 2011, of two apartments
and 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
103 – 104 of the Annual Report.
33 New and Amended Standards
Starting from 1 January 2017 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
IAS 12 Amendments: Recognition of Deferred Tax Assets for Unrealised Losses
IFRSs 2014 – 2016 (IFRS Standards 2014-2016 Cycle (issued on 8 December 2016)
Amendments to IAS 7: Disclosure Initiative
Effective
date
Jan-17
Jan-17
Jan-17
Standards issued but not yet effective and not early adopted by the Group are presented in the table below.
IFRS 15 Revenue from Contracts with Customers (issued on 28 May 2014), including amendments to IFRS 15 Effective date of IFRS
15 (issued on 11 September 2015) – effective for financial years beginning on or after 1 January 2018; IFRS 15 Revenue from Contracts
with Customers is effective for annual periods beginning on 1 January 2018. IFRS 15 establishes a five-step model that will apply to
revenue earned from a contract with a customer (with limited exceptions), regardless of the type of revenue transaction or the
industry. The standard’s requirements will also apply to the recognition and measurement of gains and losses on the sale of some
non-financial assets including sale of investment property.
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151
SECTION VII: OTHER DISCLOSURES CoNtINUED
33. New and Amended Standards continued
The standard provides a single, principles based five-step model to be applied to all contracts with customers, as follows:
1. Identify the contract with a customer
2. Identify all the individual performance obligations within the contract
3. Determine the transaction price
4. Allocate the price to the performance obligations
5. Recognize revenue as the performance obligations are fulfilled
IFRS 15 may cause revenue to be recognized earlier in some cases, but later in others.
IFRS 15 does not apply to rental income, but only apply to service charge income, marketing income and fit out services income
generated by the Group. The Group has identified 10 lease agreements the revenues of which should be disclosed differently in the
note 7 of the financial statements starting from 1 January 2018. However, this would not impact the net operating income (NOI) and
would only affect the breakdown of revenues presented in the note 7 between ‘Rental income’ and ‘Service charge and marketing
income’. The reclassification of such amounts is not material for the Group as at 31 December 2017.
There will be no impact on fit-out services income for contract in progress at 31 December 2017.
As of December 31, 2017, the Group has analysed impact of implementation of IFRS 9 on the accounting principles applied by the
Group with respect to the Group’s operations or its financial results.
(a) Classification and measurement
The Group has performed an impact assessment of IFRS 9 implementation on the presentation of its financial instruments after
1 January 2018 and concluded, that it will effect in changing the measurement of the ROFO bonds. Presented as assets available for
sale and measured at fair value through other comprehensive income as of 31 December 2017, ROFO bonds will be valued at fair
value through profit or loss under IFRS 9, which will increase volatility in recorded profit or loss. Dual business model applied towards
ROFO bonds as well as developer profit margin embedded will not allow the entity to sustain present presentation of the bonds, as
they fail IFRS 9 SPPI test. As of December 31, 2017 however the entity decided that fair value of the embedded instrument equals
zero, due to low PoC of the project as well as pre-let rate of the ROFO assets.
The Group considers that IFRS 9 regulations will not affect presentation of neither West Link Bonds nor interest-bearing borrowings
as they are already measured at amortised cost.
(b) Impairment
IFRS 9 requires the Group to record expected credit losses on all of its debt securities, loans and trade receivables, either on a
12-month or lifetime basis. The Group does not expect any significant impact of the IFRS 9 on entity's impairment policy as all trade
receivables are already analysed on a regular basis and in line with the policy they are impaired as a result of tenant's credit situation
and collaterals provided review rather than already occurred credit events. Entity applies a forward-looking approach by impairing
receivables collectively – for any tenant, whose credit risk increases significantly – instead of impairing individual items. Impact of the
new credit loss model on presentation of West Link Bonds is immaterial as the project will be completed in April 2018.
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
IFRS 9 Financial Instruments
IFRS 15 Clarifications: Revenue from Contracts with Customers
IFRIC 22 Foreign Currency Transactions and Advance Consideration
IFRS 16 Leases
IAS 19: Plan Amendment, Curtailment or Settlement
Effective
date
Jan-18
Jan-18
Jan-18
Jan-19
Jan-19
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
IAS 40: Transfers to Investment Property (Amendments)
IFRIC 22: Foreign Currency Transactions and Advance Consideration
Annual Improvements to IFRSs 2014 – 2016 Cycle
IFRIC 23 Uncertainty over Income Tax Treatments
IAS 28 Amendments: Long-term Interests in Associates and Joint Ventures
IFRS 9 Amendments: Prepayment Features with Negative Compensation
IFRS 2 Amendments: Classification and Measurement of Share-based Payment Transactions
Annual Improvements to IFRS Standards 2015-2017 Cycle
Effective
date (EU endorsement)
Not yet endorsed by EU
Not yet endorsed by EU
Not yet endorsed by EU
Not yet endorsed by EU
27 February 2018
Not yet endorsed by EU
Not yet endorsed by EU
Not yet endorsed by EU
Not yet endorsed by EU
Not yet endorsed by EU
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
34. 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 resolved the two cases together. On 19 July 2017, the presiding judge
announced that it has accepted the third party’s claim and denied the Subsidiary’s claim. Based on the legal advice it has received,
management has filed an appeal against the decision and believes that the court of appeal 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 tax system in Romania and Poland
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 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 tax legislation in Romania and Poland, 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 tax payer in Romania and Poland.
35. Subsequent Events
Date
Description
3 January 2018
23 February 2018
The Company announced that its Board of Directors has approved the payment of an interim dividend in
respect of the six month financial period ended 31 December 2017 of €0.22 per Ordinary share for total
amount of €29.1 million, which was paid on Friday 26 January 2018 to its eligible shareholders.
The Group successfully completed the acquisition of the two land plots located in the Gara Herastrau/Barbu
Vacarescu corridor of Bucharest's new CBD, that it had previously announced for a total consideration of €15.5
million. The first land plot is located between the Globalworth Plaza and Green Court "B" office properties
owned by the Group, and is the last remaining street facing land plot on Gara Herastrau street. The second land
plot adjacent to Globalworth’s Green Court complex. The combined lands are anticipated to allow for the
development of c.40.0k sqm of commercial (predominantly office) space.
27 February 2018
GPRE (partly owned subsidiary of the Group) announced a number of strategic initiatives following a meeting of
GPRE's board of directors, notably:
¡ GPRE is being rebranded as Globalworth Poland, and will be renamed as Globalworth Poland Real Estate
N.V.
¡ GPRE has announced its intention for a capital raise of €400 million to fund further expansion in Poland.
Following the purchase of three high-quality office properties for €160 million in December 2017 (West Gate
in Wroclaw, Tryton Business House in Gdansk and A4 Business Park in Katowice), GPRE is currently in
advanced negotiations for further acquisitions with an aggregate consideration of around €300 million.
¡ New nominations for GPRE's board of directors have also been made. It is proposed that Mr Norbert Sasse,
CEO of Growthpoint Properties (Growthpoint), and Mr George Muchanya, Growthpoint's Head of Corporate
Strategy, are appointed to the GPRE board.
These matters will be presented at GPRE's forthcoming Annual Meeting
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153
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF GLOBALWORTH
REAL ESTATE INVESTMENTS LIMITED
Opinion
We have audited the consolidated financial statements of Globalworth Real Estate Investments Limited (“the Company”) and its
subsidiaries (together “the Group”), which comprise the consolidated statement of financial position as at 31 December 2017, and
the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of
cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of
the Group as at 31 December 2017 and its consolidated financial performance and its consolidated cash flows for the year then
ended in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”) and in compliance
with the Companies (Guernsey) Law, 2008, as amended.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (“ISA”). Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We
are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each
matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures
designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of
our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on
the accompanying consolidated financial statements.
Key Audit Matter
How our audit addressed the key audit matter
Accounting for business combinations which gave
rise to bargain purchase gain (€28.9 million)
During the year, the Group completed various
acquisitions as disclosed in note 26. The Group has
determined these acquisitions to be business
combinations for which the purchase price is to be
allocated between acquired assets and liabilities at
their respective fair values and resulting in the
recognition of goodwill or a bargain gain. The
assessment of the fair value of net assets acquired and
the consideration transferred requires significant
judgement and the accounting is complex giving rise
to a higher risk of misstatement.
For this reason we consider this a key audit matter.
The Group’s disclosures regarding its accounting
policy, judgments and assumptions used for Business
Combinations are in note 26 of the financial
statements.
The audit procedures performed for auditing the accounting for business
combination included among others the following:
¡ We reviewed the transaction documents to evaluate management’s
assessments that the transactions fall within the business combinations
definition;
¡ We evaluated the appropriateness of management’s assessment of the
fair value of assets and liabilities acquired and we engaged our internal
valuation specialists to assess the fair values of investment property at
the date of purchase;
¡ We evaluated the competence and objectivity of the independent
experts that performed the valuation of the investment property;
¡ We evaluated the management’s assessment of the fair value of
consideration transferred;
¡ We evaluated the management’s assessment of the accounting
treatment of the assignable loans;
¡ We evaluated the management’s assessment of the adjustments to the
Purchase Price computations;
¡ We evaluated the management’s assessment of the existence of
contingent consideration arising from the acquisitions and, if
applicable, its measurement;
¡ We evaluated the management’s assessment of the bargain gain
computation;
¡ We have analysed and assessed the accounting treatment applied by
the Group in respect to the acquisition of the business in Poland –
GPRE and EPP as linked transactions, and the judgments applied in the
accounting treatment of these transactions.
We also considered the adequacy of disclosures in relation to the
acquisitions and bargain gain.
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
Key Audit Matter
How our audit addressed the key audit matter
Valuation of Investment Property (€1,792 million;
2016 – €981 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.
For this reason we consider valuation of investment
property a key audit matter.
The Group’s disclosures regarding its accounting
policy, fair value measurement and related estimates
and judgments used for investment property are in
notes 3 and 4 of the financial statements.
Recognition of rental income (€54 million; 2016 -
€46 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.
The Group provides various lease incentives to its
tenants. In order to avoid double accounting, the
assessed fair value of investment property is reduced
by the carrying amount of the lease incentives. Such
lease incentives are amortized in the income statement
over the duration of the lease together with the rental
income. Accounting for lease incentives affects one of
the most significant metrics of the Group (Revenue), as
such we consider recognition of rental income and the
accounting for lease incentives a key audit matter.
The Group’s disclosures regarding its accounting
policy for rental income and lease incentives, are in
note 7 of the financial statements.
The audit procedures performed on the valuation of investment property
included among others the following:
¡ We documented our understanding of the processes, policies and
methodologies used by management for valuing investment property;
¡ 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 performing a
sample of their calculations;
¡ We engaged our own internal valuation experts from Romania and
Poland 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.
We also considered the adequacy of disclosures in relation to the
investment property valuation.
The audit procedures performed for the audit of revenue included among
others the following:
¡ 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;
¡ We evaluated the controls and we tested them for the relevant
assertions over contracted rent;
¡ We performed reasonability tests on rental income to identify any
inconsistencies in rental income patterns;
¡ On a sample basis we agreed rental rates to tenancy agreements and
rent received to bank statements;
¡ For a sample of tenancy agreements signed within 2017 we searched to
identify any lease incentives;
¡ 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 enquired the Group’s commercial teams about unusual lease terms
and we evaluated the completeness of lease incentives through
scrutiny of other agreements in place with the tenants.
We also considered the adequacy of disclosures in relation to rental
income.
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155
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit
of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Andreas Hadjidamianou.
Ernst & Young Cyprus Limited
certified Public accountants and registered auditors
Jean Nouvel Tower,
6 Stasinos Avenue,
P.O.Box 21656,
1511 Nicosia,
Cyprus
7 March 2018
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF GLOBALWORTH
REAL ESTATE INVESTMENTS LIMITED CoNtINUED
Other information included in the Group’s 2017 Annual Report
Other information consists of the information included in the Annual Report, other than the consolidated financial statements and
our auditor’s report thereon. The Directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this
regard.
Responsibilities of Directors and Audit Committee for the consolidated financial statements
Directors are responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS
and in compliance with the Companies (Guernsey) Law, 2008, as amended, and for such internal control as the Directors determines
is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the consolidated financial statements, Directors are responsible for assessing the Group’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
The Audit Committee is responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the
audit. We also:
¡ Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
¡ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
¡ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by the Directors.
¡ Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
¡ Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
¡ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
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157
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
ADDITIONAL INFORMATION
Additional Business Analysis
Portfolio Analysis by Value and Property Type
Romania
Office
Light Industrial / Logistics
Residential & Other
Total Romania
Poland
Office
Mixed-Use
Total Poland
Grand Total
Combined
Portfolio (CP)
(€m)
% of total
JV included
in CP (€m)
Consolidated
Portfolio (€m)
Adj. for JV
ownership
(€m)
Group Share
(€m)
% of total
912.1
103.4
119.8
50.2%
5.7%
6.6%
(24.4)
–
–
887.7
103.4
119.8
12.2
–
–
899.9
103.4
119.8
55.9%
6.4%
7.4%
1,135.3
62.5%
(24.4)
1,110.9
12.2
1,123.1
69.7%
371.0
309.1
20.4%
17.0%
680.1
37.5%
–
–
–
371.0
309.1
680.1
–
–
–
265.9
221.5
16.5%
13.8%
487.4
30.3%
1,815.4
100.0%
(24.4)
1,791.0
12.2
1,610.5
100.0%
Portfolio Analysis by Contracted Rent and Property Type as at 31 December 2017
Combined
Portfolio (CP)
(€m)
% of total
JV included
in CP (€m)
Consolidated
Portfolio (€m)
Adj. for JV
ownership
(€m)
Group Share
(€m)
% of total
Romania
Office
Light Industrial / Logistics
Residential & Other
Total Romania
Poland
Office
Mixed–Use
Total Poland
Grand Total
57.4
11.5
1.5
49.5%
9.9%
1.3%
(5.5)
–
–
51.9
11.5
1.5
70.4
60.7%
(5.5)
64.9
27.0
18.5
23.3%
16.0%
45.5
39.3%
–
–
–
27.0
18.5
45.5
2.8
–
–
2.8
–
–
–
54.6
11.5
1.5
54.5%
11.5%
1.5%
67.6
67.5%
19.3
13.3
19.3%
13.3%
32.6
32.5%
115.9
100.0%
(5.5)
110.4
2.8
100.2
100.0%
Notes:
Globalworth includes 100% of the portfolio value of the investment known as Renault Bucharest Connected owned through its joint venture in Elgan Offices Srl,
in the Combined Portfolio as the Company committed to 100% of the capital expenditure for the development of the project.
Notes:
Globalworth includes 100% of the portfolio value of the investment known as Renault Bucharest Connected owned through its joint venture in Elgan Offices Srl,
in the Combined Portfolio as the Company committed to 100% of the capital expenditure for the development of the project.
Portfolio Analysis by Value and Location
Combined
Portfolio (CP)
(€m)
% of total
JV included
in CP (€m)
Consolidated
Portfolio (€m)
Adj. for JV
ownership
(€m)
Group Share
(€m)
% of total
Portfolio Analysis by Commercial Contracted Rent and Tenant Origin as at 31 December 2017
Combined
Portfolio (CP)
(€m)
% of total
JV included
in CP (€m)
Consolidated
Portfolio (€m)
Adj. for JV
ownership
(€m)
Group Share
(€m)
% of total
Romania
Bucharest
Timisoara
Pitesti
Total Romania
Poland
Wroclaw
Warsaw
Katowice
Lodz
Krakow
Gdansk
Total Poland
Grand Total
1,024.5
62.9
47.9
56.4%
3.5%
2.6%
(24.4)
–
–
1,000.1
62.9
47.9
12.2
–
–
1,012.3
62.9
47.9
62.9%
3.9%
3.0%
1,135.3
62.5%
(24.4)
1,110.9
12.2
1,123.1
69.7%
181.0
170.7
130.0
71.3
70.7
56.4
10.0%
9.4%
7.2%
3.9%
3.9%
3.1%
680.1
37.5%
–
–
–
–
–
–
–
181.0
170.7
130.0
71.3
70.7
56.4
680.1
–
–
–
–
–
–
–
129.7
122.4
93.2
51.1
50.6
40.4
8.1%
7.6%
5.8%
3.2%
3.1%
2.5%
487.4
30.3%
1,815.4
100.0%
(24.4)
1,791.0
12.2
1,610.5
100.0%
Romania
Multi
National
State Owned
Master Lease
Total Romania
Poland
Multi
National
State Owned
Master Lease
Total Poland
Grand Total
60.4
5.7
2.8
–
68.9
27.1
13.2
1.7
3.5
52.8%
5.0%
2.4%
0.0%
60.2%
23.7%
11.5%
1.5%
3.0%
45.5
39.8%
(5.5)
–
–
–
(5.5)
–
–
–
–
–
54.9
5.7
2.8
–
63.4
27.1
13.2
1.7
3.5
45.5
2.8
–
–
–
2.8
–
–
–
–
–
57.6
5.7
2.8
–
66.1
19.4
9.5
1.2
2.5
58.4%
5.8%
2.8%
0.0%
67.0%
19.7%
9.6%
1.2%
2.5%
32.6
33.0%
114.4
100.0%
(5.5)
108.8
2.8
98.7
100.0%
Notes:
Globalworth includes 100% of the portfolio value of the investment known as Renault Bucharest Connected owned through its joint venture in Elgan Offices Srl,
in the Combined Portfolio as the Company committed to 100% of the capital expenditure for the development of the project.
Notes:
Globalworth includes 100% of the portfolio value of the investment known as Renault Bucharest Connected owned through its joint venture in Elgan Offices Srl,
in the Combined Portfolio as the Company committed to 100% of the capital expenditure for the development of the project.
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159
PROPERTY PORTFOLIO ROMANIA
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
Property name
Office
BOB
BOC
TCI
City Office
Globalworth Tower
Globalworth Campus
Unicredit HQ
Globalworth Plaza
Green Court Complex
Renault Bucharest
Connected (2)
GaraHerastrau
Industrial
TAP
Dacia Warehouse
Retail / Residential
Upground Towers
Land for future
development
Luterana
Herastrau One
TAP 2
Number of
Properties
Location
Address
Year of
completion
Ownership
%
GLA
(sqm)
Occupancy
(%)
Contracted rent
(€)
WALL
(years)
Potential rent at
100% occupancy (€)(1)
"As Is" valuation
(€ million)
"Completion" valuation
(€ million)
1
1
1
1
1
3
1
1
3
2
1
5
1
1
1
1
1
Bucharest
6A Dimitrie Pompeiu Blvd, District 2
Bucharest
3 George Constantinescu St., District 2
Bucharest
15-17 Ion Mihalache Blvd, District 1
Bucharest
2 – 4A Oltenitei Street., District 4
Bucharest
201 Barbu Vacarescu Street, District 2
Tower I
Bucharest
4-6 Dimitrie Pompeiu Blvd, District 2
Tower II
Tower III
Bucharest
1F Expozitiei Blvd, District 1
Bucharest
42 Pipera Road, District 2
2008
2009
2012
2014
2016
2017
2018E
2020E
2012
2010
Bucharest
4 Gara Herastrau, District 2
2014/2016
Bucharest
Preciziei 3G, District 6
Bucharest
4B Gara Herastrau Street, District 2
2019E
2016
Timisoara
Lipovei Way, Giarmata, Timis
2011/2017
Pitesti
1 Dacia A1 Street, Oarja, Arges County
2010
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
22,391
56,962
22,434
36,145
54,686
28,955
28,235
34,836
15,500
24,061
54,328
42,261
97.3%
97.2%
99.6%
49.4%
(56.2% incl. options)
98.9%
46.8%
(73.6% incl. options)
28.0%
–
100.0%
81.5%
(96.3% incl. options)
99.2%
100.0%
12,037
75.1%
(92.9% incl. options)
103,441
68,412
97.9%
100.0%
3.6
9.6
5.0
2.5
11.3
1.7
1.2
–
3.8
3.7
9.9
5.5
1.6
4.5
4.1
3.9
4.8
3.5
6.1
7.9
10.8
10.9
–
4.4
4.8
4.2
11.0
5.2
9.9
7.6
3.7
9.9
5.1
6.3
11.4
4.0
4.4
5.9
3.8
4.5
10.0
5.5
2.1
4.6
4.1
50.8
141.8
76.4
62.1
173.0
50.8
141.8
76.4
62.1
173.0
105.9
172.1
53.0
60.7
142.7
24.4
30.2
55.5
47.9
53.0
60.7
142.7
74.0
30.2
65.1
47.9
Bucharest
9B Fabrica de Glucoza Street, District 2
2011
100%
49,056
Retail: 99.3 /
Resi: 54.9%
Retail: 0.8 /
Resi: 1.5
Retail: 7.1 /
Resi: 1.7
Retail: 0.8 /
Resi: 1.5
85.3
85.3
Bucharest
7-13 Luterana Street, District 1
Bucharest
48-50 Soseaua Nordului, District 1
Timisoara
Lipovei Way, Giarmata, Timis
–
–
–
100%
100%
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12.6
5.7
7.4
12.6
5.7
7.4
Notes:
1 Contracted rent at 100% occupancy (including ERV on available spaces).
2 Renault Bucharest Connected is presented on the 100% basis held by Elgan Offices Srl in Romania. Globalworth holds a 50% share in Elgan Office Srl.
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161
PROPERTY PORTFOLIO POLAND
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
Number of
Properties
Location
Address
Year of
completion
Ownership
% (1)
GLA
(sqm)
Occupancy
(%)
Contracted rent
(€)
WALL
(years)
Potential rent at
100% occupancy (€)(2)
"As Is" valuation
(€ million)
"Completion" valuation
(€ million)
1
1
2
2
1
1
3
1
1
5
1
1
212 A Jerozolimskie Avenue, Wlochy
Warsaw
District
Witosa Avenue and Beethovena Street,
Warsaw
Mokotow District
2000
2000
Krakow
23, 23A Lubicz Street, Old Town District
2000 / 2009
Lodz
106 Pomorska Street, Srodmiescie District
2012 / 2013
Warsaw
8 Herberta Street, Srodmiescie District
Warsaw
195A Aleje Jerozolimskie
42, 44, 46 Francuska Street, Bogucice -
Katowice
Zawodzie District
Gdansk
11 Jana z Kolna Street, Srodmiescie District
Wroclaw
12 Lotnicza Street, Fabryczna District
2000
1999
2014 / 2015
/ 2016
2016
2015
61-65 Koszykowa Street, Srodmiescie
Warsaw
District
Wroclaw
40 Swidnicka Street, Srodmiescie District
Katowice
6 Piotra Skargi Street, Srodmiescie District
2016
2009
2015
71.7%
71.7%
71.7%
71.7%
71.7%
71.7%
71.7%
71.7%
71.7%
71.7%
71.7%
71.7%
6,610
91.9%
4,920
23,986
33,510
9,024
6,217
30,556
24,016
16,646
22,246
40,604
24,223
100.0%
100.0%
100.0%
99.7%
100.0%
100.0%
100.0%
99.4%
100.0%
94.3%
96.8%
0.9
1.0
5.0
5.2
1.9
1.1
5.0
3.8
2.9
6.9
7.8
3.9
3.7
6.2
3.5
5.6
3.2
4.4
4.5
4.0
5.1
5.8
3.8
4.9
1.0
1.0
5.0
5.2
1.9
1.1
5.0
3.8
2.9
6.9
8.0
4.0
11.4
13.7
70.7
71.3
24.0
13.3
68.5
56.4
41.9
108.4
139.1
61.5
11.4
13.7
70.7
71.3
24.0
13.3
68.5
56.4
41.9
111.1
139.1
61.5
Property name
Office
Batory Building I
Bliski Centrum
CB Lubicz
Green Horizon
Nordic Park
Philips
A4 Business Park
Tryton
West Gate
Mixed-Use
Hala Koszyki
Renoma
Supersam
Forward Purchase
West Link
1
Wroclaw Na Ostatnim Grousz Street
2018E
GPRE: 100%
14,362
100.0%
2.5
7.1
2.5
n/a
36.4
Right of First Offer
Beethovena Business Park
Tower I
2
Tower 2
Warsaw
Beethovena Street
2019E
GPRE: 25%
Browary J
1
Warsaw
Grzybowska Street
2018E
GPRE: 25%
Notes:
1
2 Contracted rent at 100% occupancy (including ERV on available spaces).
Investment 100% owned by GPRE. For the Forward Purchase and Right of First Offer properties, GPRE's ownership in each investment is presented.
17,845
16,380
14,979
n/a
n/a
n/a
n/a
n/a
3.1
2.9
3.1
n/a
n/a
n/a
42.1
36.9
54.3
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163
INVESTING POLICY
GLOSSARY
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
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 75 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 under
performing 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.
Asset or Property
Represent the individual land plot or building under
development or standing building which forms part or the
entirety of an investment.
EBITDA
Earnings attributable to equity holders of the Company before
finance cost, tax, depreciation, amortisation of other non-current
assets and purchase gain on acquisition of subsidiaries.
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
Combined real estate portfolio
Is defined as the aggregation of all assets in the Company’s
portfolio, including consolidation of 100% of GPRE and 100% of
the investment referred to as Renault Bucharest Connected.
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.
Contracted Rent
The annualised headline rent as at 31 December 2017 that is
contracted on leases (including pre-leases) before any customary
tenant incentive packages.
EBITDA (normalised)
Earnings attributable to equity holders of the Company before
finance cost, tax, depreciation, amortisation of other non-current
assets, purchase gain on acquisition of subsidiaries, 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.
Debt Service Cover Ratio (DSCR)
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.
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.
Discount Rates
The discount rate is the interest rate used to discount a stream of
future cash flows to their present value.
Financial Year
Period from 1 January to 31 December.
Discounted Cash Flows 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 flows 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.
FFO
Free funds from operations, estimated as the EPRA Earnings for
the relevant period.
GLA
Gross leasable area.
IFRS
International Financial Reporting Standards as adopted by the
European Union.
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165
Overview
Strategic review
POrtfOliO Overview
gOvernance
financial StatementS
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.
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.
GLOSSARY CoNtINUED
Property Under Development
Properties in the development process that do not meet all the
requirements to be transferred to completed investment property.
Interest Cover Ratio (ICR)
Calculated as net operating income divided by the debt
service / interest.
Investment
Represent a location in which the Company owns / has interests
in.
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.
Loan-to-Cost Ratio (LTC)
Calculated by dividing the value of loan drawdowns by the total
project cost.
Gross Loan to Value (Gross 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.
Net Loan to Value (Net LTV)
Calculated as the total outstanding debt excluding amortised
cost, less cash and cash equivalents as of financial position date,
divided by the appraised value of owned assets as of financial
position date.
Maintenance Costs
Including necessary investments to maintain functionality of the
property for its expected useful life.
Net Assets Value (NAV)
Equity attributable to shareholders of the Company and/or net
assets value.
Net Asset Value (NAV) Per Share
Equity attributable to owners of the Company divided by the
number of Ordinary shares in issue at the period end.
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.
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), by Knight Frank Sp. z
o.o (Knight Frank) and CBRE Sp. z o.o.(“CBRE”) 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.
When presenting the total portfolio value of the Group, we have
included 100% of the appraised value of property held by Elgan
Offices Srl in Romania. Group holds a 50% share in Elgan Office
Srl and its investment is included in the financial statements
under “share of net assets and loans provided.
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, Knight
Frank and CBRE as of the 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, Knight
Frank and CBRE as of the 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.
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.
Master Lease
Master lease, includes various rental guarantees, which range
between 3 and 5 years, covering the majority of space which is
currently vacant in the properties owned through GPRE.
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.
SPA
Share sale purchase agreement.
SQM
Square metres.
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167
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 Cyprus Limited
Jean Nouvel Tower
6 Stasinos Avenue
1511 Nicosia
Cyprus
Registrar
Link Market Services (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 Fund Solutions (Guernsey) Limited
PO Box 156
Ground Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey
GY1 4EU
Joint Broker
Jefferies International Limited
Vintners Place
68 Upper Thames Street
London
EC4V 3BJ
United Kingdom
Asset Manager*
Globalworth Asset Managers SRL
Globalworth Tower
26th floor
201 Barbu Vacarescu Boulevard
2nd district
Bucharest 020276
Romania
Legal Adviser – English Law and US Law
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
168
Globalworth aNNUal rEPort aND FINaNCI al StatEMENtS 2017
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: +40 (0) 372 800 000
Fax: +40 (0) 371 600 000
Email: enquiries@globalworth.com
www.globalworth.com