THE LANDLORD
OF CHOICE
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
INTRODUCTION
THE LANDLORD OF CHOICE
GLOBALWORTH IS THE
LEADING OFFICE
INVESTOR IN CENTRAL
& EASTERN EUROPE
we provide world-class work spaces to
multinational tenants in Poland and Romania.
FINANCIAL HIGHLIGHTS1
Portfolio open
market value
€2.5bn
€1.8bn (2017)
Shareholders’
equity
€1.1bn
€1.1bn (2017)
ePra nav
per share
€9.04
€8.84 (2017)
iFrS earnings
before tax
€115.3m
€26.2m (2017)
adjusted normalised
eBitda
net Operating
income
€119.0m
€42.8m (2017)
€133.4m
€51.1m (2017)
iFrS earnings per share
ePra earnings per share
dividend per share
60.67 cents
26.40 cents (2017)
46.03 cents
18.17 cents (2017)
54 cents
44 cents (2017)
OPERATIONAL HIGHLIGHTS
¡ Combined portfolio value rose by
¡ Active development pipeline
35.6% on 2017 to €2.5bn, with new
acquisitions of €538.3m of which
€520.8m was in five office investments
in Poland.
restocked with 78.9k sqm to be
delivered in Romania by mid-2020
following new projects initiated in
bucharest and Timisoara.
¡ Completed Phase A of Globalworth
Campus and Renault’s new HQ in
bucharest adding 70.5k sqm of new
high-quality space.
¡ Standing portfolio footprint increased
¡ Green-certified properties now
account for 70.6% of our standing
portfolio, with the potential to rise to
100% through properties currently
under certification.
by over 250k sqm to reach 1.0m
sqm of leasable space. Commercial
occupancy of 95.1% (96.3% including
tenant options), a 2.8% increase on a
like-for-like basis, with 121.8k sqm of
leasing transactions concluded.
¡ Established a €1.5 billion Euro Medium
Term Notes program and issued
a €550 million Eurobond at 3.0%
coupon, and completed a €450 million
equity capital raise at Globalworth
Poland.
¡ Standing contracted rent increased
¡ Operational platform further
by 46.2% to €159.5m (99.0%
commercial rent).
strengthened and now counts
c.195 professionals.
1. Please refer to the Glossary (pages 179-181) for the definitions used and the Financial Review section (pages 50-54) for further details.
Overview
Strategic review
POrtFOLiO review
gOvernance
FinanciaL StatementS
additiOnaL inFOrmatiOn
CONTENTS
Overview
At a glance
investment proposition
investment journey
Strategic review
chief executive’s statement
our markets
Business model
Strategy
Key performance indicators
Review of new acquisitions
our most significant acquisitions
in 2018
Standing portfolio review
developments review
Asset management review
Financial review
Financing and liquidity review
corporate social responsibility
Risk report
Viability statement
Portfolio review
portfolio review
Governance
2
4
6
10
12
14
16
18
20
22
30
32
42
50
56
60
72
79
82
92
introduction to Governance
97
Board of directors
100
directors’ Report
Report of the Audit committee
104
Report of the nomination committee 110
Report of the Remuneration committee 112
Financial statements
consolidated financial statements
notes to the financial statements
independent auditor’s report to the
members of Globalworth Real estate
investments limited
Additional information
Schedule of properties
investing policy
Glossary
company directory
118
122
168
174
178
179
186
visit us online:
www.globalworth.com
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OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
96.7%
of our portfolio comprises
income generating
properties located in
9 key cities in
Romania and Poland
AT A GLANCE
THE LANDLORD OF CHOICE
BY CREATING
ENVIRONMENTS WHERE
BUSINESS CAN FLOURISH
wHO wE ARE
OUR PORTFOLIO
Globalworth is a leading real estate
company with a primary focus on
Poland and Romania, the two largest
markets in Central and Eastern Europe
(CEE). The Company acquires,
develops and manages commercial
real estate assets, primarily in the
office sector, with the objective of
being the landlord of choice for the
broad and growing variety of
multinational corporations in the
region. Globalworth has a real estate
portfolio valued at €2.5 billion,
managed by an internal team of
c.195 professionals mainly located in
Romania and, through its subsidiary
Globalworth Poland (GPRE), in Poland.
OUR FOCUS
Our mission is for Globalworth
to be the CEE region’s leading office
landlord and the partner of choice
for the wide variety of high-quality
tenants in the region.
Locations (% GAV)
Property type (% GAV)
49.4%
50.6%
12.4%
4.3%
4.7%
78.6%
Romania
Poland
office
mixed used
logistics / light-industrial
other
Combined Portfolio Value (GAV)
Standing Properties
Properties by status (% GAV)
€2.5bn
€1.8m (2017)
52
39 (2017)
1.8%
1.5%
96.7%
Standing Commercial Occupancy
Standing GLA
95.1%
93.3% (2017)
1,042.0k sqm
791.0k sqm (2017)
Contracted Rent
€159.5m
€115.9m (2017)
GLA Under Construction
78.9k sqm
70.5k sqm (2017)
Standing properties
Developments
land for future
development
2
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PORTFOLIO REVIEW INVESTMENT PROPOSITION
THE LANDLORD OF CHOICE
FOR GENERATING
ATTRACTIVE
SUSTAINABLE RETURNS
Our established platform, clear strategy and financial strength
provide firm foundations for future value creation.
FOCUS ON THE LARGEST REAL
ESTATE MARKETS IN THE CEE
STRONG MANAGEMENT
PLATFORM wITH LOCAL
PRESENCE
HIGH-QUALITY REAL ESTATE
PORTFOLIO
Poland and Romania, Globalworth’s
two focus markets, offer compelling
macro-economic and real estate
fundamentals with broad opportunities.
we are a multi-skilled platform, with
substantial on-the-ground operations
in our focus markets, with a team of
c. 195 experienced professionals
combining local insight with an
international approach.
we own a sizeable and modern
portfolio in prime locations, principally
of Class “A” offices, but also including
a number of landmark and strategic
investments mainly in mixed-use
(office / commercial) and logistics /
light-industrial properties.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
STRONG CASH FLOwS
Our portfolio benefits from high
occupancy rates and is predominantly
leased to a diverse and international
tenant base on triple-net, long-dated,
euro-denominated leases.
Our assets, liabilities and revenues are
principally Euro-denominated,
minimising local currency exposure.
TRACK RECORD OF CAPITAL
DISCIPLINE AND ACCESS TO
bOTH PUbLIC AND PRIVATE
CAPITAL MARKETS
MULTIPLE GROwTH DRIVERS TO
OUR bUSINESS
we take a conservative and
sustainable approach to financing,
with diversified sources of capital.
we continuously explore our markets
for value-added acquisition
opportunities in Poland and Romania.
we have a pipeline of future
development opportunities which we
plan to convert into high-quality office
and logistic / light-industrial properties
in the coming years.
we proactively seek asset
management initiatives for our
portfolio and operations, targeting
enhanced revenue streams and
improved efficiency.
See Our markets for more information
on page 12
See Corporate Social Responsability: “People”
for more information on page 60
See Portfolio review for more information
on page 82
See Financial review for more information
on page 50
See Financing and Liquidity review
for more information on page 56
See Strategy for more information
on page 16
4
4
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5
PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
INVESTMENT JOURNEY
THE LANDLORD OF CHOICE
A PROVEN
TRACK RECORD
we have consistently and successfully executed
our strategy in acquisitions, asset management and
development of predominantly prime office assets,
while diversifying our sources of capital to achieve
a strong and institutionalised capital structure.
Access to International Capital Markets (€ m)
Increasing Standing Footprint (k sqm)
1,000
800
600
400
200
0
1,200
1000
800
600
400
200
0
2013
2014
2015
2016
2017
2018
2013
2014
2015
2016
2017
2018
Equity
Debt
Romania
Poland
Developing and Delivering High-Quality
Real Estate Spaces (k sqm)
Leasing Success (take-up k sqm)
200
180
160
140
120
100
80
60
40
20
0
6
140
120
100
80
60
40
20
0
2013
2014
2015
2016
2017
2018
2013
2014
2015
2016
2017
2018
under Construction
Deliveries
Romania
Poland
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.
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7
PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
STRATEGIC
REVIEW
Chief Executive’s statement
our markets
Business model
Strategy
Key performance indicators
Review of new acquisitions
our most significant acquisitions
in 2018
Developments review
− Recently completed developments
− Development pipeline
Asset management review
Financial review
Financing and liquidity review
Corporate social responsibility
Risk report
Viability statement
10
12
14
16
18
20
22
32
34
38
42
50
56
60
72
79
8
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PORTFOLIO REVIEW CHIEF EXECUTIVE’S STATEMENT
THE LANDLORD OF CHOICE
MAKING SIGNIFICANT ACHIEVEMENTS
2018 was another dynamic year for Globalworth in which
the business has gone from strength to strength, evidenced
in the significant step up in our financial results and metrics.
We are delighted to have established Globalworth as the
leading institutional office landlord in the CEE region with a
portfolio of prime office assets, supported by a strong team of
experienced professionals. We approach 2019 with confidence
in our strategy and a number of exciting initiatives to
position us as the landlord of choice, offering vibrant
communities in which our stakeholders can thrive.
Ioannis Papalekas
Chief Executive officer
Our Portfolio and Approach
The Polish and Romanian economies once again
grew faster than the European Union average in
2018 and their real estate markets continued to
evolve in line with our expectations. Our entry into
the Polish market in late 2017 and the investments
we have made since have, within a very short
period, established Globalworth as the largest
institutional office landlord in Poland. I am thrilled
with the €538.3 million of acquisitions that we
executed on in 2018, primarily in warsaw but also in
Krakow, wroclaw and development plots in
bucharest. we have acquired some of the most
recognisable office properties in the market,
including Spektrum Tower, a landmark warsaw
office building, now proudly projecting the
Globalworth brand on its exciting new LED
illumination.
The value of Globalworth’s combined property
portfolio expanded by 35.6% in 2018 to €2.5 billion,
exclusively situated in the two largest real estate
markets in Central & Eastern Europe. we now have a
footprint of over one million square metres and, by
value, are over 75% weighted to the office sector.
Reflecting the strong growth in Poland, we are now
geographically evenly balanced between our two
markets of operation. we expect the weighting
towards Poland to increase further in the near term.
People, Places and Technology
behind these strong results and ongoing progress
stands a team of hard-working professionals from a
range of different disciplines. Our Globalworth family
has continued to grow, and is now approaching 200
professionals across our business, and I wish to
again thank them all for their unrelenting efforts.
In Romania, our operating metrics continue to be
strong, with growth in both contracted rents and
occupancy. we are delighted with the completion of
Globalworth Campus Phase A and its leasing to
dynamic tenants, notably in the technology-related
sectors, as well as that of the Renault bucharest
Connected, both in bucharest. we are equally
pleased that 60% of our Globalworth Campus Tower
3, which completes at the end of this year, is now
leased or under offer on a 10-year term to a variety
of high-quality tenants. Our development pipeline in
Romania positions us well for further expansion
there and we are currently on site on three schemes,
with more in planning.
Alongside the excellent progress in expanding our
footprint through acquisition and development, we
place equal importance on managing our portfolio
through our on-the-ground property teams. During
2018, we continued to strengthen our asset and
property management functions in line with the
growth of the platform. Collectively, our team
commits considerable energy to planning and
implementing the asset management of each of our
assets to ensure that our buildings remain suited to
our tenants’ needs both today and in the future.
we believe that being a good landlord is about
creating great communities for our tenants, and thus
environments where business can flourish. we firmly
recognise that real estate must keep pace with the
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
rapid evolution in technology, and we are excited to be
exploring a range of technology-related initiatives from
monitoring systems to user experience. Our collaboration with
Mindspace, a leading global operator of high-end, inspiring
co-working space, with Mindspace establishing operations in
three of our locations in bucharest, in addition to its existing
location with us in warsaw, is another such initiative.
Our Results and Capital Markets
I am pleased to once again report strong operating metrics and
financial results. Our occupancy improved by 2.8% in 2018 on
a like-for-like basis, while overall occupancy stood at 95.1% at
31 December 2018, or 96.3% including tenant options. Our
annualised contracted rent, which drives the cash flows that
underpin our business model, increased by 46.2% to €159.5
million as at 31 December 2018.
with the full year consolidation of Globalworth Poland, new
investments and developments, and successful management
of the existing portfolio, the Group achieved an impressive
increase in both net operating income and operating profits in
2018. we recorded a 161% increase in net operating income to
€133.4 million, our normalised adjusted EbITDA grew 178% to
€119.0 million, and our EPRA earnings by 262% to €60.9
million. Our EPRA NAV rose by 2.5% over 2018, which when
accounting for dividends paid during the year generated a total
accounting return of 7.8%, up from 5.7% in 2017. Dividends for
2018 amounted to 54 cents, paid in two equal interim dividends
in August 2018 and February 2019.
Despite increased volatility in global capital markets over the
course of the year, Globalworth successfully issued €550m in
senior unsecured notes with a 7-year maturity and coupon of
3.0%. we are delighted that our progress has been recognised
by the credit rating agencies, with Fitch assigning and S&P
upgrading (from bb+) our rating to investment grade of
bbb- and Moody’s upgrading our rating to ba1 (from ba2). In
addition, Globalworth Poland completed a €450 million equity
capital raise to support its continued growth, of which €300
million was subscribed by Globalworth and €150 million by our
largest shareholder, Growthpoint Properties.
Our planned move to a Premium Listing of the London Stock
Exchange has been challenged by ongoing uncertainty around
the UK’s proposed departure from the European Union. Mindful
of unforeseen impacts, the board is proceeding with caution as
it awaits more clarity, but continues to recognise the potential
benefits that such a move could bring, including inclusion into
indices and improved liquidity in the Company’s shares.
Governance, Corporate Structure and CSR
we introduced a series of changes to the board committee
structure, as outlined in the Governance section, in October
2018, consistent with our ongoing growth and commitment to
high corporate governance standards. I am also delighted
that my colleague Dimitris Raptis has become the CEO of
Globalworth Poland, in addition to his current responsibilities
as Deputy CEO and CIO of Globalworth. we are also actively
reviewing opportunities to simplify the Company’s corporate
structure as our business and general environment evolve. we
have recently increased our shareholding in Globalworth Poland
to 77.5% and have signalled a path to take this to over 99% as
part of our recently announced proposed capital raise, through
the potential exchange of Growthpoint’s 21.58% shareholding
into shares in Globalworth. we believe this strengthening of our
equity story will be welcomed by investors, while also offering
enhanced corporate efficiencies.
Our commitment to corporate social responsibility and also to
high environmental standards remains a key principle of the
Group. we established the Globalworth Foundation in 2018,
responsible for overseeing our various CSR initiatives, which
alongside the whole Globalworth team, works to ensure that the
Group acts consistently in an ethical and socially responsible
manner. we now have 70.6% of our property assets certified as
environmentally friendly, and have plans to take this higher.
Looking Forward
Our strategic focus remains consistent with prior years.
As we believe that both the Polish and Romanian markets will
over time become increasingly institutionalised, we will continue
to exploit attractive investment opportunities as we identify
them to further expand our footprint and capitalise on
fragmented ownership. Through our asset management focus,
we seek to enhance the value of our investments and ensure
that the attractive cash flows that they generate can be
sustained. we will seek to manage our capital structure through
a combination of debt and equity, while targeting a long-term
loan to value ratio of below 40%.
we have recently announced that we are under exclusivity on
four properties in Poland, with a total value of €280 million. with
a blended stabilised acquisition yield of over 7.5%, this pipeline
offers assets with a clear strategic fit in prime locations as well
as an attractive income profile, while not only building critical
mass and providing scale benefits across our portfolio, but also
providing further asset management angles and value creation
potential. we have announced our intention to raise up to €500
million with up to €350 million being additional warchest to fund
our investment pipeline and the remainder being the exchange
of Growthpoint’s stake in GPRE into Globalworth.
we remain confident of the dynamism of our markets and the
attractive fundamentals on offer. Tenant take-up remains strong,
supported by multinational companies looking to establish or
expand their operations, often in the share serviced centre,
business process outsourcing or IT fields. Vacancy levels are
at or close to their lows in our markets of operation, with
some sub-markets offering very limited available space.
This backdrop, combined with strong investor appetite,
in our view offers a healthy backdrop for returns, including
the potential for compression in yields given the wide spread
with those of more mature real estate markets.
Since our initial public offering in 2013, we have consistently
demonstrated our abilities to acquire and develop high-quality
properties at yields which are considerably higher than prime
property yields in our core markets. we have also seen a
continuing improvement to the economic backdrop giving us
confidence that fundamentals in both our markets remain
compelling. with this in mind, we are set to take further strides
forward in 2019.
Ioannis Papalekas
Chief Executive Officer
27 March 2019
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PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
OUR MARKETS
THE LANDLORD OF CHOICE
OPPORTUNITIES FOR
SIGNIFICANT GROWTH
Through our Polish and Romanian portfolios
we are active in the two largest1 markets in
Central and Eastern Europe.
1. Source: Eurostat
DYNAMICS
OPPORTUNITIES
CHALLENGES
OUTLOOK
SELECT MARKET DATA
POLAND
ROMANIA
¡ Poland is the largest, most mature and active
real estate market in the CEE. In 2018, €7bn of
transactions were completed, highlighting Poland’s
position as the most liquid market in the region.
¡ Overall sentiment in the office market remains
positive, supported by healthy demand and
relatively limited office stock for short-term delivery
(1.6m sqm under construction, the majority of which
to be delivered from 2020 onwards). Consequently,
vacancy rates fell in the major cities in 2018.
¡ Offices in warsaw and regional cities accounted for
approximately 40% of investment volumes in 2018,
with prime yields falling and rental levels pressured
upwards.
¡ Unemployment remained low, driving demand for
high quality space and locations that help to attract
and retain employees. There is also a noticeable
trend for skilled professionals to move into or back
to Poland.
¡ Establishing long-term partnerships with
high-quality national and multinational
tenants, ensuring sustainable cash flow
generation.
¡ Investing in new opportunities in top
quality locations in warsaw and regional
cities as the market continues to grow,
underpinned by an expanding economy
and positive real estate fundamentals.
¡ Contraction of yields which remain above
those of other more mature western
European markets as the economy
expands relatively faster.
¡ Poland further establishing itself as the key
economy in CEE and link between western
and Eastern Europe, and becoming
increasingly recognised as a developed
market by bodies such as FTSE Russell
and Stoxx.
¡ Romania is one of the best performing countries
in the EU and is benefiting from a positive macro
outlook, albeit that a more normalised rate of
growth is to be expected over time.
¡ Establishing long-term partnerships with
high-quality national and multinational
tenants, ensuring sustainable cash flow
generation.
¡ The domestic real estate market is maintaining its
¡ Investing in new opportunities –
developments and standing properties –
as the market continues to grow in
bucharest and regional cities, supported
by the expanding economy.
¡ Contraction of yields as they remain above
those of other, more mature CEE and EU
markets and as the economy expands.
dynamism, driven by demand for high-quality office
and logistics / light industrial space from national
and multi-national corporates.
¡ bucharest continues to be the principal real estate
hub in the country, although certain regional cities
are seeing increasing interest from both investors
and tenants.
¡ The supply of office space continues to grow
with a number of projects, announced or under
construction, being delivered in the short / medium
term. Occupancy levels for top quality investments,
however, are expected to remain high due to an
imbalance of Class “A” and Class “b” offices and a
positive net absorption rate.
¡ The high rate of employment
may hinder the pace of future
economic growth.
¡ Managing the portfolio to
maintain and improve occupancy
and income levels at a time
when much of the new supply is
delivered to the market.
¡ Increasing construction costs,
which may impact projects in
the pipeline and the associated
economics.
¡ Growth potentially being
restrained by global economic
uncertainty, which may impact
the domestic market, as well as
ongoing tax changes.
¡ The high rate of employment
may hinder the pace of future
economic growth.
¡ Implementation of new
infrastructure to unlock economic
potential.
¡ Increasing construction costs
impacting deployment of
developments and investor
returns.
¡ Potentially slower economic
growth, also due to recently
introduced fiscal changes
impacting certain sectors in
the economy.
¡ Increasing competition between
investors in a low interest rate
environment, driving yield contraction
as the economy expands and the
real estate market becomes more
institutional.
¡ Developers reassessing and
redesigning development projects,
and adjusting the end product mix (to
include greater residential and hotel
components).
¡ Demand to remain strong for
high-quality properties, with
good connectivity and which are
environmentally friendly (particularly
for offices).
¡ Upward pressure on effective rents in
central locations, with current levels
being maintained elsewhere.
¡ Yield contraction as the real estate
market becomes more liquid and the
economy expands, supported by
demand from new entrants.
¡ Demand for high-quality properties
with good connectivity and which are
environmentally friendly (particularly
offices) to remain strong.
¡ Increasing opportunity in regional
cities as potential employment
constraint in bucharest drives
occupier demand elsewhere.
Investment volume
2018
2017
2016
2015
€7.2bn
€5.1bn
€4.6bn
€4.1bn
Office demand and supply balance
2018
2017
2016
0.7m sqm
0.7m sqm
1.5m sqm
1.5m sqm
1.3m sqm
1.4m sqm
Demand
Supply
Investment volume
2018
2017
2016
2015
€0.9bn
€1.0bn
€0.9bn
€0.8bn
Office demand and supply balance
2018
2017
2016
0.2m sqm
0.2m sqm
0.3m sqm
0.4m sqm
0.5m sqm
0.4m sqm
Demand
Supply
Source: Colliers
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PORTFOLIO REVIEW bUSINESS MODEL
THE LANDLORD OF CHOICE
GENERATING VALUE
we aim to manage our resources to deliver attractive
returns to shareholders and value to other stakeholders.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
OUR RESOURCES
AND RELATIONSHIPS
Skilled team
In-house team of professionals
with strong functional and local
knowledge of their markets.
Financial strength
Conservative financing policy,
with simple debt structure and
Euro-denominated assets,
liabilities and revenues, and a
supportive shareholder base.
Scale and reputation
Trusted brand and scale creating
new opportunities and business
efficiencies.
wHAT wE DO TO CREATE VALUE
PROVEN INVESTMENT MODEL
Locations
Prime locations in fast-growing
regions of Poland and Romania
Sector
Office 78.6%
of GAV
Primarily Class A office, with mixed
use and logistics/light-industrial
a secondary focus
Properties
modern high-quality standing properties
with environmental certification, or with
potential to be
Tenants
Diversified base of large or established
national and multinational
corporations
Lease terms
Revenue streams backed by long-term,
Euro-denominated, triple net, inflation
linked leases
9 cities
100%
of standing
GAV with
or under
certification
98.4%
contracted
GLA secured
with triple net
contracts
Valued relationships
Longstanding partnerships with
leading real estate industry
specialists, credible financial
institutions.
76.0% of
contracted rent
from
multinational
tenants
Read more about our key strengths below
OUR KEY STRENGTHS
Skilled team
Our multi-disciplinary, local presence in both Poland and
Romania allows for dynamic and bespoke asset and tenant
management and off-market sourcing. Globalworth’s scale
and resources give us access to new investment
opportunities and help improve our operational efficiency.
Our high quality professional standards and Group profile
provide us with a competitive advantage in retaining tenants
and facilitating their potential expansion plans, as well as in
establishing relationships with prospective occupiers.
HOLISTIC FOCUS ACROSS THE VALUE CHAIN
Acquire standing
properties and land
Develop or refurbish
L O Y CAPIT
A
L
D E P
C
A
PITAL RE T U R
S
N
Stakeholder
engagment
Asset manage
Dividend
Our status as both a real estate developer and a long-term
investor gives us insight into tenants’ requirements, as well
as trends in office stock specifications.
HOw wE DELIVER VALUE
Tenants
Attractive, productive working
environments for +650 tenants.
WALL
5.0 years
Employees
Challenging and rewarding careers for
our increasing number of
professionals.
Number of professionals
c.195
Shareholders
Attractive, risk-adjusted returns
through yield and capital appreciation.
Targeting sustainable and progressive
dividend policy.
€0.54 per share (2018)
Communities
Creating a community where
business can flourish, and improve
the quality of life.
Number of causes supported
>10 causes
Financial strength
we manage our equity and debt financing to facilitate the
ongoing growth of the Group and enhance medium-term
shareholder returns. we have a conservative financial long-term
leverage target of below 40% LTV, while allowing for short-term
fluctuations. we seek to ensure that our structures and
covenants are simple and understandable, with a focus on
interest cover to support and improve our credit rating. It is our
policy that secured borrowing should be provided by a credible
and diverse group of financial institutions, which understand and
support our business model, and we seek to maintain our cost
of debt at efficient levels while using protection mechanisms
against possible interest rate rises.
Scale and reputation
Our sizeable portfolio and track record allow us to benefit
from economies of scale, through the negotiation of
attractive terms for services and costs, with a positive
impact for both our tenant base and the Group. The
resulting lower occupational costs and the consistently high
service we provide improve our tenant relationships and
shareholder returns.
Valued relationships
we have longstanding relationships with leading industry
specialist providers, whose services and expertise
complement our own, allowing us to deliver a high-quality
service, experience and benefits to our tenants and other
stakeholders. Such partners include joint-venture partners,
contractors and other specialist service providers. Tenants
are key to the success and longevity of our business, and
we target established national and multinational corporates
to form the core of our occupier base.
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15
PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
STRATEGY
THE LANDLORD OF CHOICE
THE LEADING LANDLORD & PARTNER
IN CENTRAL EASTERN EUROPE
we have a clear strategy to achieve our ambition of
being the leading office landlord in the CEE and to be
the partner of choice for tenants in our chosen markets.
INCREASE FOOTPRINT
IN OUR CORE MARKET
ENHANCE VALUE OF
EXISTING INVESTMENTS
MAINTAIN AN EFFICIENT AND
FLEXIBLE CAPITAL STRUCTURE
DE-RISK PORTFOLIO
PROGRESS IN 2018
PROGRESS IN 2018
PROGRESS IN 2018
PROGRESS IN 2018
We further increased our presence in our two countries of
operation, mainly through the acquisition of five Class “A"
offices in Poland, the completion of two Class “A” offices
and the acquisition of three land plots to be developed in
the future, all in Bucharest.
HOW WE MEASURE PROGRESS
Our Combined Portfolio Value exceeded
€2.0bn in 2018
€2.5bn
€1.8bn (2017)
Standing GLA increased +4.7x since 2014 to
+1.0m sqm
1,042.0k sqm
791.0k sqm (2017)
GLA to be developed in phases in the future
305.5k sqm
Signed and/or extended 121.8k sqm of GlA in our
properties and improved our overall occupancy rate.
increased the presence of co-working spaces in our portfolio
• Five different co-working operators with 23.4k sqm of
space (let or pre-let) in our portfolio
• Extended our business relationship with mindspace with
uS$10 million (€8.6 million) equity investment in the
company to support its ongoing growth.
We continued with our renovation and maintenance
programme and made further progress on environmental
certification of select properties in our portfolio.
HOW WE MEASURE PROGRESS
Number of Green
properties
Properties under
certification
30
18 (2017)
19
8 (2017)
Environmentally friendly
properties account for
+70% of our standing
commercial portfolio
70.6%
60.5% (2017)
Like-for-like occupancy
increased by 2.8%
2.8%
Simplified our capital structure following our second
Eurobond issue and established an EMTN program to
allow for further bond issues in the future.
Reduced exposure to developments by limiting their
contribution to up to 10% of GAV, and improved occupancy
through active management during the construction phase.
Completed a new equity capital increase at GPRE level.
Improved our credit rating with:
• Fitch: assigning investment grade rating of bbb-
• S&P: upgrading rating to bb+ positive outlook (from
stable) in 2018 and to investment grade of bbb- in 2019
• Moody’s: upgrading our rating to ba1 (from ba2)
Diversified locations to reduce reliance to any single
sub-market. increased presence to fast growing (office and
logistics / light-industrial) sector.
HOW WE MEASURE PROGRESS
HOW WE MEASURE PROGRESS
Financing
Further simplified our capital structure through the
repayment of existing bank debt following the issue of a new
€550 million Eurobond which was +2x oversubscribed
Equity Capital
Completed a €450 million equity capital raise at
Globalworth Poland, of which €150 million was new capital
Eurobond
€550m
at Globalworth
Equity Capital
€450m
at Globalworth Poland
Standing Properties account for 96.7% of our combined
portfolio value
Exposure to Bucharest new CBD reduced over the past
three years by 53.0%
Increased presence in
Warsaw to
22.1%
of GAV
See our progress over the past five years on page 18
See our progress over the past five years on page 18
See our progress over the past five years on page 18
See our progress over the past five years on page 18
PRIORITIES
PRIORITIES
PRIORITIES
PRIORITIES
Continue to invest in both core markets of operation with
further investments, mainly in office and light-industrial
properties, and potentially in other value accretive
opportunities on a select basis.
Continue to actively manage our portfolio of properties
to further increase occupancy.
Complete the certification/re-certification process of
19 properties in our portfolio.
Raise additional equity capital on an ad-hoc basis and
diversify our shareholder base.
Secure financing from reputable providers on an ad-hoc basis.
Finalise our Globalworth Campus project with the delivery
of the third tower, complete the first facility in TAP II in
2019 and further progress in the development of our other
office and logistics / light-industrial properties.
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17
PORTFOLIO REVIEW
KEY PERFORMANCE INDICATORS
THE LANDLORD OF CHOICE
FIVE YEARS OF PROGRESS
599.3
224.5
193.0
2
171.3
77.2
34.2
931.1
355.5
360.4
5
303.2
85.1
47.8
Total GAV € bn
Standing GLA k sqm
GAV of Green Properties € bn
Number of Green Properties
Standing Commercial GLA k sqm
Standing Commercial Occupancy %
Contracted Rent (€)
Concentration %
bUCHAREST NEw CbD
bUCHAREST OTHER
wARSAw
REGIONAL ROMANIA
REGIONAL POLAND
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
977.5
420.0
441.8
7
370.0
83.1
61.0
1,815.4
791.0
988.0
18
748.1
93.3
115.9
2,462.1
1,042.0
1,633.2
30
1,004.8
95.1
159.5
5.7%
67.7%
4.8%
72.7%
5.2%
73.4%
28.1%
43.5%
27.3%
34.6%
26.6%
22.5%
21.4%
6.1%
9.4%
4.7%
22.1%
18
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GLObALwORTH AnnuAl REPoRT AnD FinAnCiAl STATEmEnTS 2018
Dec 2014
Dec 2015
Dec 2016
12.9%
Dec 2017
11.4%
Dec 2018
19
PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
PORTFOLIO REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
REVIEw OF NEw ACQUISITIONS
THE LANDLORD OF CHOICE
CONTINUED EXPANSION
WITH NEW ACQUISITIONS
In 2018, our portfolio continued to expand as a result of
acquisitions, predominantly in Poland, completed developments
and further progress on developments underway in Romania.
This expansion and the successful negotiation of ongoing
leases led to further growth in our rental income and has
created the potential for future rental growth.
Over the course of the year, Globalworth completed
eight new investments in Poland and Romania for a
total of €538.3 million.
Dimitris Raptis
Deputy Chief Executive officer &
Chief investment officer
How this links to our strategy
ROMANIA
These 2018 asset acquisitions
followed on from our strategic
expansion into Poland in 2017,
optimising our local platform to
build out critical mass and scale,
and positioning Globalworth as the
largest institutional office landlord
in Poland. Core to our growth
strategy is the consistent execution
of acquisitions that can enhance
Globalworth’s footprint and the
overall quality of its portfolio
and income profile. We continue
to assess a dynamic pipeline of
opportunities.
In Romania, where the Group is looking to
its next phase of development projects,
as previously announced Globalworth
completed the acquisition of two land plots
in the new CbD of bucharest for a total
consideration of €15.5 million.
¡ One plot is located between the
Globalworth Plaza and the Green Court
“b” offices owned by the Group and
represents the last remaining street-
facing land plot on Gara Herastrau street.
¡ The second land plot is adjacent to
Globalworth’s Green Court complex and
will be used to further expand
the complex.
The combined lands are anticipated to
allow for the development of 42.6k sqm of
commercial (predominantly office) space.
In addition we acquired in June 2018 a third
land plot for €2.0 million, which is directly
adjacent to the Renault bucharest
Connected project in the west of bucharest,
on which we are now progressing
preparations and design for a new 33.4k
sqm GLA property offering predominantly
Class “A” office space and, thereby, creating
a campus of over 75.6k sqm of GLA at
this location.
based on preliminary estimates, the
development of these three plots may
add €12.9 million of rental income to our
portfolio and result in a potential yield on
cost of 10.2%, underlying the attractive
opportunities we are able to identify in
developing such properties.
PLOT
ONE
GLOBALWORTH
SQUARE
(UNDER CONSTRUCTION)
PLOT
TWO
PLOT
THREE
GREEN COURT D
GLOBALWORTH
WEST
€538.3m
invested in 8 opportunities
POLAND
we are very pleased to have been able to
acquire some of the most recognisable
properties available in the Polish market,
which included three of the 10 largest office
transactions of the year. In total we
concluded five transactions for €520.8
million, adding 185.8k sqm of Class “A” office
space, which at the end of 2018 were 94.8%
occupied and had €37.3 million of contracted
rent with and average wALL of 3.5 years.
These acquisitions offer an attractive entry
yield of 7.2%, with the scope of this to rise to
7.6% under full occupancy. This is consistent
with the Group’s strategy of acquiring
standing properties at yields above prime
market levels, where we believe that we can
enhance the attractiveness and performance
of our investments by applying different
asset management initiatives over time.
The majority of our new acquisitions where
properties in warsaw, were we have now
established a strong presence in the country’s
principal real estate market.
In addition, we continued to pursue
opportunities in select regional cities,
successfully expanding our portfolio through
new investments in Krakow and wroclaw.
SKYLIGHT
& LUMEN
QUATTRO
BUSINESS
PARK
SPEKTRUM
TOWER
See more detail on page 22
See more detail on page 24
See more detail on page 26
WARTA
TOWER
WEST
LINK
See more detail on page 39
See more detail on page 40
See more detail on page 40
See more detail on page 28
See more detail on page 29
20
GLObALwORTH AnnuAl REPoRT AnD FinAnCiAl STATEmEnTS 2018
GLObALwORTH AnnuAl REPoRT AnD FinAnCiAl STATEmEnTS 2018
Eurobuild Awards 2018:
– Investor of the Year, CEE
– Newcomer of the Year, Poland
GLA acquired in Poland
185.8k sqm
Green Certified
(with potential for 100%)
93.1%
by value
Leased to well-established
multinational corporations
61.2%
21
OVERVIEW
STRATEGIC REVIEW
PORTFOLIO REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
OUR MOST SIGNIFICANT ACQUISITIONS IN 2018
wARSAw, POLAND
SKYLIGHT & LUMEN
Skylight and Lumen represent the main office component of the
well-established “Zlote Tarasy”, the multifunctional mixed-use
complex in the heart of warsaw, which combines high-quality
office, retail and leisure spaces with excellent connectivity to
the capital’s main train station.
Property summary
Acquisition date: Q4-18
Acquisition Price: €190.0m
Space:
Skylight 22.0k sqm of GlA
Lumen 23.4k sqm of GlA
Location: Central Business District
of Warsaw
Parking units: Skylight 219
Lumen 234
Completion date: 2007
Typical Floor: Skylight 1.2k sqm
Lumen 2.9k sqm
Layout:
Skylight 4 uG, GF, 18 Floors
Lumen 4 uG, GF, 8 Floors
Green Accreditation: BREEAm (Excellent)
The Group’s largest property transaction
to-date was finalised in Q4-18 with the
acquisition of the two office buildings in
warsaw known as “Skylight” and “Lumen”
from Unibail-Rodamco-westfield, for a total
consideration of €190 million. The two
offices, which offer 45.4k sqm of GLA and
453 parking spaces, are part of the “Zlote
Tarasy” multifunctional mixed-use complex
in the heart of warsaw, which combines
high-quality office, retail and leisure space
with excellent connectivity to the capital’s
main train station. Skylight and Lumen offer
attractive upside potential as they are
88.8% occupied, with annual contracted
rental income of €11.5 million and a
weighted average lease length of 3.7 years
as at 31 December 2018. The property is
multi-tenanted to 65 national and
multinational corporates, with a range of
tenants including Pernod Ricard, Mars,
PGE Energia Ciepla, InOffice, Regus and
Cushman & wakefield.
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23
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
OUR MOST SIGNIFICANT ACQUISITIONS IN 2018
ConTinuED
KRAKOw, POLAND
QUATTRO BUSINESS PARK
Quattro business Park is a modern high-quality office
complex in Krakow developed in phases, distinguished
by its design and flexibility in combining office spaces
between four of its five buildings.
Property summary
Acquisition date: Q2-18
Acquisition Price: €139.0m
Location: northern part of Krakow
Completion date: in phases between 2010 and 2015
Space: 60.2k sqm of GlA
Parking units: 1,327
Typical Floor: 0.9k – 1.4k sqm
Layout: 1uG, GF, 6-13 Floors
Green Accreditation: BREEAm Very Good (3 buildings)
& BREEAm Excellent (2 buildings)
The park is almost fully occupied
(98.3% occupancy), with annual contracted
rental income of €10.7 million and a
weighted average lease length of 2.6 years
as at 31 December 2018.
In Krakow we acquired a high-quality
office complex of five buildings known
as Quattro business Park (“QbP”) for a
total consideration of €139.0 million.
The property is located in the northern part
of the city, c.5.0km from the city centre and
close to the ring road. QbP was completed
in phases and offers a total of 60.2k sqm
of GLA and 1,327 parking spaces.
The property is multi-tenanted to
44 national and multinational corporates,
with Capgemini, Google and Luxoft being
the largest occupiers.
24
GLObALwORTH AnnuAl REPoRT AnD FinAnCiAl STATEmEnTS 2018
GLObALwORTH AnnuAl REPoRT AnD FinAnCiAl STATEmEnTS 2018
25
PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
OUR MOST SIGNIFICANT ACQUISITIONS IN 2018
ConTinuED
wARSAw, POLAND
SPEKTRUM TOWER
Landmark high-rise Class “A” office with a dynamic and
original structure at the heart of warsaw’s CbD.
Property summary
Acquisition date: Q3-18
Acquisition Price: €101.0m
Location: Central Business District of Warsaw
Completion date: 2003, followed by an extensive
refurbishment in 2015
Space: 32.1k sqm of GlA
Parking units: 318
Typical Floor: 0.9k – 1.5k sqm
Layout: 5 uG, GF, 32 Floors
Green Accreditation: BREEAm (Very Good)
The property benefits from high occupancy
(96.8%), which we are confident can be
increased in the near-term. Spektrum is
leased to over 65 national and international
corporates and is thus well suited to our
asset management-led approach. It has
an annual contracted rental income of
€6.7 million and a weighted average lease
length of 4.6 years, as at 31 December 2018.
Also in warsaw, we added two of the
city’s most recognisable stand-alone
offices to our portfolio, Spektrum Tower
and warta Tower.
Spektrum Tower is a high-rise Class
“A” office in the heart of warsaw’s Central
business District, acquired for a total
consideration of €101.0 million. It was
completed in 2003 and underwent
extensive refurbishment in 2015, when
it was converted into a multi-tenanted
building offering 32.1k sqm of GLA
(post remeasurement of areas) and
318 parking spaces.
26
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27
PORTFOLIO REVIEW OUR MOST SIGNIFICANT ACQUISITIONS IN 2018
ConTinuED
wARSAw, POLAND
WARTA TOWER
OVERVIEW
STRATEGIC REVIEW
PORTFOLIO REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
wROCLAw, POLAND
WEST LINK
(re-certification)
A landmark office building in warsaw
and one of the most widely recognised
properties in the city, warta Tower
is characterised by a wide podium
extending over 5 floors and an
82 meter high-rise tower over 20 floors,
connected through a large winter-garden
of 1.0k sqm. Other distinct features
include its dark blue glazed glass and
its iconic lobby with a sculpture by the
highly regarded barbara Falender.
Property summary
Acquisition date: Q1-18
Acquisition Price: €55.0m
Location: West Central Business District of Warsaw
Completion date: in 2000
Space: 33.7k sqm of GlA
Parking units: 542
Typical Floor: odium: 3.0k sqm / Tower: 0.8k sqm
Layout: 3 uG, GF, +20 Floors
Green Accreditation: BREEAm Very Good
“warta Tower” presents an opportunity where we have
identified some interesting asset management angles.
The property is located in the extended west Central
business District of warsaw and was acquired for a total
consideration of €55.0 million. warta Tower offers 33.7k sqm
(post remeasurement of areas) of GLA and 542 parking
spaces. Its distinct features include its dark blue glazed
glass and its iconic lobby with a sculpture by barbara
Falender. The property is multi-tenanted and has a high
occupancy rate (92.4%), with TUiR warta S.A. (insurance
company, subsidiary of Talanx International AG) as its
largest tenant. It has an annual contracted rental income
of €5.9 million and a weighted average lease length of
2.5 years as at 31 December 2018. whilst the property
already offers a very attractive income, we are working on
longer-term repositioning alternatives, which are consistent
with the Group’s active asset management approach.
west Link is a 2018 completed
Class “A” office which together with
west Gate (also within the Globalworth
portfolio) form a campus offering total
GLA of 31.0k sqm, predominantly leased
to Nokia.
Property summary
Acquisition date: Q2-18
Acquisition Price: €35.8m
Location: West of the city centre of Wroclaw
Completion date: 2018
Space: 14.4k sqm of GlA
Parking units: 265
Typical Floor: 2.7k sqm
Layout: 2 uG, GF, 5 Floors
Green Accreditation: BREEAm Excellent (re-certification)
In wroclaw we acquired the recently completed
Class “A” office property known as “west Link” for a total
consideration of €35.8 million. west Link is located to the
west of the city centre with good access to the city’s key
communication arteries. with 14.4k sqm of GLA and
265 parking spaces it is fully let, with an annual contracted
rental income of €2.5 million and a weighted average lease
length of 6.2 years as at 31 December 2018. The main
tenant is Nokia Solutions & Network, which is also the main
tenant at Globalworth Poland’s west Gate, an adjacent
high-quality office property offering a further 16.6k sqm
of Class “A” office space.
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GLObALwORTH AnnuAl REPoRT AnD FinAnCiAl STATEmEnTS 2018
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29
STANDING PORTFOLIO REVIEw
THE LANDLORD OF CHOICE
THE VALUE OF OUR STANDING INCOME
GENERATING PROPERTIES INCREASED
BY 39.2% IN 2018 TO €2.4 BILLION
Standing GLA Evolution (k sqm)
1,200
1,000
800
600
400
200
0
70
1,042
186
(5)
791
Q4-17
Acquisitions
Deliveries
Q4-18
Apt. Sales
& B O M A Adj.
Our portfolio of standing properties continued to expand in 2018,
following the acquisition of five standing investments (10 office
properties) in Poland, and the completion of Globalworth Campus
Tower 2 and Renault bucharest Connected projects in bucharest.
As of year-end 2018, there were 31 standing investments in our
portfolio with a total of 52 standing properties in Poland and Romania.
Our standing portfolio comprised 25 Class “A” office investments
(39 properties in total) and three mixed-use investments (with seven
properties in total) in central locations in bucharest (Romania),
warsaw (Poland) and five of the largest office markets/cities of
Poland (Krakow, wroclaw, Katowice, Gdansk and Lodz). In addition,
we owned a light industrial park with four facilities in Timisoara
(Romania), a modern warehouse in Pitesti (Romania), and part of
a residential complex in bucharest (Romania).
Globalworth’s total standing commercial GLA at the end of December
2018 had increased by 34.3% to reach 1.00 million sqm, with the
overall standing portfolio GLA increasing 31.7% to 1.04 million sqm.
The appraised value of our standing properties rose to over
€2.0 billion (as at 31 December 2018) for the first time in our short
history at €2.4 billion, representing an annual increase of 39.2%,
mainly due to new additions (acquisitions and deliveries), while
properties held throughout the period (like-for-like) marginally
improved in value (+0.6%) in 2018.
we consider our portfolio to be modern, with the majority of our
properties having been completed or refurbished since 2011.
It is worth noting that 37 of our standing properties, accounting for
64.1% of our GLA and 65.2% of our standing combined portfolio
value have been delivered or significantly refurbished in the past
five years. In addition, following the delivery of our projects under
construction and other future completions, the proportion of modern
office stock in our portfolio will further increase in the short to
medium term.
Age of Portfolio
)
%
(
e
g
a
t
n
e
c
r
e
P
50
40
30
20
10
0
41.1
29.1
24.1
16.1
Year of completion
Year of last refurbishment
9.6
9.6
11.1
8.5
34.2
16.8
< 3 yrs
3 < x
< 5 yrs
5 < x
< 7 yrs
Age (years)
7 < x
< 10 yrs
+ 10 yrs
Year of Completion
Year of Last Refurbishment
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Standing Portfolio Value Evolution (€ m)
3,000
2,500
2,000
1,500
1,000
500
0
540
2,381
(9)
1,710
11
129
Q4-17
Like for Like
Deliveries
Acquisitions
Apt. Sales
Q4-18
Globalworth consistent with its commitment to energy efficient
properties, added nine environmentally certified properties in our
portfolio. All properties acquired this year were green with warta
Tower, the Quattro business Park (three of five buildings) and
Spektrum Tower being certified with bREEAM Very Good
accreditation, with the remaining two buildings of the Quattro
business Park, Skylight and Lumen being certified with bREEAM
Excellent accreditation, while west Link which was green certified at
the time of acquisition is currently in a recertification process. In
addition, Globalworth Campus Tower 1, a Class “A” office
developed by the Group was also awarded with bREEAM Excellent
certification in Q4-2018.
Overall, our standing portfolio as of 31 December 2018 comprised
30 green certified properties, accounting for 70.6% of our standing
commercial portfolio, further increasing to 73.2% in January 2019
following the bREEAM Excellent accreditation received for
Globalworth Campus Tower 2, and we are in the process of
certifying or recertifying 19 other properties in our portfolio.
Upon receipt of environmentally friendly accreditations for the
properties which are under certification or recertifying process,
100% of our portfolio will be green accredited.
Total Standing Properties
Number of Investments
Number of Assets
GLA (k sqm)(1)
GAV (€ m)(2):
Contracted Rent (€ m)(3)
Of which Total Commercial Properties
Number of Investments
Number of Assets
GLA (k sqm)
GAV (€ m)(2)
Occupancy(4)
Contracted Rent (€ m)
wALL (years)
31 Dec. 2017
31 Dec. 2018
25
39
31
52
791.0
1,042.0
1,710.3
2,381.1
109.1
159.5
31 Dec. 2017
31 Dec. 2018
24
38
30
51
748.1
1,004.8
1,632.6
2,312.2
93.3%
95.1%
107.6
157.9
5.3
5.0
(1) Includes c.42.8k sqm and c.37.2k sqm of residential space in 31 December 2017
and 2018 respectively.
(2) Appraised valuations as of 31 December 2017 and 2018 respectively.
(3) Contracted Rent includes c.€1.5 million from residential space in 31 December 2017
and 2018 respectively.
(4) Occupancy including tenant options of 95.4% and 96.3% in 31 December 2017
and 2018 respectively.
(*) At 31 December 2018, Renault bucharest Connected is presented on an 100% basis
held by Elgan Offices Srl in Romania. Globalworth holds 50% share in Elgan Offices
Srl.
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PORTFOLIO REVIEW
DEVELOPMENTS REVIEw
THE LANDLORD OF CHOICE
WELL-POSITIONED TO CAPITALISE
ON FUTURE OPPORTUNITIES
How this links to our strategy
The development expertise within the Group remains central to
our strategy of owning best-in-class properties that meet the
needs of our tenants into the future. we continue to explore the
market for the next phase of projects that meet our investment
criteria and will continue to grow our portfolio with high-quality
assets.
Globalworth continued with its active
development programme in Romania,
making excellent progress in the
construction and delivery of high-quality
office and light-industrial space.
In April we completed Phase A of our
Globalworth Campus project in bucharest,
with the delivery of its second tower, with
Tower 2 offering 28.2k sqm GLA and 180
parking spaces. Phase A comprises twin
Class “A” office towers with total GLA of
57.2k sqm. On completion of Phase b,
currently under construction, Globalworth
Campus will become the largest office
campus in bucharest with a total 92.0k
sqm of GLA and 960 parking spaces.
Renault bucharest Connected (“RbC”) was
completed at the end of the year, and was
subsequently handed over to the tenant in
line with its targeted timeline in February
2019. we are particularly pleased with the
efforts of our team and partners in delivering
such a high-quality project within a
compressed timeline. RbC is 100% leased
to Groupe Renault and houses their new
Headquarters in Romania, as well as a
dedicated design centre for the development
of future models of cars, in over 42.3k sqm of
GLA and 1,000 parking spaces.
RbC is the ninth property delivered by
Globalworth in Romania since the
beginning of 2015, increasing the total GLA
developed by the Group to c. 254k sqm.
Following the delivery of these high-quality
properties and as of year-end, we had two
active developments in bucharest under
construction and one in Timisoara, which
upon completion will further increase our
footprint by 78.9k sqm of GLA.
Construction of Tower 3 (centre tower)
of the Globalworth Campus project is
currently in progress. The third tower,
which represents the second and final
phase of the project, will upon completion
offer high-quality Class “A” office space
and other amenities such as a 750-seat
conference centre, spanning 34.8k sqm of
GLA, and will also include c. 500 parking
spaces. The new building will extend
over 14 floors above ground and two
underground levels and is expected to be
completed in Q4-2019. As at March 2019,
construction is in progress with the building
having reached the eighth floor.
In October 2018 we started the development
of the first phase at our TAP II project in
Timisoara. The launch of this new
development project, which was acquired
in December 2017, follows the success of
our nearby TAP project which is now 100%
let, and the ongoing demand for logistics
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
space in this location. This first facility is
now under construction, and on delivery
will offer 17.7k sqm of high-quality logistics
/ light-industrial space and is expected to
be completed in Q2-19. TAP II will be
developed in phases and upon its full
completion will offer 140k sqm of high-
quality space over 30 hectares of land.
At the end of the year we commenced the
development of a new Class “A” office in
the new CbD of bucharest. Globalworth
Square, will be located between our own
Globalworth Plaza and Green Court “b”
offices, and on completion (Q1-2020) will
offer 26.4k sqm of high-quality GLA and
450 parking spaces.
In addition Globalworth owns land plots
in four prime locations in bucharest (new
CbD, Herastrau Lake, historical CbD and
bucharest west), covering a total land
surface of 21.4k sqm, in which office or
mixed-use properties can be developed.
we have prioritised the lands in the new
and historical CbD and the west of
bucharest for future development,
where we anticipate constructing office
and mix-use properties comprising
c. 76.0k sqm GLA in total, subject to
relevant approvals.
we are currently progressing with the
required preparatory activities, including
performing planning and/or permitting,
for this land bank in bucharest and
Timisoara (TAP II – other phases) in order
to be in a position to progress these
schemes expediently.
Right of First Offer Portfolio
Globalworth, through Globalworth Poland,
has invested in two projects in Poland
which are at different phases of
construction and in each of which it owns
a 25% economic stake, with the right to
acquire the remaining interest once certain
conditions have been satisfied.
¡ beethovena I & II are a Class “A” office
project located in warsaw comprising
two, four-floor offices, which on
completion will offer total GLA of 35.8k
sqm. beethovena I and II are of similar
size (18.9k sqm and 16.9k sqm) and are
expected to be delivered in Q2-2019 and
Q3-2020 respectively. The first phase is
currently c.64% pre-leased to tenants
such as Havas, MasterCard and others.
¡ The Gatehouse Offices (previously
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 was delivered in Q4-2018 and,
offers 15.7k sqm of GLA, of which 100%
is leased to blue-chip office tenants
(including Epam, L’Oreal, Sony and
wework).
The sale of Gatehouse Offices to a fund
managed by GLL Real Estate Partners
was preliminarily signed in Q4 2018.
Under construction: GLA to be
delivered by H1-2020E
78.9k sqm
Total remaining capex of
projects under construction:
€84.1m
Future development pipeline:
GLA in phases
226.6k sqm
beethovena I
beethovena II
The Gateway House
Total ROFO
Location
Completion Date
warsaw
warsaw
warsaw
Q2-2019
Q3-2020E
Q4-2018E
GLA
(k sqm)
Equity Invested
(€ m)
18.9
16.9
15.7
51.5
2.9
2.8
4.2
9.9
Potential increase in our
current commercial GLA
+30%
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PORTFOLIO REVIEW DEVELOPMENTS REVIEw: RECENTLY COMPLETED DEVELOPMENTS
GLObALwORTH CAMPUS – TOwER 2
COMPLETING THE FIRST PHASE
OF OUR GLOBALWORTH CAMPUS
DEVELOPMENT IN BUCHAREST
Our vision for the Globalworth Campus development was to create a best-in-
class office community, using best practice from around the world to provide
technically highly specified and environmentally friendly towers, with 92.0k sqm
of high-quality space balanced between Class “A” offices, commercial and
other supporting facilities, and a 750-seat conference centre.
How this links to our strategy
PROJECT PHASE A
OUR TENANTS
Property overview
Type: Class “A” office
Year of completion: 2018
GLA: 28.2k sqm
Parking units: 180
Layout: 2x2uG+GF+12F+Tech Floor
Access: metro, tram and bus
Green Accreditation: BREEAm
Excellent
Phase A of the Globalworth Campus
project comprises “twin” Class “A”
office towers with total GLA of 57.2k
sqm and 456 parking spaces.
Tower 2 was delivered in April 2018,
offering 28.2k sqm of GLA.
The building has efficient open-space
floors, with a standard office floor
plate of 2.2k sqm and a 1 to 6
employee / sqm ratio.
Tower 2 is a multi-tenant office
selected by blue-chip tenants in the IT
and Services sectors like Dell,
Stefanini, Delphi and Chain IQ. The
attractiveness of the building, the
campus and amenities provided by the
Group are evidenced by the leasing
progress and lease length of the
contracts signed. Tenants in the
property benefit from access to a
number of amenities part of the
Globalworth portfolio including
conference centres, restaurants, coffee
shops, gym and other amenities all
within a 5 minute walk from the
property.
Occupancy as of year-end in Tower 2
was 71.6% (90.9%% including tenant
options), while lease contracts were
signed for an average duration of 8.0
years, with remaining wALL of 7.8 as of
31 December 2018.
Key investment metrics
The evolution of occupancy (% of space rented)
28.0%
70.8%
71.6%
90.9%
Contracted Rent: €3.2m
Rent at 100% Occupancy: €4.3m
Implied Yield on Cost: 11.7%
Stefanini
PC4Cards
Q4-2017
Dell
Delphi
Mazars
Chain IQ
Q2-2018
Stefanini
Chain IQ
Amazon
Q4-2018
Tenant options
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
91%
(incl. options)
occupancy achieved in
a short period following
delivery of the building
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PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
DEVELOPMENTS REVIEw: RECENTLY COMPLETED DEVELOPMENTS ConTinuED
RENAULT bUCHAREST CONNECTED
DELIVERING THE NEW HEAD
QUARTERS OF GROUPE
RENAULT IN ROMANIA
How this links to our strategy
Property overview
Type: Class “A” office
Year of completion: 2018
GLA: 42.3k sqm
Parking units: 1,000
Layout: 2uG+GF+7F+Tech Floor
Access: metro, tram and bus
Green Accreditation: BREEAm
Excellent (in progress)
Ownership: 50% Joint Venture
Key investment metrics
Contracted Rent: €5.5m
Implied Yield on Cost: 9.8%
Renault bucharest Connected is a modern
office complex, located in the western part
of bucharest, developed by Globalworth to
provide the new headquarters for Groupe
Renault in Romania.
THE PROJECT
THE LOCATION
The RbC project extends over
42.3k sqm and comprises of two
distinct buildings.
¡ A Class “A” office building which,
in addition to the “standard” office
areas, hosts an in-house 350-seat
conference center, a car showroom,
meeting rooms and other amenities.
¡ A dedicated design center for the
development of future models of
the Groupe.
The location was strategically selected
in the western part of bucharest
as it allows for easy connectivity
to the Groupe Renaults warehouse
(“Dacia warehouse”), also owned by
Globalworth, in Pitesti and its main car
assembly plant nearby in Mioveni.
In addition, the property is situated in
front of the metro station and within a
5-minute walking distance from other
means of public transport, which
together with the 1,000 parking spaces
available in the property, allows for very
easy access and comfort for the
tenant, its employees and partners.
100%
let to Groupe Renault
for 11 years
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PORTFOLIO REVIEW DEVELOPMENTS REVIEw: DEVELOPMENT PIPELINE
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
2019
Q2
2019
Q4
2020
Q1
TAP & TAP II Logistics/Light-Industrial in Timisoara
Expansion of our versatile light-industrial / logistics
platform in Timisoara through the development of new
facilities on a 30-hectare land plot adjacent to the
existing TAP project. A 17.7k sqm GLA facility is
currently under construction, with an additional
127.3k sqm of GLA expected to be developed in the
next phases. In addition, there is the possibility of
developing a 28.5k sqm facility within the original
TAP complex, with the right to expand under option
to one of the existing tenants.
Globalworth Campus –Tower 3
The third and final tower of the Globalworth
Campus development, which combines Class
“A” office space and a 750-seat conference
center over 34.8k sqm, and surrounded by
stylish public space.
Globalworth Square developments in
Bucharest’s New CBD
Office development under construction in the
new CbD, expected to offer 27.0k sqm of Class
“A” GLA. The property is located between the
Globalworth Plaza and Green Court “b” offices
on Gara Herastrau street, benefiting from great
visibility from of the city’s main arterial roads.
Location
Timisoara / Romania
GAV (€ m)
5.4
Status
Under Construction
Expected Delivery
Q2-2019
GLA (k sqm)
17.7
CAPEX to 31 Dec 18 (€ m)
3.3
Estimated CAPEX
to Go1 (€ m)
5.2
ERV (€ m)
0.8
Estimated Yield on
Development Cost
10.0%
CGI render
Location
Timisoara / Romania
GAV (€ m)
7.8
Status
Future Development
Expected Delivery
2019 – 2020E
GLA (k sqm)
150.6
CAPEX to 31 Dec 18 (€ m)
5.0
Estimated CAPEX
to Go1 (€ m)
59.1
ERV (€ m)
6.5
Estimated Yield on
Development Cost
10.2%
Location
Bucharest New CBD
GAV (€ m)
25.5
Status
Under Construction
Expected Delivery
Q4-2019
GLA (k sqm)
34.8
CAPEX to 31 Dec 18 (€ m)
17.0
Estimated CAPEX
to Go1 (€ m)
39.0
ERV (€ m)
5.6
Estimated Yield on
Development Cost
10.0%
CGI render
Location
Bucharest New CBD
GAV (€ m)
13.8
Status
Under Construction
Expected Delivery
Q1-2020E
GLA (k sqm)
26.4
CAPEX to 31 Dec 18 (€ m)
14.2
Estimated CAPEX
to Go1 (€ m)
39.9
ERV (€ m)
5.1
Estimated Yield on
Development Cost
9.5%
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PORTFOLIO REVIEW DEVELOPMENTS REVIEw: DEVELOPMENT PIPELINE ConTinuED
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
2020
Q2
2021
2021
Q2
Green Court D development in
Bucharest’s New CBD
Globalworth West development
in West of Bucharest
Class “A” office development, expected to offer
16.0k sqm of GLA, to be constructed in the
new CbD. The property will be an extension of
our very successful Green Court Complex,
which currently comprises 3 Class A offices
with 54.3k sqm of GLA.
Future 33.0k sqm Class “A” office development
to be constructed in the western part of the
city, and adjacent to Globalworth’s RbC
project, expanding the Company’s presence in
this increasingly attractive office sub-market.
Luterana development
in Bucharest’s CBD
Future development combining Class “A” office
and other high-quality commercial spaces over
27.0k sqm of GLA, to be constructed in a plot
ideally situated within bucharest’s central
business district on Luterana street.
CGI render
Location
Bucharest New CBD
GAV (€ m)
5.1
Status
Future Development
Expected Delivery
Q4-2020E
GLA (k sqm)
16.0
CAPEX to 31 Dec 18 (€ m)
2.6
Estimated CAPEX
to Go1 (€ m)
23.9
ERV (€ m)
2.9
Estimated Yield on
Development Cost
11.0%
CGI render
Location
West of Bucharest
GAV (€ m)
3.2
Status
Future Development
Expected Delivery
Q2-2021E
GLA (k sqm)
33.4
CAPEX to 31 Dec 18 (€ m)
3.0
Estimated CAPEX
to Go1 (€ m)
42.4
ERV (€ m)
4.8
Estimated Yield on
Development Cost
10.6%
CGI render
Location
Bucharest CBD
GAV (€ m)
14.3
Status
Future Development
Expected Delivery
Q2-2021E
GLA (k sqm)
26.4
CAPEX to 31 Dec 18 (€ m)
7.1
Estimated CAPEX
to Go1 (€ m)
40.4
ERV (€ m)
5.8
Estimated Yield on
Development Cost
12.2%
Developments Under Construction
Two developments at different stages of
construction are currently in progress in
bucharest and a third in Timisoara, which on
completion will increase our footprint by
78.9k sqm of GLA. Two projects are expected to
be delivered in 2019, with the third to follow in the
first half 2020, and have an appraised value of
€44.7 million (31 December 2018) and an ERV on
completion of €11.6 million, resulting in blended
yield on investment cost of 9.8%.
Future Development Pipeline
we continue to prepare new office and light-
industrial / logistics development projects in
bucharest and other regional cities in Romania.
Overall, the current value of our future pipeline
projects accounts for 1.2% of our combined
portfolio value, and on completion will offer
226.6k sqm of high-quality real estate space,
providing an expected blended yield on
investment cost of 10.9%.
1. Estimated CAPEX based on currently contracted costs and
company estimates.
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PORTFOLIO REVIEW ASSET MANAGEMENT REVIEw
THE LANDLORD OF CHOICE
ENHANCING THE PERFORMANCE
OF OUR INVESTMENTS
Central to our business is the
active management approach that
we take to our real estate portfolio,
which allows us to both enhance
the attractiveness and performance
of our investments and to satisfy
our partners’ requirements.
In 2018, we focused our initiatives
on three distinct areas:
Maintaining high occupancy across our
portfolio and letting-up vacant space.
Sustaining and improving the quality of
our real estate space through our renovation
and maintenance programme.
Creating the Globalworth Community.
LEASING REVIEw
Globalworth maintained its strong leasing momentum in 2018.
Market conditions continued to be positive, with Globalworth
benefiting from healthy demand for high-quality office space in
its target real estate markets.
Over the course of the year, driven by its proactive internal leasing
team, the Group successfully negotiated the take-up (including
expansions) or extension of 121.8k sqm of commercial space in
Romania (62.5% of transacted GLA) and Poland (37.5% of
transacted GLA), with an average wALL of 7.1 years.
New leases for 51.3k sqm were signed at a wALL of 8.5 years, and
included tenants such as Mindspace, Dell, Honeywell, Calypso,
Coca Cola and Delphi as well as 47 other corporates. Leases were
renewed, and thus extended, for 51 of our tenants for a total of 54.0k
sqm of GLA, at a wALL of 6.3 years, with the most notable extensions
involving Nokia, Huawei, Carrefour and Eurozet. The remaining 16.6k
sqm of space signed in the period related to expansion by 25 tenants,
with an average wALL of 5.7 years.
Summary Leasing Activity (2018)
Contracted rent
€159.5m
Commercial GLA leased
955.8k sqm
Commercial WALL
5.0yrs
New Leases / New Contracts
New Leases / Expansion
Renewals / Extensions
Total
* Number of unique tenants.
GLA
(k sqm)
No. of
Tenants
WALL
(yrs)
51.3
16.6
54.0
53
25
51
121.8
115*
8.5
5.7
6.3
7.1
In December 2018, Globalworth settled certain master lease and net
operating income (“NOI”) guarantees which had been granted ahead
of the GPRE initial public offering in April 2017 by its previous
controlling shareholders and were due to expire in April 2022. The
purpose of these guarantees was to cover previously unleased office
space across GPRE’s original IPO portfolio and to top up any NOI
shortfall to a specified level on the retail component of GPRE’s three
mixed-use assets, for five years post IPO, as well as covering certain
specified situations to top up rent subject to a rent-free period and
other related costs. They were settled in exchange for GPRE receiving
a cash settlement of €21.5 million (representing the net present value
of the expected guaranteed income) to compensate for any and all
amounts due now or in the future under these agreements.
The master leases settled accounted for 0.5% of our standing
commercial GLA (1.1% of standing commercial GLA in Poland) at
the time of their settlement, with the Group being confident that it
will be able to lease the corresponding spaces in the short to
medium term.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
On a like-for-like basis, occupancy increased by 2.8%
to 95.8% following the successful lease-up of previously
vacant spaces, offsetting the impact of the master
lease termination. New take-up exceeded the space becoming
available during the year, with net-take up for the year being
31.3k sqm, thus increasing occupancy in our portfolio.
Going forward, our asset management initiatives target
a reduction of the remaining vacant space. Taking into
consideration positive market conditions and the quality and
location of our properties, we are confident of demonstrating
progress in the forthcoming period.
Overall occupancy of our standing commercial portfolio
as of 31 December 2018 was 95.1% (96.3% including
tenant options), representing a 2.0% increase over the
past 12 months (93.3% as of 31 December 2017, 95.4%
including tenant options).
The overall vacancy level was modestly weighed down by
several new additions to the standing portfolio during the
period where occupancy rates were lower than the average,
but as part of identified asset management opportunities we
are confident there is near-term scope for further upside in
both occupancy and contracted rents.
In total we have 955.8k sqm of commercial GLA leased
to approximately 650 tenants, at an average wALL of
5.0 years, the majority of which is let to national and
multinational corporates that are well-known within their
respective markets.
The Group’s rent roll is well diversified, with the largest tenant
accounting for 6.1% of contracted rents, while the top three
tenants account for 12.1% and the top 10 tenants account or
28.4%, a characteristic which we expect to diversify further
as the portfolio continues to expand.
Romania
Contracted Rent(1):
€76.1 million
Romania
Poland
Contracted Rent(1):
€81.8 million
Poland
Combined Portfolio
Contracted Rent(1):
€157.9 million
Combined Portfolio
89.9%
0.0%
2.8%
7.3%
63.1%
0.4%
2.4%
34.1%
76.0%
0.2%
2.6%
21.2%
Master Lease
State Owned
National
Multinational
Occupancy(1): 94.9%
wALL(1): 6.1 years
Occupancy(1)(2): 95.4%
wALL(1): 3.9 years
Occupancy(1)(2): 95.1%
wALL(1): 5.0 years
Note:
1. Figures refer to Commercial
Standing Properties.
2. Occupancy in Poland includes
the positive impact of certain
rental guarantees, which range
between 3 and 5 years, covering
part of the space which is
currently available.
(*) Multinational, National, State
Owned and Master Lease
refers to rent contribution by
tenant origin.
(**) Occupancy including tenant
options of 96.3% s at
31 December 2018.
(***) Renault bucharest Connected is
presented on an 100% basis held
by Elgan Offices SRL in Romania.
Globalworth holds a 50% share in
Elgan Offices SRL.
Lease Expiration Profile – Commercial properties as at 31 December 2018 (€ m)
Tenant concentration in clusters
35
28
21
14
7
0
28.3
24.8
19.1
17.2
15.2
9.8
18.3
12.3
7.2
5.6
6.2% 9.6% 10.9% 17.9% 12.1% 15.7% 7.8% 3.6% 4.6% 11.6%
2019
2020
2021
2022
2023
2024
2025
2026
2027
>=2028
lease Agreements
master lease
80
70
60
50
40
30
20
10
0
100.0%
100
80
60
40
20
0
56.9%
51.0%
42.0%
1-20
21-30
31-40
41-650
Rent (€/yr)
Cumulative % of total
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PORTFOLIO REVIEW ASSET MANAGEMENT REVIEw
ConTinuED
The Mindspace lease was awarded
lease of the year at the 2018
Romanian CIJ Awards.
ROMANIA
Like-for-like occupancy in our standing Romanian
portfolio was 95.8% at 31 December 2018,
increasing by 5.5% from 90.8% at 31 December
2017. The additions of Globalworth Campus Tower
2, which is at its lease-up stage and Renault
bucharest Connected which is 100% leased,
resulted in the overall occupancy rate of our
standing portfolio increasing by year-end to 94.9%
(97.0% incl. tenant options).
Excellent progress has been made with the lease-up
of Globalworth Campus, with new leases signed
with Dell, Honeywell, Mindspace, and Delphi
amongst others in 2018. Occupancy in Tower 1
stood at 85.6% (96.8% including tenant options) as
at 31 December 2018, compared to 46.8% (73.6%
including tenant options) as at 31 December 2017.
Tower 2 was 71.6% let at 31 December 2018
(90.9% including tenant options), compared to
28.0% the previous year. In addition Tower 3 as of
Q1-2019 is 60.0% (31 December 2018: 0%) leased
Notable Lease Contracts signed in
Romania in 2018
or subject to a letter of intent, to high-quality
international tenants, with a wALL of 10 years.
Notable changes in occupancy were achieved at
City Offices and Globalworth Plaza in bucharest,
where occupancy improved during the year by
43.8% and 16.2%, reaching 71.0% (77.8% including
tenant options) and 94.7% respectively as at
31 December 2018.
At TCI, occupancy fell temporarily as a result of the
space returned by the Ministry of European Funds at
the beginning of the year. Part of the space vacated
was quickly taken up by EY and Mindspace,
however, resulting in this popular building being
effectively fully occupied as at year-end 2018.
Our TAP logistics / light-industrial complex in
Timisoara is now 100% leased, with Coca Cola
taking up the remaining available space at the
complex, as a result of which Globalworth has
initiated the development of the first facility in the
nearby TAP II project.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
The 14.1k sqm Nokia lease extension
in West Gate was the largest lease
transaction in Wroclaw in 2018.
POLAND
In Poland, like-for-like occupancy was 95.9%
as at 31 December 2018, decreasing from 98.5%
at 31 December 2017 mainly due to the
settlement of certain Master Lease and NOI
guarantees in December.
The decision to settle the aforementioned
guarantees in December 2018 provided an
immediate security of cashflow, while also
enhancing the asset management control the
Group has on these assets. It was supported by
the positive results of our leasing efforts which,
on an annualised basis, had already reduced
exposure to Master Leases prior to their
settlement by €1.9 million to €1.3 million as at
11 December 2018, compared to €3.5 million
on 31 December 2017.
Overall occupancy of our Polish portfolio as at
31 December 2018 was 95.4%, decreasing by
3.1% from a year earlier. In addition to the
like-for-like change described above, this
decrease was largely a result of the significant
acquisitions made during the year, which included
certain assets with lower occupancy.
In 2018, 48 new contracts were signed in 11 of
our buildings for a total of 20.0k sqm. In addition,
25.7k sqm of GLA were renewed in our portfolio
including Nokia’s (14.1k sqm) lease in the west
Gate property in wroclaw and Eurozet’s lease
(4.0k sqm) in the bliski property in warsaw.
Notable Lease Contracts signed in
Poland in 2018
Eurobuild Awards 2018:
– Office of the Year, Tryton
HUAWEI
MINDSPACE
DELL
NOKIA
EUROZET
CALYPSO
11.2k sqm
IN GLOBALWORTH
CAMPUS T2, TCI AND
CITY OFFICES
New Lease
CARREFOUR
11.8k sqm
IN GLOBALWORTH
TOWER
Extension & Expansion
7.6k sqm
IN GREEN COURT B
Extension
6.8k sqm
IN GLOBALWORTH
CAMPUS T2
New Lease
HONEYWELL
4.6k sqm
IN GLOBALWORTH
CAMPUS T1
New Lease
3.5k sqm
IN RENOMA
AND SUPERSAM
New Lease
MINDSPACE
2.3k sqm
IN HALA KOSZYKI
Expansion
4.0k sqm
IN BLISKI CENTRUM
Extension
BAXTER
3.6k sqm
IN NORDIC PARK
Extension & Expansion
14.1k sqm
IN WEST GATE
Extension
44
GLObALwORTH AnnuAl REPoRT AnD FinAnCiAl STATEmEnTS 2018
GLObALwORTH AnnuAl REPoRT AnD FinAnCiAl STATEmEnTS 2018
45
PORTFOLIO REVIEW ASSET MANAGEMENT REVIEw
ConTinuED
€15.0 million renovation and
maintenance CAPEX in 2018.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
RENOVATION AND MAINTENANCE PROGRAMME OF STANDING PROPERTIES
CREATING THE GLObALwORTH COMMUNITY
Globalworth takes a long-term approach to its
portfolio, looking to maximise returns over the full
life cycle of its individual buildings. Continuous
management and investment in our portfolio
enables us to preserve value and offer best-in-
class real estate space to our business partners.
Every asset has an asset management strategy.
Depending on the stage in the life cycle of each
of our buildings, improvements in technology and
their prevailing condition, we may conduct works
which extend from small-scale upgrades to
large-scale refurbishments. Larger-scale
refurbishments allow us to more fully upgrade an
asset, secure new leases and re-set the life clock
of the property.
In 2018, €15.0 million was invested under our
renovation and maintenance programme, with
works on 20 of our standing portfolio to upgrade
primarily both indoor and outdoor common areas,
and minor works on others.
Renovation and Maintenance Programme 2018
Standing Buildings
Selected Upgrades in our Portfolio
Globalworth Tower
Globalworth Plaza
City Offices
Hala Koszyki
Renoma
Other
¡ Upgrades for Globalworth App pilot installation
¡ Lobby and other select floors refurbishments / rejuvenations
¡ Upgrades and modernisation of access areas
¡ Upgrades of communal interion and open areas
¡ Upgrades of communal green areas
¡ Upgrades of heating & ventilation systems improving quality
of work spaces
The purpose of the “Globalworth Community” is
to transform our properties from places where
people work to more vibrant areas where
business as well as social, cultural and
technological interaction can flourish.
Our employees and partners are proud to be
associated with this initiative which we started to
implement more actively in 2018 and will develop
further over time.
Globalworth Art & Tech District
The Globalworth Art & Tech District, is a cultural
initiative that aims to promote a young generation
of artists through emerging technologies. In 2018,
our initiatives were focused on Romanian artists.
The Group hosted several exhibitions at our
properties and participated in exhibitions in select
locations in bucharest (more details in the CSR
section).
Art presentation through virtual reality, augmented
reality, video mapping and other technological
means has been the central theme of the
exhibitions and artists that we have supported,
attracting over 18,500 visitors this year.
OPENING MONTH
The Art & Tech District
by Globalworth & One Night Gallery
INAUGURAL ARTSHOW
Victor Fota
Part One: Human Extension
July 31st – August 24th
Globalworth Tower, main lobby
→ Download Artivive App
Scan the Artwork and bring art to life
Art Exhibition
Augmented reality
Video mapping animations
+18
Globalworth App
In conjunction with Honeywell, in 2018 we started
to develop the Globalworth App through which our
portfolio will become “smarter”, allowing more
interactive engagement and operation between the
people working or visiting our buildings.
The application will include functions such as
access to a building, news and events taking
place at the building and elsewhere within the
Globalworth estate, and alerts. It will also allow
administrators to control and monitor the
performance of both individual spaces and the
building.
The Globalworth App is currently at a development
stage and we plan to implement it in phases,
rolling it out to a selection of our buildings in 2019
and deploying it to the whole portfolio once testing
is completed (more details in the CSR section).
46
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47
PORTFOLIO REVIEW ASSET MANAGEMENT REVIEw
ConTinuED
Investment in Co-working
The rising popularity of the co-working concept has become
a major global trend in real estate in recent years, with
increasing take-up of space by co-working operators in a
wide range of locations and building types. while at an early
stage of development in our markets, we expect this
segment to experience rapid growth in years to come.
Factors driving the growth in co-working include:
¡ Investment in start-ups: Poland and Romania are two
of the fastest growing economies in the EU, resulting in
many new companies being established.
¡ Multinational corporations using co-working space:
A noticeable trend is the growing appetite of multinational
corporations to use flexible workspaces. This allows them
to scale their business quickly and efficiently, rapidly
locate specific teams in dynamic environments, improve
staff retention, access talent, and cross-sell with other
end users.
¡ Lease accountancy impacts: Memberships and short-
term leases are becoming more important in terms of
lease accounting treatment under revised accounting
standards.
¡ Technology: Technology and increased work mobility
is reshaping the way individuals and corporates work,
affecting to some extent the look of an office.
¡ workforce requirements: Employees are becoming
increasingly interested in blending work and personal
time, which is reshaping the way that workspaces are
configured. The co-working design typically combines
collaborative space, relaxation space, and the provision
of food and drinks amenities.
Globalworth has 23.4k sqm of co-working space in its
portfolio, let or pre-let to five operators and accounting for
2.8% of our standing office portfolio. we believe that this
adds an important vibrancy and added amenity value to all
users of the properties in which such space is available.
Operator
No. Locations
Buildings
GLA (sqm)
Case study
GLOBALWORTH
AND MINDSPACE
In June 2018, Globalworth announced
the transaction with Mindspace Ltd.,
a leading global operator of high-end,
inspiring co-working space.
Mindspace
InOffice
Cityspace
Regus
OfficeHub
4 Hala Koszyki
Globalworth
Campus
TCI
City Offices
1
2
1
1
Lumen
Supersam
Tryton
Skylight
Spektrum
16.3k
As part of this transaction:
2.7k
2.2k
1.2k
1.0k
¡ Mindspace is opening its first locations in Romania in
three of our buildings, taking up 10.8k sqm of GLA in
total on 16-year leases. The three locations chosen
have been branded as the Mindspace business
District (Globalworth Campus) which opened in
Q4-2018, Mindspace City Offices (City Offices) and
Mindspace Victoriei (TCI), both scheduled to open in
2019. Romania marks the seventh country in which
Mindspace is offering flexible workplace solutions.
¡ Globalworth made an equity investment in
Mindspace of US$10 million (c.€8.6 million) to
support its ongoing growth.
Prior to this transaction, Globalworth had already built a
close collaboration and respect for the activities and
approach of Mindspace through its presence at our
flagship Hala Koszyki property in warsaw.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
What is Mindspace?
Is a rapidly-growing global provider of
inspiring co-working space for teams
of all sizes, from leading enterprises,
technology start-ups, and small and
medium companies from all industries.
Where can you find Mindspace?
Mindspace is present in 13 major cities
and 23 prime locations in Europe, the
US and Israel.
What Mindspace offers?
An upscale coworking environment
with unique designs that feature local
artists and correspond with local
culture, an exceptional level of service
to our members, and a vibrant
real-world community.
What sets Mindspace apart from
other coworking spaces?
¡ Transparency
¡ Flexibility
¡ Artistic Design
¡ Global Community
What’s included
24/7 Access
Hundreds of
benefits and services
Team on the ground
Kitchens & lounges
Flexible monthly
subscriptions
Fully furnished
Cleaning service
Private phone booths
Coffee, soda
& refreshments
Weekly happy hours
& professional events
Customise your space
Events spaces
Mindspace mobile app
IT support
Full-equipped
meeting rooms
Ultra fast
internet & Wi-fi
Mail and
packaging handling
Global access to
Mindspace locations
Guest reception
We are firm believers of the
benefit of the co-working
concept and of the approach
offered by Mindspace, as it
enables us to cater to a wider
universe of potential tenants
and their ever-changing needs.
48
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49
PORTFOLIO REVIEW FINANCIAL REVIEw
THE LANDLORD OF CHOICE
2018 DEMONSTRATED SIGNIFICANT
GROWTH IN OUR PORTFOLIO,
REVENUES AND PROFITABILITY
The significant expansion of the Group in late 2017 through its
entry into Poland and subsequent further acquisitions had a
positive impact on our 2018 financial results.
OVERVIEw
NOI1
€133.4m
€51.1m (2017)
OMV1
€2.5bn
€1.8bn (2017)
IFRS Earnings per share2
EPRA NAV per share1,3
60.67 cents
26.40 cents (2017)
€9.04
€8.84 (2017)
Normalised EBITDA1
EPRA Earnings per share1,2
€96.9m
€41.2m (2017)
46.03 cents
18.17 cents (2017)
Adjusted normalised
EBITDA1,4
Dividends
per share
€119.0m
€42.8m (2017)
54 cents
44 cents (2017)
Total Accounting Return1
LTV1,5
7.8%
5.7% (2017)
43.9%
34% (2017)
The significant expansion of the Group into
Poland, along with new leasing activity and
the completion of developments in
Romania, this produced a strong uplift in
our earnings.
Revenue and Net Operating Income (NOI)
increased year on year by 148% to
€192.8 million and 161% to €133.4 million
respectively, while normalised EbITDA and
adjusted normalised EbITDA rose by
135% to €96.9 million and 178% to
€119.0 million respectively.
1. See Glossary (pages 179-181)
for definitions.
2. See note 12 of the consolidated
financial statements for calculation.
3. See note 22 of the consolidated
financial statements for calculation.
4. See page 52 for further details.
5. See note 25 of the consolidated
financial statements for calculation.
50
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
EPRA Earnings per share for 2018
increased by 153% compared to 2017,
reaching 46.03 cents per share from
18.17 cents per share in 2017, while IFRS
Earnings per share for 2018 amounted to
60.67 cents, as compared to 26.40 cents
in 2017, an increase of 130%. Dividends
declared and paid in respect to 2018 of
54 cents per share, as compared to
44 cents for 2017, represented a
22.7% increase.
EPRA NAV per share as at 31 December
2018 increased by 2.3% from
31 December 2017 to €9.04 per share
(31 December 2017: €8.84). Combined
with dividends paid in 2018, this resulted
in a Total Accounting Return of 7.8%, an
increase of 210 basis points on the prior
year (2017 TAR: 5.7%).
The Open Market Value of the portfolio
grew by €646.8 million, an increase of
35.6%, to €2.5 billion, primarily through
acquisitions and revaluation gains.
LTV at 31 December 2018 amounted to
43.9%, increased from 34.0% at
31 December 2017 mainly as a result of
the second Eurobond issued in March
2018 of €550 million and subsequent
EPRA NAV/ Total Accounting Return1
5.7%
8.84
%
R
A
T
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
acquisitions of properties. €150 million of
equity was invested in Globalworth Poland
in June 2018, while the last major equity
raise at Globalworth level took place in
December 2017.
Revenue share by country 2018
Revenue share by country 2018
47%
53%
Romania
Poland
Revenue share by country 2017
Revenue share by country 2017
Revenues and Profitability
Group revenues of €192.8 million in 2018
rose by 148% on 2017 (€77.9 million),
driven by:
¡ the full year consolidation of
Globalworth Poland, as well as further
acquisitions in Poland, with revenues
of €102.7 million, as compared to the
prior year (€4.9 million) when it was
consolidated for less than one month.
This includes the effect of the settlement
of master lease and NOI guarantees, as
announced on 21 December 2018 (see
“Asset Management Review”), which
resulted in a €21.5 million cash payment
to GPRE.
¡ an increase of 23.5% on 2017 in
revenues derived from our properties in
Romania following leasing activity, the
full year effect of prior year acquisitions
and development completions.
Group revenues were split 53% Poland /
47% Romania, which contrasted to 6%
Poland / 94% Romania in 2017.
7.8%
9.04
6%
94%
Romania
Poland
€
e
r
a
h
s
/
V
A
N
A
R
P
E
9.1
9.0
8.9
8.8
8.7
8.6
8.5
8.4
8.3
42.0%
2017
2018
1. Total Accounting Return is the growth in EPRA NAV per share plus dividends paid, expressed as a percentage of EPRA NAV per share
at the beginning of the year.
GLObALwORTH AnnuAl REPoRT AnD FinAnCiAl STATEmEnTS 2018
GLObALwORTH AnnuAl REPoRT AnD FinAnCiAl STATEmEnTS 2018
51
PORTFOLIO REVIEW
FINANCIAL REVIEw
ConTinuED
Net Operating Income of €133.4 million in 2018, a 161% increase over 2017
(€51.1 million), in line with the increase in Group revenue. The growth in NOI reflected an
increase of €74.6 million in Poland and an additional €7.7 million in Romania. NOI was
split 59% Poland / 41% Romania, compared to 8% Poland / 92% Romania in 2017.
Growth in Net Operating Income
74.6
7.7
133.4
n
o
i
l
l
i
m
€
150
120
90
60
30
0
51.1
NOI 2017
NOI Growth
(Poland)
NOI Growth
(Romania)
NOI 2018
NOI share by country 2018
NOI share by country 2018
NOI share by country 2017
NOI share by country 2017
41%
59%
8%
92%
Romania
Poland
Romania
Poland
EbITDA1 of €121.8 million in 2018, an increase of 287% over 2017 (€31.5 million).
In addition to the growth in NOI (by €59.6 million), higher valuation gains on investment
property and financial instruments (by €25.5 million) and lower acquisition costs
(by €9.0 million) contributed to the increase, partly offset by an increase in
administration, other income and other expenses (by €3.8 million) while reflecting
the full year inclusion of Globalworth Poland.
Adjusted EbITDA2 of €150.8 million, which includes the share of minority interests,
an increase of 368% over 2017 (€32.2 million), resulting from the increase of NOI
(by €82.3 million) but also higher valuation gains on investment property and financial
instruments (by €32.8 million) and lower acquisition costs (by €9.6 million), partly offset
by the increase in administration, other income and other expenses (by €6.1 million).
Normalised EbITDA3 of €96.9 million, an increase of 135% over 2017 (€41.2 million),
while adjusted normalised EbITDA4 amounted to €119.0 million, which includes the
share of minority interests, an increase of 178% over 2017 (€42.8 million), tracking more
closely the rise in NOI
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. Earnings before finance cost, tax, depreciation, amortisation of other non-current assets and purchase gain on
acquisition of subsidiaries.
3. EbITDA less: fair value gains on investment property and financial instruments (2018: €32.2 million; 2017:
€6.7 million), non-recurring income (2018: €0.2 million; 2017: €nil); plus: acquisition costs (2018: €1.0 million;
2017: €10.0 million); plus: non-recurring administration and other expense items (2018: €6.5 million; 2017:
€6.4 million).
4. Adjusted EbITDA less: fair value gains on investment property and financial instruments (2018: €39.6 million;
2017: €6.7 million), non-recurring income (2018: €0.3 million; 2017: €nil); plus: acquisition costs (2018:
€1.2 million; 2017: €10.8 million); plus: non-recurring administration and other expense items (2018:
€6.9 million; 2017: €6.5 million). The adjustments listed include the share of minority interests.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
A modest 3.8% increase in net financial costs reflecting the additional €550 million
bonds issuance and reduction in secured bank loan balances of c.€167 million during
the year. Included in finance costs for 2018 are €0.9 million bank loan restructuring costs
incurred and an additional €2 million debt costs previously capitalised which were
amortised in full upon the repayment of bank loans (2017: €16.1 million non-recurring
finance costs resulting from debt restructuring).
Earnings before tax of €115.3 million, an increase of 341% over 2017 (€26.2 million),
mainly as a result of the increase in NOI and savings from non-recurring costs incurred
in 2017 related to the acquisition of the majority stake in Globalworth Poland.
IFRS earnings per share increased by 130% from 26.40 cents to 60.67 cents.
IFRS EPS to EPRA EPS € cents per share
s
t
n
e
c
€
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0
60.67
(25.80)
(4.10)
13.20
2.06
46.03
IFRS EPS
Fair value
gain on
Investment
Property
Fair value
gain on
Financial
Instruments
Deferred tax
Other
Impacts
EPRA EPS
Balance Sheet
The Open Market Value of the portfolio grew by €646.8 million, an increase of 35.6%,
to €2.5 billion. This comprises €2.4 billion of investment property and a further
€0.1 billion representing other balance sheet adjustments including the full share of
our JV property, RbC.
Investment activity in 2018, which included c.€573.0 million of new acquisitions and
development projects as well as valuation gains of €34.1 million, contributed to a
33.4% increase in the balance sheet value of our investment property portfolio at
31 December 2018 to €2.4 billion (31 December 2017: €1.8 billion).
Growth in Porfolio Value € million (by location)
n
o
i
l
l
i
m
€
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
523
508
15
1,792
23
1,815
680
680
50
11
39
34
17
17
(9)
48
2,462
2,390
(71)
1,216
1,216
1,112
1,135
1,245
1,174
Investment
Property –
Dec 17
JV and
others –
Dec 17
OMV
Dec 17
Romania
Poland
Acquisitions
CAPEX
Valuation
Uplift
Apartment
Disposals
JV’s Capex
& Uplift
OMV –
Dec 18
JV and
others –
Dec 18
Investment
Property –
Dec 18
om the
fect
om 18.17
52
GLObALwORTH AnnuAl REPoRT AnD FinAnCiAl STATEmEnTS 2018
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53
PORTFOLIO REVIEW
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Total assets at 31 December 2018 exceeded €2.7 billion and increased by 26.6%
from 31 December 2017 (€2.2 billion), primarily due to the expansion of the
property portfolio.
EPRA NAV of €1,200.2 million at 31 December 2018, an increase of 2.5% on
31 December 2017 (€1,171.5 million), while EPRA NAV per share increased by 2.3%
to €9.04 per share (31 December 2017: €8.84 per share). Factoring in the receipt of the
dividend distributions paid during 2018 of 49 cents per share, the adjusted EPRA NAV
per share at 31 December 2018 would be €9.53 per share, representing a total accounting
return of NAV growth and dividend return for 2018 of 7.8%, up from 5.7% in 2017.
EPRA NAV per share (€)
0.46
8.84
0.25
(0.49)
(0.02)
9.04
10
9
8
7
6
Dec–17
Valuation
EPRA earnings
Dividends
Minority, JVs
& Others
Dec–18
Evolution of NAV/share and OMV by semester
€
e
r
a
h
s
r
e
p
V
A
N
A
R
P
E
/
V
A
N
10
9
8
7
6
5
4
3
2
1
0
3,000
2,500
2,000
1,500
1,000
500
0
n
o
i
l
l
i
m
€
V
M
O
/
V
A
N
A
R
P
E
Dec 15
June 16
Dec 16
June 17
Dec 17
June 18
Dec 18
NAV – Basic per share
NAV – Diluted per share
EPRA NAV per share
EPRA NAV
OMV
Cash Flows
Cash flows from operating activities were €80.1 million, compared to €10.1 million in
2017, reflecting the expansion of the Group’s operating activities and the full inclusion
of Poland.
Net proceeds from the successful debt financing in 2018 of €648.7 million, with
€270.7 million being used to repay senior debt facilities secured on some of our
properties in Poland.
Cash used for investments made in 2018 of €575.0 million, including the acquisition of
six standing properties in Poland, two land plots in Romania and the completion or
further advancing of the construction of properties under development in Romania.
Dividends paid in 2018 of €64.9 million in respect of the six-month periods ended
31 December 2017 and 30 June 2018 of €29.1 million and €35.8 million respectively.
Cash and cash equivalents at 31 December 2018 stood at €229.5 million, €43.8 million
lower than 31 December 2017 (€273.3 million). At 31 December 2017 the higher level
of cash and cash equivalents was due in large part to the €340 million of equity raised
in December 2017.
54
GLObALwORTH AnnuAl REPoRT AnD FinAnCiAl STATEmEnTS 2018
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55
PORTFOLIO REVIEW
FINANCING AND LIQUIDITY REVIEw
THE LANDLORD OF CHOICE
MAINTAINING STRONG
LIQUIDITY AND SIMPLIFYING
THE FINANCIAL STRUCTURE
Financing Activity in 2018
In March 2018, the Group successfully issued a second €550 million unsecured seven-
year Eurobond at a coupon of 3% to March 2025. This was part of a newly established
€1.5 billion Euro Medium Term Notes programme, under which a further €950 million of
bonds can still be issued. This bond issuance, despite being undertaken at a time of
increased market volatility, received significant support from a variety of institutional
investors, predominantly from the UK and Continental Europe, resulting in the issue being
oversubscribed more than two times. Part of the net proceeds (c.€214 million) were used
in April 2018 to repay all but one of the bank loans secured on our properties in Poland,
thereby extending the flexibility of Globalworth’s predominantly unsecured debt structure
across the Group and further simplifying the Group’s financial structure by consolidating
debt.
Although primarily focused on unsecured debt, the Group selectively uses secured bank
financing facilities in order to diversify sources of funding and build greater flexibility in
its debt book. In 2018, the Group took advantage of favourable conditions in the bank
financing market to secure various facilities. In June 2018, the Group signed a
€100 million seven-year facility in Poland at a competitive interest rate with a consortium
consisting of Landesbank Hessen-Thüringen and Deutsche Pfandbriefbank AG, following
the above-mentioned repayment of all but one of the bank loan facilities secured on our
properties in Poland. In August 2018, a new €46 million long-term facility was signed in
Romania with banca Comerciala Romana (bCR, part of Erste bank Group) for the
financing of the development costs of the Renault bucharest Connected project, which
was completed by the end of 2018 and delivered to the tenant in mid-February 2019.
In December 2018, a subsidiary of the Group signed a €65 million 10-year secured
financing agreement with Erste bank AG (part of Erste bank Group) for the refinancing of
Globalworth Tower in bucharest, Romania, which was drawn down during March 2019.
In June 2018, at the Globalworth Poland subsidiary level, the Group completed a
€450 million equity capital raise. The transaction was fully subscribed by Globalworth
(66.7%) and Growthpoint Properties (33.3%), resulting in €150 million of new capital
becoming available to fund further growth of the Polish portfolio. The remaining
€300 million was used to partially repay outstanding debt under various inter-company
loans previously entered into between Globalworth Poland and Globalworth.
Dividends
In January and August 2018, the Company made interim dividend payments of 22 cents
per share (c.€19.9 million) and 27 cents per share (c.€35.7 million) in respect of the
six-month periods ended 31 December 2017 and 30 June 2018 respectively. A second
interim dividend of 27 cents per share (c.€35.8 million) was paid in February 2019 in
respect of the six-month period ended 31 December 2018, resulting in a full year dividend
of 54 cents per share in respect to the 2018 financial year, an increase of 22.7% over
2017 (44 cents per share).
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Debt Summary
The total debt portfolio of the Group at 31 December 2018 of €1.26 billion comprises
predominately medium to long-term debt, denominated mostly in EUR, with
insignificant facilities denominated in Romanian Leu (‘RON’) and Polish Zloty (‘PLN’).
The Group has delivered on its strategy over the last few years of extending the
weighted average period to maturity of its debt financing, while reducing the applicable
weighted average interest rate, as presented in the chart below:
weighted average interest rate versus debt duration to maturity
7.00%
6.00%
5.00%
e
t
a
r
t
s
e
r
e
t
n
I
4.00%
3.00%
2.00%
1.00%
0.00%
6.0
5.0
4.0
3.0
s
r
a
e
Y
2.0
1.0
0.0
2013
2014
2015
2016
2017
2018
Weighted average interest rate
Weighted average duration to maturity
The weighted average interest rate on debt financing as at 31 December 2018
amounted to 2.91% versus 2.62% at 31 December 2017. The small increase in the
weighted average interest rate should be viewed in light of the seven-year €550 million
unsecured Eurobond issued in March 2018 at a 3% coupon, which has helped to
maintain the weighted average period to maturity of our debt at 31 December 2018
(5.1 years) at a similar level as at 31 December 2017 (5.4 years).
The majority of the Group’s debt at 31 December 2018 (€1.1 billion Eurobonds) is
unsecured (31 December 2018: 87.3%; 31 December 2017: 63.2%), with the remainder
secured with real estate mortgages, pledges on shares, receivables and loan
subordination agreements in favour of the financing parties.
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PORTFOLIO REVIEW
FINANCING AND LIQUIDITY REVIEw
ConTinuED
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Debt Structure – Secured vs. Unsecured Debt
31 December 2017
31 December 2018
Maturity by year of the principal balance outstanding at 31 December 2018
36.8%
63.2%
12.7%
87.3%
Secured
Unsecured
Secured
Unsecured
Loan to value ratio
Loan to value at 31 December 2018 was 43.9%, increasing over the course of the year as
a result of acquisitions (31 December 2017: 34.0%). The Group has a long-term LTV
target of below 40%, but is comfortable with this level at this time, marking its intention to
issue further equity as it seeks to sustain its dynamic growth profile while managing its
leverage target.
Servicing of Debt During 2018
In 2018, we repaid in total c.€270.7 million of loan capital, the majority of which relates to
the refinancing of existing facilities using the proceeds of the Eurobond issued in March
2018, and c.€21.2 million of accrued interest on the Group’s drawn debt facilities.
Liquidity
The Group seeks to maintain at all time sufficient liquidity to enable it to finance its
ongoing, planned property investments and the completion of properties under
development, while maintaining the flexibility to react quickly to attractive new investment
opportunities. As at 31 December 2018, the Group had cash and cash equivalents of
€229.5 million, while additional available liquidity from committed, undrawn loan facilities
at 31 December 2018 amounted to €30.8 million.
Debt Structure as at 31 December 2018
The Group has credit facilities and Eurobonds with different maturities, 99.9% of
which are long-term (compared to 98.5% at 31 December 2017), and 94.8% (36.8% at
31 December 2017), carry fixed interest or coupon rates. Out of the facilities carrying
variable interest rates 27.9% (5.9% at 31 December 2017) are hedged using variable to
fixed interest rate swaps.
700
600
500
400
300
200
100
n
o
i
l
l
i
m
€
2019
2020
2021
2022
2023
2024
2025
Year
2026
to
2035
Debt Denomination Currency and Interest Rate Risk
Our long-term loan facilities are almost entirely Euro-denominated and bear interest
based either at one-month or three-months Euribor plus a margin, or at a fixed interest
rate. This ensures a natural hedging to the Euro, the currency in which the most
significant part of our liquid assets (cash and cash equivalents and rental receivables) is
originally denominated and the reporting currency for the fair market value of our
investment property.
Debt Covenants and Securities
The Group’s financial indebtedness is arranged with standard terms and financial
covenants, the most notable as at 31 December 2018 being the following:
Unsecured Eurobonds
¡ the Consolidated Coverage Ratio, with minimum value of 200%;
¡ the Consolidated Leverage Ratio, with maximum value of 60%; and
¡ the Consolidated Secured Leverage Ratio with a maximum value of 30%.
Secured bank Loans
¡ the debt service cover ratio (‘DSCR’)/interest cover ratio (‘ICR’), with values ranging
from 120% to 300% (be it either historic or projected);
¡ the LTV ratio, with contractual values ranging from 60% to 83% (versus the significantly
lower overall LTV at 31 December 2018 of 43.9%); and
¡ the loan to cost ratio (‘LTC’) with a maximum value of 75%.
There were no breaches of the aforementioned covenants during the year ended
31 December 2018.
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 14 of the
consolidated financial statements.
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PORTFOLIO REVIEW
CORPORATE SOCIAL RESPONSIbILITY
THE LANDLORD OF CHOICE
A RESPONSIBLE LANDLORD
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
At Globalworth we believe that it is our
duty to responsibly manage the social,
environmental and economic impact of
how we do business and to contribute to
the community in which we live and work.
In 2018, we worked hard to implement our vision, which
centres around creating communities by focusing on
People, Places and Technology.
In the latter part of the year, we established the Globalworth
Foundation, 100% owned by the Group, responsible for
overseeing our various CSR initiatives. The Foundation,
alongside the whole Globalworth team, works to ensure that
the Group acts consistently in an ethical and socially
responsible manner.
PEOPLE
Our Team Members
Globalworth’s most important asset is its team of
dedicated professionals, who have been instrumental in
driving the Group’s performance since inception. This
team is responsible for offering premium services to our
partners, efficiently managing our high-quality portfolio,
facilitating growth and creating value for our shareholders
and stakeholders.
To meet our expansion needs and to maintain and
improve the high standards and success of our business,
we have continued to invest in aa, skilled professionals,
adding 84 team members to the Group in 2018.
The majority of our new team members were recruited to
work in bucharest and warsaw, primarily to support our
asset management operations which are core to our
customer service and product offering, as well as
maintaining and strengthening the broad network of
relationships in our main real estate markets.
In addition, in order to enhance our corporate identity and
further integrate our operations in the markets in which
we are present, several strategic initiatives were
undertaken during the year. The most notable of these
was the rebranding of Globalworth’s Polish subsidiary
(GPRE) to Globalworth Poland, with the objective of
promoting even greater interaction and cooperation
between our teams in Romania and Poland and further
improving our operational efficiency and effectiveness.
Furthermore, as part of our objective to meet the very
highest standards, during the year we organised a series
of in-house and third-party led training programs,
designed at improving our team’s skillset, knowledge,
operational experience, and interaction with
our stakeholders.
GLOBALWORTH
POLAND
GLOBALWORTH
breakdown of the Globalworth Team
The Globalworth team, including its board of Directors,
comprised c.205 members at year-end 2018. The Group
has 98 and 88 members in its two main offices in
bucharest and warsaw, with the remainder being based in
secondary cities in Romania and Poland, as well as
Cyprus, the UK and other jurisdictions.
The Group maintains a policy of employing the best available
candidates for every position, regardless of gender, ethnic
group or background. we actively try to maintain a balance
between male and female professionals.
GENDER DIVERSITY
AGE
LENGTH OF SERVICE
male
Female
under 25
41 – 50
25 – 40
over 50
up to 1 year
3 – 5 years
1 – 3 years
over 5 years
2017
2018
2017
2018
11%
11%
11%
11%
11%
11%
18%
18%
18%
18%
18%
18%
2017
6%
6%
6%
6%
6%
6%
11%
11%
11%
11%
11%
11%
2018
6%
6%
6%
6%
6%
6%
15%
15%
15%
15%
15%
15%
46%
46%
46%
46%
46%
46%
44%
44%
44%
44%
44%
44%
54%
54%
54%
54%
54%
54%
56%
56%
56%
56%
56%
56%
29%
29%
29%
29%
29%
29%
60%
60%
60%
60%
60%
60%
27%
27%
27%
27%
27%
27%
55%
55%
55%
55%
55%
55%
49%
49%
49%
49%
49%
49%
53%
53%
53%
53%
53%
53%
40%
40%
40%
40%
40%
40%
26%
26%
26%
26%
26%
26%
1
1
1
1
1
1
1
1
1
1
1
1
25%
25%
25%
25%
25%
25%
9%
9%
9%
9%
9%
9%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
3%
3%
3%
3%
3%
3%
32
32
32
32
32
32
38
38
38
38
38
38
29%
29%
29%
29%
29%
29%
54%
54%
54%
54%
54%
54%
29%
29%
29%
29%
29%
29%
63%
63%
63%
63%
63%
63%
7
7
7
7
7
7
12
12
12
12
12
12
34
34
34
34
34
34
39
39
39
39
39
39
50%
50%
50%
50%
50%
50%
25%
25%
25%
25%
25%
25%
62%
62%
62%
62%
62%
62%
31%
31%
31%
31%
31%
31%
60%
60%
60%
60%
60%
60%
38%
38%
38%
38%
38%
38%
48%
48%
48%
48%
48%
48%
38%
38%
38%
38%
38%
38%
23%
23%
23%
23%
23%
23%
15%
15%
15%
15%
15%
15%
17%
17%
17%
17%
17%
17%
38%
38%
38%
38%
38%
38%
38%
38%
38%
38%
38%
38%
57%
57%
57%
57%
57%
57%
6%
6%
6%
6%
6%
6%
23%
23%
23%
23%
23%
23%
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61
Board
Board
Board
Board
Board
Board
Management
Management
Management
Management
Management
Management
Board
Board
Board
Board
Board
Board
Management
Management
Management
Management
Management
Management
Board
Board
Board
Board
Board
Board
Management
Management
Management
Management
Management
Management
Board
Board
Board
Board
Board
Board
Management
Management
Management
Management
Management
Management
Board
Board
Board
Board
Board
Board
Management
Management
Management
Management
Management
Management
Board
Board
Board
Board
Board
Board
Management
Management
Management
Management
Management
Management
PORTFOLIO REVIEW
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
CORPORATE SOCIAL RESPONSIbILITY
ConTinuED
PEOPLE
The Globalworth Structure
The Group is structured to advance the
experience of its team members and its in-house
capabilities in areas including investment,
leasing, project management, asset and property
management. The ultimate deciding body is the
board of Directors.
Investments
Marketing &
Communications
Capital
Markets
& Investor
Relations
CSR
Leasing
Compliance
Legal
Board of
Directors
Construction &
Developments
Asset
Management
Accounting &
Finance
IT
Human
Resources
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63
PORTFOLIO REVIEW CORPORATE SOCIAL RESPONSIbILITY
ConTinuED
PEOPLE
Charity & Partnerships
The Globalworth family has continued to support
charitable actions which have the power to make
a difference to the communities in which we live
and operate.
we are committed to social responsibility, and it is our
belief that by contributing to some of the most significant
causes of our day, such as education, the environment
and palliative care, we can help make a difference both to
the welfare of our society and benefit generations to
come. The contributions that we aspire to make are not
only financial, and it is important to the Group and its
founder that employees volunteer their own time to
support those in need.
Globalworth has launched the Globalworth Foundation,
a non-governmental organisation, with the aim of
developing and supporting such initiatives over the
long term.
we are very pleased that in 2018 we were able to continue
supporting social causes and form partnerships that
we believe in and, together with organisations such as
Hospice Casa Sperant ,ei, , Make a wish, Renas ,terea
Foundation, United way and many other NGOs, positively
impact the lives of those in need.
To this end, last year we organised and participated in
several charitable events as well as visiting selected
charities throughout the year.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
EDUCATION & SOCIAL ASSISTANCE
In an effort to support and educate, as well as address
the social issues of young people, in 2018 Globalworth
formed a partnership with the United way Romania
Foundation to develop an initiative named “Education –
the centre of change within the community” with the aim
of reaching over 3,000 children and their families from
disadvantaged communities. This partnership, to which
Globalworth has committed to contribute €1.0 million,
will extend initially to 2021.
Our internship and scholarship programmes continued
and in 2018 we were pleased to have been able to
support 18 students from Romania and abroad:
¡ Nine high school scholarships were awarded with
students attending the Ioanid International High School,
a very reputable institution in bucharest / Romania.
¡ Nine internships were awarded by Globalworth,
in partnership with IASTE Association, to foreign
students from Spain, Croatia, Poland, Canada,
Lebanon, Jordan, Thailand and Japan to train at
Globalworth over the summer months.
In addition, we supported more than seven other
initiatives, including:
¡ The organization of the 26th “balkan Olympiad in
Inforatics” held in Timisoara / Romania, in which
c.300 students and teachers from seven countries
participated.
¡ The University of Architecture and Urbanism Ion Mincu
in bucharest through student internships, diploma
competitions and international scholarships for
teachers.
¡ The activity of the parents’ association for the benefit
of the International Hellenic School in bucharest.
OTHER
business & Leadership
¡ In 2018, Globalworth became a member of Romania
Aspen Institute and was the main sponsor of the
bucharest Forum held from 8-10th September, as
well as the host of the Aspen Dialogue on Technology
and Society held in October in our bOC building
with participation from a number of national and
international executives of multinational companies
present in Romania.
¡ we continued our partnership with the Hellenic
Romanian Chamber of Commerce and Industry,
promoting business and trade relations between
Greece and Romania and supporting initiatives aimed
at improving educational and cultural relations between
the two countries.
Culture
¡ we are a friend and partner of Prietenii Muzeului
National de Arta al Romaniei Association.
SPORT & LIFESTYLE
One of the most visible ways of raising awareness of
the causes we support is through our participation in
sporting events.
The Globalworth Running Team in 2018 proudly
participated in several events including:
¡ The bucharest Half and International Marathons as
an official sponsor of the Hospice – Casa Sperantei
Foundation to raise awareness for those in palliative
care.
¡ The Race for Cure initiative in bucharest, where the
team represented the Renasterea Foundation to raise
awareness of the importance of early detection of
breast and cervical cancer.
¡ The Poland business Run, which took place
simultaneously in nine cities across the country.
Our team participated in the warsaw run, aiming to
help people with mobility disabilities and supporting
their professional re-engagement and the levelling of
social barriers.
Globalworth was the principal sponsor of the 11th edition
of the 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.
Finally, we supported several young athletes in their
sporting endeavours and are particularly proud of our
young tennis champion David Gheorghe, who in 2018
won two trophies at Circuitul National FRT – Cupa
Electromax – CSS Petrosani, as well all of the other
players for their efforts during the year.
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PORTFOLIO REVIEW CORPORATE SOCIAL RESPONSIbILITY
ConTinuED
PEOPLE
HEALTHCARE & EDUCATION
The Globalworth Family is particularly sensitive to
matters concerning human welfare and quality of life,
and we have continued to support initiatives addressing
such issues.
we are prime supporters of causes which address:
¡ children and adults fighting terminal cancer;
¡ providing medical assistance to people from
disadvantaged social environments;
¡ providing preventive education to women
in relation to breast and uterus cancer; and
¡ supporting individuals in need of complicated
surgery or medical treatment.
we are proud to be associated with causes such as
Hospice – Casa Sperantei Foundation, the Make a wish
Romania Foundation, CMU – Regina Maria Foundation
and the Renasterea Foundation, all of which are very
active in helping those in medical need.
In December, Globalworth participated in the XVIIIth
edition of the “Illuminate in Pink” initiative, organised
annually by the Renasterea Foundation, to draw attention
to early detection of breast cancer. The colour Pink
represents hope and was used as an illumination in
honour of breast Cancer Awareness Month.
Our annual “Christmas Charity Days” event has become a
tradition and one of the most important events of the year
for the Globalworth Family. In 2018, we brought a bit of
winter holiday magic to over 900 children from various
NGOs such as Hospice Casa Sperantei, United way,
Concordia Romania 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 three days between December 17-19, the
Globalworth Tower lobby was transformed into a winter
wonderland where the children had the opportunity to
sing, play, enjoy themselves and discover Christmas
tradition from around the world.
Each day, 300 children participated in creative workshops
where they learnt how to create their own wooden toys,
Christmas tree decorations, origami, dolls and globes.
To add a little bit of magic, carols were sung and live
music was performed. A healthy breakfast and/or lunch
for everyone was included, popcorn and cotton candy
were also on offer and, of course, Santa Claus brought a
big bag of gifts.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Hospice Casa Sperantei
Hospice Casa Sperantei (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 22k 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.
United way worldwide
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.hospice.ro
www.unitedway.ro
Health, Safety & Security
we are committed to maintaining a high standard
of health, safety and security in our portfolio.
Our portfolio comprises standing / operating
properties, development projects under
construction and land for future development.
Each of the three categories presents different
characteristics, but maintaining a high level of
attention to health, safety and security is key
to the productivity of the people working in or
around our properties and to the reputation of
the Group.
Health
we consider and treat health as importantly as
safety across all our initiatives and are proud to
report that no serious health-related incident or
loss of life occurred in any of our operating
properties or projects under construction in 2018.
Safety
we are committed to providing a safe and secure
workplace for our team members, partners and
communities. All of our standing properties are
well maintained according to their specifications
and the operations of our construction sites are
strictly regulated.
Security
Our properties are guarded on a 24-hour basis to
increase the security of the people working in or
visiting our properties. In addition to physical risk,
we also face the growing threat of cyber security
and, although we cannot influence the approach
of our partners, we are making efforts to raise
awareness of this.
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PORTFOLIO REVIEW CORPORATE SOCIAL RESPONSIbILITY
ConTinuED
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
PLACES
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.
we principally target properties which have
bREEAM Very Good / LEED Gold or higher
green certification or with the potential to
achieve this, and currently 30 of our
standing properties are certified as
environmentally friendly, accounting for
70.6% of our standing commercial portfolio
value, up from 60.5% at year-end 2017.
In Romania we own 11 green certified
offices, four of which were certified prior to
acquisition and seven were certified
following their acquisition or development by
the Company. we are particularly proud that
all the properties developed by the Group
have been awarded bREEAM Excellent,
LEED Gold or Higher, including Globalworth
Campus Tower 1 (2017 completion) and
Globalworth Tower (2016 completion) which
were awarded bREEAM Excellent and LEED
Platinum respectively.
In Poland, we have a further 19 properties
which are green certified, of which 9 were
acquired in 2018.
In addition, and in line with our commitment
to a “greener” portfolio, at the beginning of
2019 Tower 2 of the Globalworth Campus
project (completed in 2018) received
bREEAM Excellent accreditation. we have
19 properties under green certification or
recertification and are confident that we will
add them to our green certified portfolio
in 2019.
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).
¡ Our partners benefit by assisting us to
develop, maintain and operate a green
portfolio according to the respective
specifications of each property.
¡ Our investors benefit through the
creation of long-term sustainable value
in the portfolio.
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; and
¡ any areas where conditions fluctuate,
indicating that equipment is not
functioning or being used correctly.
This platform is being tested in three of our
properties in bucharest and we aim to
include more in 2019 and, soon after,
to the rest of the portfolio.
In addition, in 2018 we started a review of
our real estate portfolio, which we aim to
conclude in 2019, in order to better
understand the performance of each
property and how we can improve it in
the future.
As one alternative, we are considering
installing photovoltaic solar panels to
our properties with a view to producing
cleaner energy and reducing our fossil
fuel footprints.
LEED PLATINUM
(LEED)
LEED GOLD
(LEED)
bREEAM EXCELLENT
bREEAM VERY GOOD
UNDER CERTIFICATION
(19 PRoPERTiES)
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PORTFOLIO REVIEWGlobalworth TowerBOB / DB spaceGreen Court AGreen Court BGreen Court CCity OfficesGreen Horizon(2 properties)BOBBOC Globalworth Plaza Gara Herastrau Globalworth Campus Towers 1 & 2 Tryton West Gate West Link Philips House Quattro Business Park(2 properties) Skylight & LumenUnicredit HQ A4 Business Park Hala Koszyki (retail) WARTA TowerQuattro Business Park(3 properties) Spektrum Tower TCI Renoma Batory Building I Hala Koszyki(4 offices) Bliski Centrum TAP(4 facilities) Upground Towers Nordic ParkRenault Bucharest ConnectedDacia Warehouse CORPORATE SOCIAL RESPONSIbILITY
ConTinuED
TECHNOLOGY
Technology is at the epicentre of modern everyday activity
and impacts the way we live and conduct business.
At Globalworth we embrace technology and the benefits
it can provide to improve our quality of life, the way we
interact and communicate, and to promote, simplify and
advance business.
In 2018 a number of initiatives were adopted including:
¡ Globalworth Art & Tech District;
¡ Globalworth App; and
¡ investment in Early Games Venture and supporting of
other technology initiatives.
Globalworth Art & Tech District
we hosted the first Art & Tech exhibition in Romania at our
Globalworth Tower, where over a three-week period over
7,000 visitors experienced contemporary artworks by
Victor Fota, a young Romanian artist, who presented his
paintings through augmented reality and video mapping.
we collaborated with One Night Gallery (“ONG”), to
participate in an exhibition concept focusing on Romanian
contemporary art through a number of exhibitions
including:
¡ hosting the seventh ONG event in Green
Court, presenting Romanian artist KITRA using
virtual and augmented reality, video mapping,
interactive installation to over 1,000 visitors;
¡ hosting the eighth pop-up ONG exhibition in
Globalworth Tower, where over 6,000 visitors
viewed artworks by Ioana Trusca; and
¡ participating in the Globalworth interactive
installation @One Night Gallery.
we also participated in the @Internetics
Interactive Expo, one of the main digital events in
bucharest, where in the Globalworth District
segment we promoted Art and Technology.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Globalworth App
The Globalworth App is a gateway, currently in its
development phase, through which we aim to make our
portfolio “smarter”, allowing more interactive engagement
and operation between the people working or visiting
our buildings.
In the spirit of building a community, the App will provide
news related to the properties, the portfolio, and events
held in the Globalworth District. In addition, it is aimed at
improving the experience of those working and visiting
our properties by allowing access, indoor navigation, the
ability to control the working environment, and improving
efficiency. At the same time it allows us, as the landlord,
to better monitor and operate our portfolio and interact
with people working or visiting our properties.
Investment in Technology Funds and
Other Technology Initiatives
As part of an effort to promote technological innovation,
Globalworth directly or indirectly invests in various
opportunities and initiatives, including technology-related
venture capital funds. we believe that making modest
investments in such ventures will provide Globalworth
with direct access and intelligence to the latest property
and other technology related developments enabling it to
be ahead of the curve compared to other landlords. In
2018, the Group made a €2.0 million commitment in Early
Games Venture (“EGV”), a venture capital fund focused on
innovative companies in Romania and funded through the
Competitiveness Operational Program (2014-2020),
co-funded by the European Regional Development Fund.
The EGV fund will take minority positions in early-stage
Romanian companies in technology and other intellectual
property-intensive domains, with a maximum investment
of €3.5 million per investment.
EGV will also organise a very selective and intensive
acceleration program for a limited number of start-ups
(up to six per year), with individual investments of up
to €200k.
Other initiatives include participation in the Techcelerator
in bucharest, where Globalworth, GapMinder Venture
Partners and certain others, target investing up to
€1 million in Romanian technology companies. The Group
is also planning to make additional technology related
investments in 2019, either in general technology funds or
ventures focusing on real estate solutions in the domain
of smart buildings / smart city, mobility and energy,
property automation and real estate software.
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PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
RISK REPORT: PRINCIPAL RISKS & UNCERTAINTIES
COMMITTEE REPORT
LETTER FROM THE
CHAIR OF THE COMMITTEE
Globalworth has a strong track
record of robust risk management
and it remains a priority for
the company to ensure this
will continue.
Andreea Petreanu
Chair of the Risk Committee
Membership
Director
Andreea Petreanu
Geoff Miller
John whittle
Richard van Vliet
Highlights
Position
Chair
Member
Member
Member
Risk Committee established in the final
Quarter of 2018.
The first meeting of the Committee was
held in January 2019.
The immediate priorities will be to review
the overall risk management framework
and evaluate risk appetite.
The Risk Committee was established during the final
Quarter of 2018 following a board decision to separate the
Audit and Risk functions into two separate committees and
the overall reorganisation of the board Committees, which
was announced on 31 October 2018. I am pleased that
the membership of the Risk Committee is the same as the
Audit Committee as this ensures that the necessary links
between risk and financial oversight at board level remain
well co-ordinated.
Globalworth has a strong track record of robust risk
management and it remains a priority for the company to
ensure this will continue. The increasing size and complexity
of the Group, and the rapid growth of recent years, means
we have reached the point where the board felt that the
establishment of a separate Risk Committee was required
to ensure that the appropriate amount of time and attention
could be continued to be dedicated to this important area
of governance. Of particular importance to me in this regard
will be to use this opportunity to ensure, as far as we can,
that our approach to risk is comprehensive, well co-ordinated
and attuned with the business strategy.
Our first meeting as a newly formed Committee was held in
January 2019 and our immediate priorities are to review the
overall risk management framework to ensure that it remains
appropriate for the huge scale of business that we have now
achieved and to evaluate our risk appetite to ensure that it
continues to accurately reflect the board’s approach to risk.
I am delighted to be appointed the Chair of this Committee
and look forward to working with my fellow Committee
members, on behalf of the board, and the management
team to further enhance the governance of risk and risk
management. I look forward to reporting further on our
progress in next year’s annual report.
The board is responsible for establishing and maintaining the
Company’s system of internal control and for maintaining and
reviewing its effectiveness.
Risk oversight
BuSinESS EnViRonmEnT
oRGAniSATion
CulTuRE, PoliCiES AnD PRoCEDuRES
SEnioR mAnAGEmEnT TEAm
AuDiT
CommiTTEE
BoARD
oVERSiGHT
In accordance with the guidance for Directors on internal
control, there is a process for identifying, evaluating and
managing the risks faced by the Company. 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 104 to 108 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.
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PORTFOLIO REVIEW RISK REPORT: PRINCIPAL RISKS AND UNCERTAINTIES
ConTinuED
Identify
Evaluate
internal control
indexation of Principal Risks
RISK
IDENTIFICATION
& MANAGEMENT
PROCESS
Respond
Report
Monitor
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OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Further details on our principal risks are outlined below, linking each risk to our strategic objectives, and explaining our risk
mitigation strategies and the rationale for change in risk during the year.
Key
The following key is used in the table below to highlight
the changes in risk exposures during the year ended
31 December 2018:
In addition, the risks marked with
considered relevant for the Viability Statement analysis.
have been
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
Strategic objectives:
1. Increase Footprint in our Core market
3. Maintain an efficient and flexible capital structure
2. Enhance value of existing investments
4. De-risk portfolio
Identify
The board and the Risk 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 75
to 78 of the Annual Report.
Probability
more
Risk
Strategic Objective
Impact
Mitigation
Change from
prior year
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 illustration of certain principal risks in the above
diagram have been repositioned versus the prior year to
better reflect the relative probabilities and impact of each
principal risk when considered against the other risks,
without reflecting a change in the risk profile itself, unless
specified.
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.
business Environment Risks
1 Market
conditions and
the economic
environment,
particularly in
Romania and
Poland
2 Changes in the
Political or
Regulatory
Framework in
Romania,
Poland or the
European
Union
Property Portfolio Risks
3
Execution of
Investment
Strategy
negative trends in
economic activity, and
specifically the real estate
markets in Romania and
Poland may affect the
occupier demand, rental
rates and investment
valuation in respect of the
Group’s properties.
The Group is primarily
focused on property
investments in Romania
and Poland, and is
therefore exposed to
political and regulatory
framework changes that
may impact activities in
these markets.
Poor execution of the
Group’s strategy of
investing in high-quality
properties at sufficiently
attractive valuations would
affect the Group’s
objectives of maximisation
in nAV and EPS.
The Group is focused on leasing to multinational
groups with either insignificant exposure to
developments in the Romanian and Polish
economy and/or very sound financial standing.
The Group also focuses on achieving 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 improve income security.
The Group’s Executives frequently monitor
political or regulatory developments in the
Romanian and Polish market through their own
observation and third-party information 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.
management believes that both economies
continue to have a stable outlook for the medium
to long term.
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.
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PORTFOLIO REVIEW RISK REPORT: PRINCIPAL RISKS AND UNCERTAINTIES
ConTinuED
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Risk
Strategic Objective
Impact
Mitigation
Change from
prior year
Risk
Strategic Objective
Impact
Mitigation
Change from
prior year
Property Portfolio Risks continued
4 Counterparty
Credit Risk
loss of income may result
from the possible default of
tenants.
5
Valuation of
Portfolio
6
Inability to
Lease
Space
7
Inability to
Complete
Projects Under
Development
on Time
The Group has a diversified tenant base
(over 800 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.
During 2018 the Group strengthened its
Asset management teams in Romania and
Poland, including resources dedicated to active
monitoring of timely collections from tenants.
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.
The Group strives to preserve and enhance
property values through its property
management and leasing initiatives, and where
applicable its development strategy. in addition,
our property development and leasing strategy
anticipates the future needs of our tenants,
especially those experiencing continuous growth
and additional lease area requirements.
our Group has also initiated an investment
programme in the latest building management
technologies for upgrading its existing buildings
and consequently the services offered to
its tenants.
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, through the effective
management of vacant space by its very
experienced marketing and leasing teams based
in Romania and Poland. in addition, the leasing
teams cooperate closely with leading estate
specialists in their respective local markets to tap
all emerging opportunities.
Any error or negative trend
in valuations of properties
would significantly impact
the results (nAV and EPS)
of the Group.
Changes in occupational
trends (e.g. requirement for
more flexible space and
building management
technologies) can impact
future revenues generating
capacity and hence impact
the valuation of properties.
Potential loss of revenues
leading to inability to
maximise the EPS and
FFo available for
distribution of dividends
to shareholders.
Vacancy contributes to
higher unrecoverable
costs due to no service
charge income
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
8 Changes in
Interest Rates
Additional financing costs
may be incurred as a result
of interest rate increases.
Forecasting financing
costs could become
less accurate.
9
Lack of
Available
Financing
10 breach of Loan
Covenants
11 Foreign
Exchange Risk
This would negatively
affect the Group’s ability to
execute, to the full extent,
its investment plan,
maintain an optimal capital
structure, and potentially
make refinancing of
maturing debt difficult.
A breach 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.
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.
The Group monitors on a regular basis the
cost of its debt financing and has a preference
towards fixed rate, longer term, financing,
as depicted by the fact that c.95% of
outstanding debt at 31 December 2018 bears
fixed interest rates and has a weighted average
period to maturity of 5.1 years (31 December
2017: 5.4 years).
As a result, the impact of possible increases in
interest rates for the medium term is minimal.
The Group continuously explores financing and
refinancing options so as to diversify and
potentially reduce its average debt financing
costs. An example in 2018 is the successful
€550 million fixed coupon bond issued in march
2018 of 7 year duration, as part of its €1.5 billion
EmTn programme.
The Group’s management team holds frequent
meetings with current and potential equity and debt
investors, as well as continuous discussions with
leading global, European, and local institutions in
connection with its financing requirements.
Since admission, the Group has raised
c.€2.7 billion in equity and debt (including new
loan facilities and rolled-over loan facilities on
the acquisition of subsidiaries) to meet its
financing requirements.
in addition, as part of the €1.5 billion EmTn
programme entered into in march 2018 the
Group has €0.95 billion available for the issuance
of additional Bonds.
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.
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, with the help and
expertise of the Group Treasurer, 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.
increase as
a result of
acquisition of
properties with
higher vacancy
than the
average for
the Group and
termination of
certain master
lease and noi
guarantees.
Decrease as
a result of
the lower
proportion of
the Group’s
assets under
development at
31 December
2018.
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RISK REPORT: PRINCIPAL RISKS AND UNCERTAINTIES
ConTinuED
VIAbILITY STATEMENT
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Risk
Strategic Objective
Impact
Mitigation
Change from
prior year
The Group, through the Executive management,
the Group Head of Tax and 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 tax efficiency of its
group structure.
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 and Eu Directives.
Even though there have been significant changes
in the Romanian and Polish corporate taxation
legislation in the recent years, these changes
were in-line with the Eu antitax avoidance
Directive, which is a Eu political priority, as
opposed to specific initiatives in the countries
where the Group operates.
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.
Regulatory Risks
12 Change in
Fiscal and Tax
Regulations
Adverse changes in
taxation provisions and
approach of the tax
authorities in the
jurisdictions the Group’s
legal entities operate it
may negatively affect its
net results.
13 Compliance
with Fire,
Structural,
Health and
Safety or
Other
Regulations
non-compliance with
related regulations in
Romania and Poland
may affect our reputation
with existing and
potential tenants.
it may lead to loss of
right to operate our
properties, and may
also lead to severe legal
implications for the
Directors of the property
owning subsidiaries.
Andreea Petreanu
Chair of the Risk Committee
27 March 2019
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;
¡ 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; and
¡ three years is considered as the optimum balance between the necessity to plan for the short to medium
term and the requirement to maintain high levels of accuracy in the underlying projections.
In 2018, the viability assessment process comprised the following key steps:
1. A review and assessment by the Risk 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 75-78.
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;
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.
¡ valuation of portfolio;
¡ inability to lease space;
¡ changes in interest rates;
¡ lack of available financing; and
¡ breach of loan covenants.
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 2022.
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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PORTFOLIO REVIEW
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
PORTFOLIO
REVIEW
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PORTFOLIO REVIEW PORTFOLIO REVIEw
OUR REAL ESTATE PORTFOLIO
PRIMARY ASSET FOCUS
Globalworth’s real estate portfolio comprises high quality
properties in prime locations, either stand-alone or in
clusters, in the markets and sub-markets on which we
focus. These had an aggregate value of €2.5 billion at
31 December 2018, reflecting a 35.6% increase on 2017.
OFFICES
Our principal focus is on Class “A”,
environmentally friendly offices. Our properties,
which we have both acquired and developed
ourselves, offer a diverse mix of high-quality
space. These properties accommodate front
office and supporting (mainly business Process
Outsourcing and Shared Services Centre)
operations in seven cities in Romania and Poland,
accounting for 79.7% (including land to be
developed in the future as office) of our combined
portfolio by value.
Selected metrics
GAV1: €2.0bn
Standing GLA: 739.3k sqm
Standing Occupancy: 94.2% (95.8% incl.
tenant options)
Standing Contracted Rent: €130.2m
Standing 100% Potential Rent: €138.7m
Future GLA1: 137.2k sqm
Future ERV1: €24.3m
1. includes “land to be developed in the future” as office.
GLObALwORTH TOwER, GLObALwORTH PLAZA AND GREEN COURT COMPLEX
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
We invest in properties which are energy efficient
and easily accessible by public and private transport, being located close
to major arterial roads.
MIXED-USE
Our mixed-use, modern, multifunctional
properties combine a high-quality retail and
leisure experience with Class “A” office space.
All three properties are in prime locations in
Poland, are reference points in their respective
cities, and account for 12.4% of our combined
portfolio by value.
Selected metrics
GAV: €305.4m
Standing GLA: 87.4k sqm
Standing Occupancy: 93.0%
Standing Contracted Rent: €18.1m
Standing 100% Potential Rent: €19.2m
LOGISTICS / LIGHT-INDUSTRIAL
we invest in logistics and light-industrial properties
in markets where we identify strong tenant demand.
we acquire and develop high-quality properties
directly or together with select partners, seeking to
sign long-term lease contracts with well-known
international tenants, providing exposure to one of
the fastest growing market segments.
Selected metrics
GAV2: €114.6m
Standing GLA: 171.9k sqm
Standing Occupancy: 100.0%
Contracted Rent: €8.8m
Future GLA2: 168.3k sqm
Future ERV2: €7.4m
HALA KOSZICKI
OTHER INVESTMENTS
we hold partial ownership of a residential complex,
adjacent and complementary to our office
properties in the new CbD of bucharest.
Selected metrics
GAV: €79.6m
Description: 293 residential units & 6.2k sqm
commercial GlA
Standing Commercial Occupancy: 99.7%
Contracted Rent: €2.4m
2. includes “land to be developed in the future” as
logistics / light-industrial.
DACIA wAREHOUSE
UPGROUND TOwERS
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ConTinuED
OUR REAL ESTATE PORTFOLIO
GEOGRAPHIC FOCUS
The Group’s real estate investments are
in Romania and Poland, the two largest
markets in Central and Eastern Europe
(CEE). As at 31 December 2018, our
portfolio was relatively evenly split,
with Romania accounting for 50.6%
by value and Poland 49.4%.
Our properties are situated in three cities in
Romania and six cities in Poland, the majority
being in the capital cities of bucharest and
warsaw, which account for 68.0% of our
combined portfolio by value.
bucharest, Romania’s capital city, accounts
for 45.9% of our combined portfolio by value,
with the greatest concentration being in the
new Central business District (CbD). As at
31 December 2018, we had 10 standing
properties and two developments in the new
CbD, accounting for 34.6% of the combined
portfolio by value and representing 287.9k sqm
of standing commercial GLA and 293 residential
units. while our absolute exposure continues
to grow in bucharest’s new CbD through our
development activities, the proportion of our
portfolio in this sub-market has decreased by
53.0% since 2016.
Our presence in warsaw, Poland’s capital city,
increased significantly in 2018 following the
completion of three new investments, resulting in
13 standing properties offering 160.2k sqm of
standing commercial GLA, accounting for 22.1%
of the portfolio by value as at 31 December 2018.
The remainder of our portfolio spans seven major
regional cities across Poland and Romania.
Our largest presence is the regional cities of
Krakow (seven standing properties, 84.2k sqm
GLA) and wroclaw (three standing properties,
71.9k sqm GLA), accounting for 8.6% and 8.4%
of combined portfolio value respectively.
Poland: Regional Cities
72.5%
27.5%
Selected metrics
GAV: €673.1m
Standing Properties: 17
Standing GLA: 268.5k sqm
Standing Occupancy: 97.1%
Contracted Rent: €46.3m
Standing 100% Potential Rent:
€47.8m
Romania: Regional Cities
93.2% 6.8%
Selected metrics
GAV: €114.6m
Standing Properties: 5
Standing GLA: 171.9k sqm
Standing Occupancy: 100.0%
Contracted Rent: €8.8m
Future GLA: 168.3k sqm
Future ERV: €7.4m
Capital
Regions
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Gdansk
Lodz
Wroclaw
Katowice
Krakow
Warsaw
77.9% 22.1%
Warsaw
Selected metrics
GAV: €543.7m
Standing Properties: 13
Standing GLA: 160.2k sqm
Standing Occupancy: 92.7%
Contracted Rent: €35.5m
Standing 100% Potential Rent:
€38.5m
Timisoara
Bucharest
90.4% 9.6%
Selected metrics
GAV: €1,130.7m
Standing Properties: 17
Standing GLA(1): 441.5k sqm
Standing Occupancy: 92.7%
(95.7% including tenant options)
Contracted Rent: €68.8m
Standing 100% Potential Rent:
€74.0m
Future GLA: 137.2k sqm
Future ERV: €24.3m
1. Includes 37.3k sqm of residential space.
Pitesti
Bucharest
office
logistics / light-industrial
mixed-use
other (incl. land for future development)
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ConTinuED
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
BUCHAREST
Globalworth Tower
Globalworth Plaza
BOC
Green Court Complex
Globalworth Square
Unicredit HQ
Globalworth Square
Green Court Complex
Green Court D
BOB
Globalworth Plaza
Globalworth Campus T1 & T2
Globalworth Campus T3
Globalworth Tower
BOC
Unicredit HQ
Upground Towers
Gara Herastrau
Renault Bucharest Connected
Globalworth West
TCI
Luterana
City Offices
CGI render
Standing properties
Developments
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ConTinuED
WARSAW
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Hala Koszyki
Skylight & Lumen
Spektrum Tower
Bliski Centrum
Skylight & Lumen
Batory Building I
Bliski Centrum
Philips House
Warta Tower
Batory Building I
Nordic Park
Hala Koszyki
Philips House
Nordic Park
Spektrum Tower
Warta Tower
Standing properties
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STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
GOVERNANCE
92
introduction to Governance
97
Board of Directors
100
Directors’ Report
Report of the Audit Committee
104
Report of the nomination Committee 110
Report of the Remuneration Committee 112
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PORTFOLIO REVIEW INTRODUCTION TO GOVERNANCE
CORPORATE GOVERNANCE REPORT
LETTER FROM THE
CHAIRMAN OF THE BOARD
We continue to strive for high
standards of corporate governance.
During 2018, we have taken some
significant and tangible actions as
part of that journey.
Geoff Miller
Chairman
Dear Shareholder
I am pleased to introduce this Corporate
Governance report, in which we report on our
continuing journey towards high standards of
corporate governance. During 2018, we have
taken some significant and tangible actions as
part of that journey.
Highlights
Publication of our Statement of Compliance
with the UK Corporate Governance Code
Completion of a Group-wide integrity
compliance review and the update and
introduction of a number of written policies
and procedures including an overarching
Code of Conduct
Creation of a new Nomination Committee
and the splitting of the Audit and Risk
Committee into two separate committees
GDPR requirements implemented ahead
of schedule
busy year for board activity with 20 meetings
held during the year
Key CSR event(s)
Outstanding health and safety record
Corporate Governance Statement
In September, we published our Statement of
Compliance with the UK Corporate Governance
Code in response to changes to the AIM Rules.
In this Statement, we confirmed our commitment
to the principles set out in the UK Corporate
Governance Code and, as required by the AIM
Rules, outlined how we meet the requirements of
the Code. In this Annual Report, we explain our
progress in this endeavour in more detail.
Integrity Compliance Review and
Code of Conduct
During the year we completed a Group-wide
integrity compliance review following which we
updated and introduced a number of written
policies and procedures. we also introduced an
overarching Code of Conduct which is designed
to help all employees of Globalworth connect with
our values and sets expectations for everyday
behaviour. In line with the board’s commitment to
high standards of integrity compliance, our Code
of Conduct is published on our website.
Committee re-structure
Further significant steps were taken on
31 October 2018 when we announced the
re-vamp of our board Committee structure.
This move was taken to ensure that our
committee structure continues to align with
the needs of our growing business and our
commitment to high corporate governance
standards. The two key elements of this
re-vamp were the creation of a new Nomination
Committee and the splitting of the Audit and
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
¡ Focusing on our team of professionals by
employing the best available candidates for
every position, regardless of gender, ethnic group
or background and providing fair treatment;
¡ Support charitable actions and forming
partnerships which have the power to make a
difference to the communities in which we live
and operate, such as Hospice Casa Speran,tei,
Make a wish, Rena ,sterea Foundation, and
United way;
¡ Maintaining a high standard of health, safety
and security in our portfolio;
¡ Investing and maintaining a an environmentally
friendly portfolio targeting green building
certifications mainly from bREEAM and LEED
organisations; and
¡ Supporting Technological innovation and
through the application of technology to
improve our quality of life and operations.
The Board
Following a number of changes to the board in
2017, the past year has been a more settled year
in terms of board membership, allowing the
board to establish a new pattern of working as
the newer Directors have settled into their roles.
I am pleased to report that the close relationship
and open communication between the Non-
Executive and Executive Directors, which had
previously been so integral to the smooth
operation of the board, has been maintained.
we have had a busy year with 20 board meetings
in total (including three board Committee
meetings), including strategy discussions and
approvals for specific transactions, and no loss of
momentum in the pace of our transactions.
At this point I would like to thank Mr Alexis
Atteslis for his contribution to the board and the
Group over the 5 years as he stepped down in
March 2019 and, to thank all other remaining
members for their ongoing support and efforts.
As we continue to develop our approach to
corporate governance in anticipation of a move to
a Premium Market, I believe that the board is as
well-placed and as ready as ever to meet those
challenges.
Geoff Miller
Chairman
27 March 2019
Risk Committee into two separate committees.
Individual reports from each of these new
committees are included in this Corporate
Governance Report which outline how the
new Committee structure is bedding down and
the priorities that the Committees are setting
for 2019.
Oversight of strategy
The board performs a critical role in overseeing
how the Company is managed. with continued
growth we wish to ensure that the entrepreneurial
spirit is retained in the executive approach whilst
also maintaining a responsible approach to
corporate governance. we are also anxious not
to become complacent. Consequently, we have
spent time overseeing the strategic development
of the Group and ensuring that each business
development transaction delivers value and
mitigates its risks.
GDPR
In line with many other businesses, we had to
take significant steps during 2018 to ensure that
our processes for handling data complied with
the General Data Protection Regulation (GDPR).
The board were pleased with the approach
taken by the management team to GDPR which
was both well-planned and well-executed ahead
of schedule.
Stakeholders
we are working to ensure that our governance
systems are appropriate to the requirements
of all of our shareholders, irrespective of their
holdings. we are also aware of the board’s
wider responsibilities to its other stakeholders.
we will seek to ensure that management
are acting responsibly in its relationships with
those stakeholders.
Sustainability/Social Responsibility
The board places significant importance on the
roles of business ethics and corporate social
responsibility within the overall approach to
governance within Globalworth.
we firmly believe that this sustains long-term
value for the Company, our shareholders, our
people, the community and environment.
Consequently, we have tried to ensure that our
progress in this area keeps pace with the
development of the Group.
As outlined in detail in the Corporate Social
Responsibility (“CSR”) section of the Annual
Report, in 2018 we have been working hard in
implementing our vision which centres around
creating communities by focusing on People,
Places and Technology, through undertaking
initiatives such as:
¡ Establishing the “Globalworth Foundation”,
a 100% owned foundation by the Group,
responsible for the strategy and overseeing
our CSR initiatives;
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INTRODUCTION TO GOVERNANCE
CORPORATE GOVERNANCE REPORT
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 2018 with the provisions set out in the
uK Code, subject to the statements made below in this section.
Board of Directors
Introduction
During the year ended 31 December 2018 the
board comprised the Chairman, who is a Non-
Executive Director, two Executive Directors and ten
other Non-Executive Directors. 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 2018, 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. Each of the Directors is committed to their
role and has sufficient time available to discharge
their responsibilities effectively.
Details on the profile and experience of the
Executive and Non-Executive Directors are set
out on pages 97-99 of the Annual Report.
Committees of the Board
The Committees of the board comprise the
Remuneration Committee, the Audit Committee,
the Risk Committee, the Investment Committee
and the Nomination Committee. Details about the
terms of reference of the Remuneration Committee
and the Audit Committee and their work during the
year are provided in the Remuneration Committee
Report and the Audit Committee Report on pages
112-115 and pages 104-108, respectively, of the
Annual Report. In addition, the Nomination
Committee Report (pages 110-111 of the Annual
Report) and the Letter from the Chair of the Risk
Committee (page 72 of the Annual Report) each
outline the terms of reference and objectives of
those Committees, which were both formed
towards the end of 2018.
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;
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STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
¡ 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.
Regular trading updates are posted on the
Company’s website with commentary on significant
events in the evolution of the Company’s portfolio
and performance.
The Company’s senior management and its brokers
maintain regular dialogue with institutional
shareholders, feedback from which is reported to the
board. In addition, board members are available to
answer shareholders’ questions at any time, and
specifically at the Annual General Meeting (‘AGM’).
The Company Secretary is available to answer
general shareholder queries at any time during the
year. The board monitors activity in the Company’s
shares and the discount or premium to net asset
value at which the shares trade both in absolute
terms and relative to the Company’s peers.
Board Meetings and Directors’ Attendance
The number of meetings of the board of Directors
attended by each Director, as applicable, during the
year ended 31 December 2018 is set out below.
Director
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
Total Number of Meetings
Quarterly
Board
Meetings
Ad-hoc
Board
Meetings*
Board
Meetings
(Total)
Ad-hoc
Board
Committee
Meetings**
4/4
4/4
4/4
4/4
4/4
3/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4
2/13
8/13
13/13
11/13
8/13
3/13
7/13
10/13
9/13
10/13
12/13
12/13
8/13
13
6/17
12/17
17/17
15/17
12/17
6/17
11/17
14/17
13/17
14/17
16/17
16/17
12/17
17
-/-
2/2
-/-
1/1
1/1
-/-
-/-
-/-
1/1
1/1
-/-
1/1
-/-
3
* Even though all Directors were eligible to attend the board Committee meetings, a quorum was formed with the participation of
2 or 3 Directors at each Committee meeting, as applicable depending on the case.
** The board Committee meetings attendance presented reflects the attendance of those Directors who were appointed to form
each of the three board Committees.
Nomination Committee
A separate Nomination Committee is in operation
commencing 1 November 2018. The Committee
consists of three independent Non-Executive
Directors and is chaired by Geoff Miller.
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. For details please refer to the Nomination
Committee section of the Annual Report.
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.
Development
On joining the board, new members receive a
comprehensive induction. Individual training
needs are identified as part of the annual board
evaluation process and training is provided as
required. All Directors receive regular updates on
legal, regulatory and governance issues.
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 2018 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.
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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 pursuant to the right of the Founder,
Ioannis Papalekas, to appoint a director), Akbar
Rafiq and Alexis Atteslis (nominated and appointed
pursuant to the rights of York Capital and Oak Hill
Advisors respectively to appoint a director), as well
as Norbert Sasse, George Muchanya and Peter
Fechter (appointed pursuant to the right of
Growthpoint Properties Ltd to appoint a specified
number of directors) and Richard van Vliet
(appointed pursuant to Growthpoint’s right to
nominate a Guernsey based director), 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.
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
we believe in respecting individuals and their
rights in the workplace. Further details are
provided on page 61 of the Annual Report.
Corporate Governance Structure
The Board
Nomination
Committee
Audit
Committee
Remuneration
Committee
Investment
Committee
Risk
Committee
Committee Chair
Geoff Miller
Committee Chair
John Whittle
Committee Chair
Bruce Buck
Committee Chair
Eli Alroy
Committee Chair
Andreea Petreanu
Committee Members
Eli Alroy
Peter Fechter
Committee Members
Andreea Petreanu
Richard van Vliet
Committee Members
Peter Fechter
Eli Alroy
Committee Members
Ioannis Papalekas
Dimitris Raptis
Norbert Sasse
George Muchanya
Committee Members
Geoff Miller
Richard van Vliet
John Whittle
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
bOARD OF DIRECTORS
AN EXPERIENCED TEAM
I
I
N
Ri
Ioannis Papalekas
Founder &
Chief Executive Officer
Dimitris Raptis
Deputy Chief Executive Officer
& Chief Investment Officer
Geoff Miller
Independent Non-Executive Director
& Chair of the Board
Appointed to the Board (as CEo)
14 February 2013
Appointed to the Board
14 February 2013
Appointed to the Board
6 June 2013
Skills and Experience
Mr Papalekas is the Founder of
Globalworth and has nearly 20 years of
real estate investment and development
experience, predominantly in Romania,
and the wider Central Eastern European
region, having created one of the
most successful real estate groups in
the CEE. He has significant experience
in the acquisition, master planning,
development, reconstruction,
refurbishment, operation and asset
management of land and buildings
across all major real estate asset classes.
Prior to founding Globalworth, Ioannis
was responsible for the acquisition,
development and successful disposal
of more than 400k sqm of commercial
(office, retail and logistics) space and
1.0k residential units in Romania.
Skills and Experience
Mr Raptis joined Globalworth in November
2012, following 15 years of experience in
financial services and real estate
investment management with Deutsche
bank (Db), where he held various senior
roles including MD/European Head
of Portfolio Management for RREEF
Opportunistic Investments and had
responsibility for acquisitions and
management of a pan-European portfolio
valued in excess of €6.0 billion, as well as
other European investments with an
enterprise value in excess of €5.5bn.
Dimitris has significant experience in the
origination, structuring, investing and
portfolio management of real estate
properties in Europe. Since December
2018, Dimitris has been the Interim Chief
Executive Officer of Globalworth Poland.
Skills and Experience
Mr Miller has over 20 years of experience
in research and fund management in the
UK, specialising in the finance sector,
followed by moves to Moscow and then
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. In addition,
he is a Director of a number of private
companies.
Committee membership
A
I
N
Audit Committee
investment Committee
nomination Committee
Re
Remuneration Committee
Ri
Risk Committee
Committee Chair
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ConTinuED
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
I
Re
N
A Ri
N
Re
A Ri
Committee membership
A
I
N
Audit Committee
investment Committee
nomination Committee
Re
Remuneration Committee
Ri
Risk Committee
Committee Chair
Eli Alroy
Independent Non-Executive Director
John Whittle
Independent Non-Executive Director
Akbar Rafiq
Independent Non-Executive Director
Appointed to the Board
6 June 2013
Appointed to the Board
6 June 2013
Appointed to the Board
29 September 2014
Skills and Experience
Mr Alroy has over 25 years of
international experience in real estate
investment and project management.
Eli, in 2010, was honored 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. From 1994 to 2012 he was
Chairman of the Supervisory board of
Globe Trade Centre S.A. (GTC), a
warsaw-listed real estate company.
Eli is also a senior member or director
of various private companies.
Skills and Experience
Mr whittle has over 40 years of experience
in business, accounting and finance. John
is a Chartered Accountant, resident of
Guernsey and is a non-executive Director
of several LSE and AIM listed companies.
He also acts as Non-Executive Director to
other Guernsey investment funds. John
previously was Finance Director of Close
Fund Services1, and has held various
positions with Price waterhouse, Talkland
International2, John Lewis and windsmoor.
1. Large independent fund administrator
2. Now Vodafone Retail
Skills and Experience
Mr Rafiq is multi-sector finance
professional with over 17 years of
experience. Akbar 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.
He is a Co- Portfolio Manager of the York
European Distressed Credit funds.
Previously, Akbar worked at Deutsche
bank AG, bear, Stearns and Co. Inc. and
private equity firm, Alta Communications.
Peter Fechter
Independent Non-Executive Director
Richard van Vliet
Independent Non-Executive Director
Appointed to the Board
27 February 2017
Appointed to the Board
27 February 2017
Skills and Experience
Mr Fechter has 50 years of experience in
real estate and business. Peter’s track
record includes becoming the CEO of a
large private South African construction
company in 1978. In 1980 he formed his
own real estate business, which after 20
years he exited through the sale to an IPO
company, which subsequently merged
with Growthpoint Properties in 2003. Peter
is a non-executive director of Growthpoint,
serving on the audit and risk committees
and as chairman of the property
investment committee.
Skills and Experience
Mr van Vliet is qualified as a Chartered
Accountant in South Africa, England and
wales, with over 35 years of professional
experience. Richard has been a Guernsey
resident since 1997 and is Managing
Director of Cannon Asset Management
Limited. He is Chairman of The Cubic
Property Fund, holds various board
positions on companies and investment
funds exposed to property, equity and
alternative investments, and sits on
operational boards of the subsidiaries of
the LSE-listed Stenprop Limited.
Previously he worked in South Africa at
Price waterhouse and was sole proprietor
of an audit practice in Johannesburg.
A
Ri
I
I
Re
Andreea Petreanu
Independent Non-Executive Director
Norbert Sasse
Non-Executive Director
Appointed to the Board
29 September 2014
Appointed to the Board
27 February 2017
George Muchanya
Non-Executive Director
Appointed to the Board
27 February 2017
Skills and Experience
Ms Petreanu is a risk management
professional with nearly 20 years of
experience in the field. Andreea is Head of
Credit Risk Management at Mizuho
International in London, having previously
held various risk management roles with
Morgan Stanley, HSbC, Merrill Lynch,
bank of America and VTb Capital.
Andreea holds an MbA from University of
Cambridge, MSc from CASS business
School and is also an Associate of the
Chartered Insurance Institute in London.
Skills and Experience
Mr Sasse has nearly 30 years of
experience in real estate and corporate
finance. Norbert is the Chief Executive
Officer of Growthpoint Properties (GRT),
South Africa’s largest real estate REIT,
which he was instrumental in growing its
portfolio to over ZAR 130 billion (c.€8bn),
and holding investments in South Africa,
Australia and the CEE. Norbert was also
involved in establishing SAREIT1. Prior to
GRT he spent 10 years with EY Corporate
Advisory and Investec Corporate Finance.
He is also a Chartered Accountant.
1. South African Real Estate Association.
Skills and Experience
Mr Muchanya has over 20 years of
experience in real estate, consulting and
banking. George is responsible for
Corporate Strategy at Growthpoint
Properties (GRT) and is a member of the
Executive Committee. Having started his
career as an engineer, he moved into
banking in 2000 in South Africa and the
UK, and then into a global management
consulting firm. Since joining GRT in
2005, George has focused on M&A and
been involved in its expansion in Australia,
the CEE and the acquisition of the V&A in
South Africa.
Bruce Buck
Independent Non-Executive Director
Alexis Atteslis
Independent Non-Executive Director
Appointed to the Board
13 December 2017
Skills and Experience
Mr buck is a professional with more than
35 years of experience in practicing law in
Europe. bruce was Managing Partner in
Europe and latterly Of Counsel for
international law firm Skadden, Arps,
Slate, Meagher and Flom LLP, until retiring
from this role in 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 its primary subsidiary Chelsea
Football Club Limited.
Appointed to the Board
29 September 2014 to 19 March 2019
Skills and Experience
Mr. Atteslis is a Partner and Portfolio
Manager at Oak Hill Advisors. Alexis is a
member of OHA’s investment strategy,
ESG and various fund investment
committees. Previously, he worked at
Deutsche bank and at
PricewaterhouseCoopers. Alexis 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.
98
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PORTFOLIO REVIEW DIRECTORS’ REPORT
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
The Directors present their Annual Report and the audited
consolidated financial statements of the Group for the year
ended 31 December 2018.
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.
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 178 of the Annual Report.
Results and Dividends
The results for the year are set out in the consolidated
statement of comprehensive income on page 118 of the
Annual Report.
The Company has already distributed in August 2018 and
in February 2019 interim dividends of €0.27 per share for
each interim dividend distribution, or €0.54 per share in
total, in respect of the year ended 31 December 2018, to
holders of shares at the respective record dates for each
such interim dividend.
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 the
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.
Substantial Interests
At 31 December 2018 and 27 March 2019, the following shareholders had substantial interests (more than 3%) in the
issued share capital of the Company:
Growthpoint Properties Ltd
Ioannis Papalekas
Aroundtown
York Capital
Altshuler Shaham Ltd
European bank for Reconstruction and Development
Oak Hill Advisors
Gordel Holdings Limited
At 27 March 2019
At 31 December 2018
Number of shares
38,371,429
24,237,362
16,000,000
11,935,697
9,757,703
8,317,714
5,499,680
5,203,712
% of issued
share capital of
the Company
28.3%
17.9%
11.8%
8.8%
7.2%
6.1%
4.1%
3.8%
Number of shares
38,371,429
24,237,362
–
20,335,697
9,757,703
5,714,286
13,099,680
5,203,712
% of issued share
capital of the
Company
29.0%
18.3%
–
15.3%
7.4%
4.3%
9.9%
3.9%
Directors’ Interests
The beneficial and non-beneficial interests of the Directors in the share capital of the Company as at 31 December 2018
and 2017 are as set out below:
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
2018
2017
2018
2017
24,237,362
559,640
21,000
698,814
11,900
–
–
–
114,286
60,000
–
–
–
25,129,187
527,834
21,000
698,814
11,900
–
–
–
114,286
60,000
–
–
–
2,830,020
–
11,000
–
9,000
–
–
–
–
–
–
–
–
2,830,020
–
11,000
–
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.
As at 31 December 2018, 20,000 warrants (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 2018 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.
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PORTFOLIO REVIEW
DIRECTORS’ REPORT ConTinuED
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
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.
Directors’ 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 already been exercised, while the
warrants held by Geoff Miller and John whittle,
have also vested but have not yet been exercised.
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 2018 the board has not
exercised its power to buy back shares in the market.
Annual General Meeting
The AGM of the Company will be held on 24 June 2019 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 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.
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 27 March 2019.
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.
Geoff Miller
Director
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PORTFOLIO REVIEW REPORT OF THE AUDIT COMMITTEE
COMMITTEE REPORT
LETTER FROM THE
CHAIRMAN OF THE COMMITTEE
We will in future be able to focus
more attention on two priorities:
ensuring the integrity of the
financial reporting of the Group
and ensuring that the Group’s
internal controls are fit for
purpose.
John Whittle
non-Executive Director,
Chairman of the Audit Committee
Membership and attendance
Date of
Committee
Member
Position
appointment Attendance
John whittle
Chairman
6 Jun. 13
Andreea Petreanu Member
8 Jun. 15
Richard van Vliet Member 27 Feb. 17
George Muchanya Observer
n.a.
5/5
5/5
5/5
3/3
Highlights
Separate Risk Committee established in the
final Quarter of 2018.
Focus on integrating the financial records
of newly acquired businesses.
Oversight of the preparation of
financial statements.
On behalf of the Audit Committee, I am delighted to
introduce the Audit Committee Report for 2018. For most of
the year, our responsibilities have included oversight of risk.
However, with the formation of a separate Risk Committee
towards the end of the year, we will in future be able to
focus more attention on two priorities: ensuring the integrity
of the financial reporting of the Group and ensuring that the
Group’s internal controls are fit for purpose, given the
Company’s rapid expansion through acquisition and
territorial extension.
In relation to our financial reporting, there have been three
main objectives. The first is to ensure that management are
integrating the financial records of newly acquired businesses
appropriately and making correct judgements around issues
such as valuation and revenue recognition. The second aim is
to ensure that the management team do a proper job of
preparing fair, balanced and understandable reporting with
appropriate levels of scrutiny and challenge being applied by
the Company’s auditor. Finally, the third main objective is to
exercise scrutiny over internal controls. I believe that we have
made good progress in these three objectives.
with risk becoming the responsibility of a separate board
Committee, I expect the Audit Committee to be able to
focus on the Company’s internal controls environment over
the coming year. As part of this work, and again recognising
the growth of the business, we will evaluate the need for a
separate internal audit function within the Company.
I would like to thank my fellow Committee members for their
support and contribution to the work of the Committee
which is always greatly appreciated. we also benefit from
having the input of George Muchanya, as an observer, at our
meetings and his contributions are always most helpful.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Structure and Composition
During the year ended 31 December 2018 the
Audit Committee comprised three independent
Non-Executive Directors: John whittle (Chairman of the
Audit Committee), Andreea Petreanu and Richard van Vliet.
During the year George Muchanya joined the Committee as
an observer.
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,
however, the Audit Committee is also in compliance with
the UK Corporate Governance Code which recommends
that an audit committee should comprise at least three
independent non-executive directors.
All members of the Committee are independent
Non-Executive Directors with recent, relevant financial
experience, following the requirement of the UK Corporate
Governance Code that at least one member of the
Audit Committee should have recent and relevant
financial experience. The profiles of the Chairman and
other Members of the Committee, including their relevant
experience, are presented in the board of Directors
sub-section of the Annual Report (pages 97 to 99).
The dates of appointment of the members of the Committee,
together with attendance at Committee meetings during the
year, are outlined in the table on the previous page.
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; and
– assessing whether the Annual Report and financial
statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary
for shareholders to assess the Company’s
performance, business model and strategy.
¡ Controls and Safeguards:
– keeping under review, on an annual basis, 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 2018 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 and consolidated financial
statements for the years ended 31 December 2017 and
31 December 2018 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 2018 prior to its approval by the board.
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PORTFOLIO REVIEW REPORT OF THE AUDIT COMMITTEE ConTinuED
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 most significant issues impacting the Company’s
financial statements and Annual Report disclosures, as presented in the following table together with the Committee’s
response thereon:
Significant financial reporting matters considered Audit Committee Response
Significant financial reporting matters considered Audit Committee Response
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
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.
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.
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, as well as the correct application of new
IFRSs related to accounting for lease agreements.
Going Concern Principle
The Committee considers the appropriateness of
preparing the Group’s financial statements on a going
concern basis, being one of the fundamental
principles under which the financial statements are
prepared.
Underlying cash flow projections and sensitivity
analysis supporting the viability statement
The Committee considers whether the assessment
undertaken by management regarding the Group’s
long term viability appropriately reflects the prospects
of the Group and covers an appropriate period of time.
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 valuers 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.
During the year ended 31 December 2018 the Group has made
significant acquisitions of completed office buildings in Poland and
land for development in Romania. The Committee has discussed
with management and the auditors the accounting treatment
followed in accordance with IFRS requirements, including the
classification of these acquisitions as “asset acquisitions”.
There were no disposals of core properties during the year ended
31 December 2018.
The Committee is updated by the Auditor annually on the results
of the specific audit procedures performed in this area.
During the year ended 31 December 2018 the Committee
discussed with management and the auditors the assessments
made in relation to the application of IFRS 15 “Revenue from
Contracts with Customers” and IFRS 9 “Financial Instruments:
Classification and Measurement”, applicable from 1 January 2018.
IFRS 9 was considered in light of its relative complexity as regards
the assessment of any required provision for not impaired
receivables from lessees.
A discussion was also held with management and the auditors on
the potential impact from the application of IFRS 16 “Leases”,
applicable from 1 January 2019.
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 2020 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.
The Committee has considered management’s viability analysis,
including the underlying cash flow projections for the three-year
period to 31 March 2022, 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 79.
Fair, balanced and Understandable Principle
The Committee considers 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, financial position, business
model and strategy.
The Committee in reviewing the Company’s Annual Report and
consolidated financial statements for the year ended 31 December
2018 has placed particular attention in ensuring adherence to this
principle.
Following its review, the Committee 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.
¡
¡ At the planning stage of the audit for the year ended
31 December 2018, John whittle and Andreea Petreanu
met the auditor in October 2018. 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: accounting for lease incentives,
including impact on valuation adjustments;
– accounting treatment of major acquisitions; and
– risk of misstatement due to fraud and error
(associated to the significant risks).
In addition, the Committee held at the beginning of January
2019 a call with the external auditor to discuss in detail their
final audit plan, following the performance of their interim
audit work in November and December 2018.
Moreover, the Chairman of the Committee met at the
beginning of March 2019 with the external auditor and
discussed the findings from their audit of the consolidated
financial statements for the year ended 31 December 2018,
prior to publication of the results for the year ended
31 December 2018.
At the end of March 2019 the Committee also held a
call with the external auditor to discuss in detail the audit
findings and the draft auditor’s report, following the
conclusion of their audit fieldwork for the year ended
31 December 2018, prior to submission of the draft
Annual Report to the board for formal approval.
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;
¡ performed an assessment of the internal controls of the
Group, which has been in place for the financial year
ended 31 December 2018 and up to the date of approval
of the annual report and accounts, 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. The Committee
welcomes management’s initiative during the year to
increase human capital in critical departments within
the Group, focusing on recruiting experienced,
talented personnel in their respective fields of
expertise, which also enhanced further the internal
control environment; 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 expansion into the
Polish real estate market starting from December 2017
and further growth through significant additional
investments made during 2018 as well, both in Poland
and Romania.
External Audit:
Held regular meetings and discussions with the external
auditor:
¡ The Chairman of the Committee and other Committee
members 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 2018.
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PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Reviewed the effectiveness of the external auditor and
recommended its reappointment to the board:
For the year ended 31 December 2018 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. In addition, as outlined above, the Chairman of the
Audit Committee discussed with the external auditor at the
beginning of March 2019 their preliminary findings on the
audit of the consolidated financial statements for the year
ended 31 December 2018. Furthermore, the Committee
discussed with the external auditor at the end of March
2019 their final findings on the audit of the Annual Report
and consolidated financial statements for the year ended
31 December 2018 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 2019.
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
Chair of the Audit Committee
27 March 2019
REPORT OF THE AUDIT COMMITTEE ConTinuED
Assessed the independence and objectivity of the
external auditor:
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. This is the second year that the current lead audit
partner is responsible for the Group’s audit, following the
rotation that took place in prior year.
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.
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 and reviews,
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 and other entities of EY during the
years ended 31 December 2018 and 31 December 2017:
Audit of financial statements
Other assurance services
Other non-audit services
Audit fees
€‘000
Non-audit fees
€‘000
2018
1,058
–
–
1,058
2017
586
–
–
586
2018
–
358
485
843
2017
–
11
397
408
The significant increase in audit fees for 2018 is mainly due
to the fact that in prior year only a small portion of the
annual audit fees of GPRE was reported in prior year’s
Annual Report (as also presented in the above table), as the
acquisition of GPRE was completed in December 2017.
The Committee has reviewed the level of non-audit fees of
the external auditor for the year ended 31 December 2018
and has considered that they are in line with the Group’s
level of development and fund raising activities, and
concluded that they relate to permissible non-audit services
under the auditor’s independence and other related
professional standards.
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PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
A key element in retaining the entrepreneurial culture as the
business grows will be to ensure that constructive challenge
of the status quo is always present in our thinking. we
therefore see diversity of thought as an important
contributor and are supportive of diversity across the board
and the senior management team. I am committed to taking
a positive approach to diversity in our board and senior
management appointments process.
I look forward to reporting on the work undertaken by this
Committee in next year’s Annual Report.
Yours faithfully.
Geoff Miller
Chairman of the Nomination Committee
27 March 2019
REPORT OF THE NOMINATION COMMITTEE
COMMITTEE REPORT
LETTER FROM THE
CHAIRMAN OF THE COMMITTEE
Ensuring that we have a
leadership team capable of
growing with the business whilst
retaining the entrepreneurial
qualities that have been so
instrumental in the Group’s
success to date is a key challenge.
Geoff Miller
Chair of the nominaton Committee
Membership
Director
Geoff Miller
Peter Fechter
Eli Alroy
Highlights
Position
Chairman
Member
Member
Nomination Committee established in the final
Quarter of 2018.
The immediate priorities will be to ensure that
robust succession and development plans are
in place.
Having only been established as a separate board
committee towards the end of 2018, the work of the
Nomination Committee has just begun. The purpose
of the Nomination Committee is to lead the process for
appointments, ensure plans are in place for orderly
succession to both the board and senior management
positions, and oversee the development of a diverse
pipeline for succession. we plan to meet two or three times
a year, more often if necessary, and I would like to take this
opportunity to outline our priorities for the coming year.
The Nomination Committee comprises three independent
Non-Executive Directors: myself as Chairman of the
Committee, Peter Fechter and Eli Alroy. 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 Terms of Reference of the Committee
state that it shall have a minimum of three, independent
non-executive directors as members and, as such, it is in
compliance with the UK Corporate Governance Code which
recommends that a nomination committee should comprise
at least three independent non-executive directors.
The transformation of the Company both in terms of size
and complexity since the Company’s admission to AIM in
2013 has been huge and we expect it to continue. Ensuring
that we have a leadership team capable of growing with the
business whilst retaining the entrepreneurial qualities that
have been so instrumental in the Group’s success to date is
a key challenge. Succession planning and executive
development will, therefore, be an important area of focus
for the Nomination Committee. Allied to this, the
Nomination Committee will retain a close interest in the
culture of the Group to ensure that it continues to be
aligned with, and supportive of, the strategic development
of the Group’s business.
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PORTFOLIO REVIEW REPORT OF THE REMUNERATION COMMITTEE
COMMITTEE REPORT
LETTER FROM THE
CHAIRMAN OF THE COMMITTEE
Bruce Buck
non-Executive Director,
Chairman of the Remuneration Committee
Membership and attendance
Director
Geoff Miller
bruce buck
Eli Alroy
Peter Fechter
Dimitris Raptis
Norbert Sasse
* Attended one meeting as observer.
** Attended two meetings as observer.
Position
Date of Committee appointment
Date of Committee resignation
Attendance
Chairman
Chairman
Member
Member
Observer
Observer
6 Jun. 13
1 Nov. 18
8 Jun. 15
27 Feb. 17
n.a.
n.a.
31 Oct. 18
n.a.
n.a.
*6/6
**3/3
6/6
6/6
4/4
4/4
The Committee also held numerous informal discussions through telephone conference calls.
Composition of the Committee
During the year ended 31 December 2018 the
Remuneration Committee comprised three independent
Non-Executive Directors. On 31 October 2018 Geoff Miller
stepped down as Chairman of the Committee and bruce
buck was appointed as its Chairman commencing
1 November 2018.
Mr Miller has continued to provide guidance and
assistance to the Committee as an “observer” at its
formal meetings and informal discussions and the
Committee is grateful for Mr. Miller’s support.
The changes in the members of the Committee, together
with attendance at Committee meetings during the year,
are outlined in the table above:
Responsibilities of the 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.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
The emoluments of the Directors is a matter for the board,
considering the recommendations received from the
Remuneration Committee. No Director 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 Investment Management
Agreement signed between the Company and GIAL on 24
July 2013, as amended in November 2016 following an
Extraordinary General Meeting of the Company’s
shareholders (the ‘Plan’ or the ‘IMA’).
Directors’ Emoluments
The Directors’ emoluments during the year ended
31 December 2018 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 2018 the emoluments of the Directors were as follows:
Amounts in €‘000
Ioannis Papalekas
Dimitris Raptis
Geoff Miller4
Eli Alroy
John whittle
Akbar Rafiq
Alexis Atteslis
Andreea Petreanu
Norbert Sasse
Peter Fechter
George Muchanya
Richard van Vliet
bruce buck
Company
Subsidiaries1
Dividends2
Fees
–
–
228
200
77
–
–
65
–
65
–
65
104
804
Fees
Salary
Total
Total3
emoluments
–
–
28
–
28
–
–
–
–
–
–
–
–
56
1,051
185
–
–
–
–
–
–
–
–
–
–
–
1,236
1,051
185
28
–
28
–
–
–
–
–
–
–
–
1,292
1,400
625
–
–
–
–
–
–
–
–
–
–
–
2,025
2,451
810
256
200
105
–
–
65
–
65
–
65
104
4,121
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 as 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 (€0.7 million to be settled in cash and €0.7 million by the issuance of shares of the Company); and for Dimitris Raptis dividends include an
accrual of €0.425 million (€0.213 million to be settled in cash and €0.212 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 €1.825 million was payable to the Directors as of 31 December 2018. An additional amount of €14,081 was due to
the Directors as of 31 December 2018 for out-of-pocket expenses incurred, which was settled subsequent to 31 December 2018.
4. For Geoff Miller the emoluments received from the Company during the year ended 31 December 2018 include €85 thousand which was awarded in respect
of the year ended 31 December 2017 after the date of publication of the Annual Report and Financial Statements for the year ended 31 December 2017.
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PORTFOLIO REVIEW
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
REPORT OF THE REMUNERATION COMMITTEE ConTinuED
Having not been reviewed since the Company was admitted
to AIM in 2013, the standard level of compensation for
certain Non-Executive Directors, which applied to Geoff
Miller, John whittle, Andrea Petreanu, Peter Fechter and
Richard van Vliet, was reviewed during the year. The review
was based on bringing the fees of those Non-Executive
Directors in line with companies of a similar size to
Globalworth. To provide the benchmarking, a leading
remuneration consultancy was engaged and the levels of
fees for those Directors will be adjusted from the beginning
of 2019, although there were some additional fees paid to
each Director in 2018 above the standard level of fees, to
reflect work done during the year. The fees for all non-
Executive Directors will also be fixed in Euros henceforth,
rather than in sterling, to align with the Company’s reporting
currency. The amended level of fees payable will encompass
all work provided to the Company, in the expectation that
one-off fees for Non-Executive Directors in the future will be
exceptional and the Non-Executive Directors will not receive
any form of remuneration from subsidiary entities, as had
been the case historically. It is envisaged that the level of
Non-Executive remuneration will be reviewed at least once
every three years in future.
During the year ended 31 December 2017 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
Norbert Sasse
Peter Fechter
George Muchanya
Richard van Vliet
bruce buck
Fees
–
–
56
200
56
–
–
46
–
37
–
38
6
439
Fees
Salary
869
150
–
–
–
–
–
–
–
–
–
–
–
–
–
29
–
29
–
–
–
–
–
–
–
–
58
1,019
1,077
Total
869
150
29
–
29
–
–
–
–
–
–
–
–
Total3
emoluments
2,469
875
85
200
85
–
–
46
–
37
–
38
6
3,841
1,600
725
–
–
–
–
–
–
–
–
–
–
–
2,325
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 as 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 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.
Founder and Director Warrant Agreements
Please refer to page 102 of the Annual Report for details on
the Founder and Director warrant Agreements concluded
on 24 July 2013.
Performance Incentive Scheme
The Company’s Admission document in July 2013 stated
that the Company would implement a performance incentive
plan based on Total Shareholder Return.
Post Admission, and following extensive discussions with
the board, the board adopted the current Investment
Adviser Incentive Plan which the Company’s shareholders
approved at an Extraordinary General Meeting in November
2016 (referred to above as the “Plan” or the “IMA"). The Plan
comprises the following three main elements:
¡ a long-term incentive fee (“LTF”), primarily based on
achieving certain returns for shareholders.
Following discussions during 2018 by the Company’s
management with the Company’s major shareholders, as
well as other key shareholders and potential new investors,
regarding the LTF, concerns were raised over the potential
uncapped dilutive future effect of the LTF. It is evident that
should the Company continue to grow as it has so far, at
termination of the Plan, the LTF-related liability would be
significantly higher than if it was to be terminated today.
If decided to be terminated over the course of the current
year, any consideration could represent a significant
discount to the potential future value of the LTF component
of the Plan.
¡ an annual fee which includes a fixed component and 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 by the board at the start of the relevant year;
and
As a result of these concerns over this future uncapped
liability the board requested the Remuneration Committee
to conduct a detailed analysis of what could be the potential
payout to the Investment Adviser (and subsequently to its
preference shareholders, who comprise the Executive
Directors and other members of senior management of the
Company) in the future should the LTF’s related conditions
be met and what would be a reasonable and fair value to
terminate the Plan today in order to prevent a potentially
much bigger liability to the Company in the future.
The Remuneration Committee, supported by international
expert remuneration consultants, conducted such detailed
analysis and has recommended to the board an appropriate
termination value for the LTF should the board decide to
terminate the LTF.
The board is currently in the process of further assessing
and analysing the proposal of the Remuneration Committee,
and since no final decision has been taken and implemented,
no accounting entries have been recorded in the current
financial year.
bruce buck
Remuneration Committee Chairman
27 March 2019
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PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
FINANCIAL
STATEMENTS
119
118
Consolidated statement of
comprehensive income
Consolidated statement of
financial position
Consolidated statement of changes
120
in equity
Consolidated statement of cash flows 121
122
Section i: Basis of preparation
124
Section ii: investment property
Section iii: Financial results
129
Section iV: Financial assets
136
and liabilities
Section V: Share capital and reserves 147
Section Vi: investment in subsidiaries,
joint ventures and related
disclosures
Section Vii: other disclosures
152
160
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117
PORTFOLIO REVIEW CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FoR THE YEAR EnDED 31 DECEmBER 2018
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEmBER 2018
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Revenue
operating expenses
Net operating income
Administrative expenses
Acquisition costs
Fair value gain on investment property
Bargain purchase gain on acquisition of subsidiaries
Share-based payment expense
Depreciation on other long-term assets
other expenses
other income
Foreign exchange loss
Gain from fair value of financial instruments
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
Note
2018
€’000
2017
€’000
7
8
9
3
24
16
192,801
(59,360)
133,441
(15,253)
(1,182)
34,088
251
(509)
(398)
(4,332)
330
(1,214)
5,463
77,866
(26,772)
51,094
(10,231)
(10,809)
6,727
28,897
(143)
(150)
(4,091)
5
(317)
–
17,244
9,888
150,685
60,982
10
(41,727)
3,289
(38,465)
1,447
(38,438)
(37,018)
28
3,095
2,188
115,342
26,152
11
(15,425)
(2,405)
99,917
23,747
–
–
99,917
23,747
80,263
19,654
24,426
(679)
30
Cents
Cents
12
12
60.67
60.57
26.40
26.04
ASSETS
Non-current assets
investment property
Goodwill
Advances for investment property
investments in joint-ventures
Equity investments
other long-term assets
other receivables
Prepayments
Available for sale financial assets
Financial assets at fair value through profit or loss
long-term restricted cash
Current assets
Debentures
Available for sale financial assets
Financial assets at fair value through profit or loss
Trade and other receivables
Contract assets
Guarantees retained by tenants
income tax receivable
Prepayments
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Total equity
issued share capital
Treasury shares
Share based payment reserve
Retained earnings
Equity attributable to equity holders of the Company
non-controlling interest
Non-current liabilities
interest-bearing loans and borrowings
Deferred tax liability
Guarantees retained from contractors
Deposits from tenants
Provision for tenant lease incentives
Trade and other payables
Current liabilities
interest-bearing loans and borrowings
Guarantees retained from contractors
Provision for tenant lease incentives
Trade and other payables
Contract liability
other current financial liabilities
Deposits from tenants
Dividends payable
income tax payable
Total equity and liabilities
nAV per share
Diluted nAV per share
Note
2018
€’000
2017
€’000
3
27
5
28
17
18
16
16
19
16
16
18
33
19
2,390,994
12,349
4,209
38,316
8,837
1,035
–
1,472
–
2,829
–
1,792,414
12,349
3,355
21,939
–
689
416
1,578
5,897
–
2,958
2,460,041
1,841,595
–
–
12,878
25,281
3,937
11
395
4,929
229,527
18,389
4,346
–
22,419
–
304
295
325
273,272
276,958
319,350
2,736,999
2,160,945
21
24.4
24
897,314
(842)
2,117
186,326
894,509
(270)
2,240
172,405
1,084,915
1,068,884
30
212,407
67,572
1,297,322
1,136,456
14
11
3.1
15
14
3.1
15
33
20
30
22
22
1,235,106
106,978
693
13,754
780
694
834,044
99,574
2,616
8,931
1,509
–
1,358,005
946,674
23,965
3,353
1,211
32,956
1,401
2,084
2,241
10,731
3,730
81,672
36,360
1,057
859
34,776
–
2,638
1,256
–
869
77,815
2,736,999
2,160,945
€
8.19
8.18
€
8.09
8.07
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119
The financial statements were approved by the board of Directors on 27 March 2019 and were signed on its behalf by:
John whittle
Director
PORTFOLIO REVIEW CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FoR THE YEAR EnDED 31 DECEmBER 2018
CONSOLIDATED STATEMENT OF CASH FLOwS
FoR THE YEAR EnDED 31 DECEmBER 2018
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Equity attributable to equity holders of the Company
Share-
based
payment
reserve
€’000
Retained
earnings
€’000
Non-
controlling
interest
€’000
Total
€’000
As at 1 January 2017
Shares issued for cash
Transaction costs on issuance
of shares
Transaction costs on issue of
shares settled in shares
Fair value of options 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 dividends paid by
the Company
Acquisition of own shares
Shares granted under the
subsidiaries’ employees share
award plan
Shares issued to the Executive
Directors and other senior
management employees
Shares vested under the
subsidiaries’ employees share
award plan
Acquisition through business
acquisition
Acquisition of non-controlling
interest for cash
Profit for the year
Note
Issued
share
capital
€’000
538,114
340,000
(2,271)
8,584
–
8,950
1,132
–
–
–
–
–
–
–
–
Treasury
shares
€’000
–
–
–
–
–
–
–
–
(428)
–
–
158
–
–
–
As at 31 December 2017
894,509
(270)
Shares issued to the Executive
Directors for vested warrants
Transaction costs on issuance
of shares
Shares issued to the Executive
Directors and other senior
management employees
interim dividends paid by the
Company
interim dividends declared by
the subsidiary to non-
controlling interest holders
Shares issued under the
24.1
153
21
(40)
24.2
1,874
23
30
–
–
–
–
–
–
–
subsidiaries’ employees share
award plan
24.4
Share based payment expense 24.4,24.2
Shares vested under the
818
–
(818)
–
subsidiaries’ employees share
award plan
Acquisition of non-controlling
interest for cash
Change in non-controlling
interest arising from shares
issue in subsidiary
Shares issue in subsidiary
Profit for the year
24.4
30
30
30
–
–
–
–
–
246
–
–
–
–
As at 31 December 2018
897,314
(842)
Unpaid
share
capital
€’000
8,584
–
–
(8,584)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
equity
€’000
715,394
340,000
(2,271)
–
17
8,775
–
(19,933)
(428)
126
1,423
–
–
–
–
–
–
–
–
–
–
–
–
–
2,139
166,557
715,394
–
–
–
17
(175)
(1,132)
–
–
–
–
–
–
340,000
(2,271)
–
17
8,775
–
–
–
(19,933)
–
(19,933)
(428)
–
–
–
–
126
1,423
–
–
126
1,423
(158)
–
–
–
77,306
77,306
1,355
24,426
1,355
24,426
(9,055)
(679)
(7,700)
23,747
2,240
172,405 1,068,884
67,572 1,136,456
(3)
–
(1,874)
–
–
–
2,000
(246)
–
–
–
–
–
–
–
150
(40)
–
(64,870)
(64,870)
–
–
–
–
150
(40)
–
(64,870)
–
–
–
–
–
(14,229)
(14,229)
–
2,000
–
–
–
–
–
2,000
–
279
279
(9,319)
(9,040)
(1,102)
(649)
80,263
(1,102)
(649)
80,263
1,102
147,627
19,654
–
146,978
99,917
2,117
186,326 1,084,915
212,407 1,297,322
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
Share-based payment expense
Depreciation on other long-term assets
net movement in provision for doubtful debts
Foreign exchange loss
Gain from fair valuation of financial instrument
Share of profit of joint ventures
net financing costs
Operating profit before changes in working capital
increase in trade and other receivables
Decrease in trade and other payables
interest paid
interest received
income tax paid
Cash flows from operating activities
Investing activities
Expenditure on investment property completed and under development
Payments for land acquisitions
Payments for acquisition of investment property
Payment for acquisition of subsidiaries less cash acquired
Proceeds from non-controlling interest holders in subsidiary's share capital
Payments for the acquisition of non-controlling interest
investment in unquoted equity shares
Proceeds from sale of investment properties
investment in available for sale financial assets
investment in and loans given to joint ventures
Repayment of loans from 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 borrowings
Repayment of interest-bearing loans and borrowings
Payment of interim dividends by the Company
Payment of interim dividends to non-controlling interest by the subsidiary
Payment of loan arrangement fees and other financing costs
Change in restricted cash reserve
Cash flows from financing activities
Net (decrease)/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 (2017: €2.3 million) cash reserve, see note 19.
Note
3
24.4
20
16
28
2018
€’000
2017
€’000
115,342
26,152
(34,088)
(251)
2,701
509
398
1,087
1,214
(5,463)
(3,095)
38,438
116,792
(11,179)
(1,239)
(21,161)
2,282
(5,420)
(6,727)
(28,897)
3,807
143
150
129
317
–
(2,188)
37,018
29,904
(3,027)
(3,010)
(13,352)
170
(614)
80,075
10,071
30
30
17
(51,392)
(15,500)
26 (481,876)
–
146,978
(9,040)
(8,740)
6,736
–
(26,208)
12,875
(741)
28
28
(50,076)
–
–
(317,653)
–
(7,700)
–
10,392
(3,464)
(19,360)
–
(117)
(426,908)
(387,978)
150
(40)
–
648,711
(270,700)
(64,870)
(3,498)
(9,623)
2,958
348,775
(3,896)
(428)
548,989
(430,213)
(19,933)
–
(15,702)
2,971
303,088
430,563
(43,745)
52,656
271,022
218,366
227,277
271,022
24.1
21
23
30
19
19
19
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121
PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
2. Critical Accounting Judgements, Estimates and Assumptions
The preparation of financial statements in conformity with IFRS requires management to make certain judgements,
estimates and assumptions that affect reported amounts of revenue, expenses, assets and liabilities, and the
accompanying disclosures and the disclosures of contingent liabilities.
Selection of Functional Currency
The Company and its subsidiaries used their judgement based on the criteria outlined in IAS 21 ‘The Effects of Changes
in Foreign Exchanges Rates’ and determined that the functional currency of all the entities is the EUR. In determining the
functional currency consideration is given to the denomination of the major cash flows of the entity. e.g. revenues
and financing.
On 6 December 2017, the Group acquired the controlling shareholding in Globalworth Poland Real Estate N.V., (GPRE or
GPRE Group or acquiree). Although until the acquisition date GPRE prepared its financial statements with Zloty ('PLN') as
the 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 considered Euro as the functional currency of GPRE since the acquisition date of 6 December
2017.
As a consequence, the Company uses the Euro (€) as the functional currency, rather than the local currency ('RON') for the
subsidiaries incorporated in Romania, Zloty ('PLN') for the subsidiaries in Poland and Pounds Sterling (‘GbP’) for the
Company and the subsidiary incorporated in Guernsey.
Further additional critical accounting judgements, estimates and assumptions are disclosed in the following notes to the
consolidated 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;
¡ Equity investments, see note 17;
¡ Financial assets at fair value through profit or loss, see note 16;
¡ Trade and other receivables, see note 18;
¡ Performance Incentive Scheme, see note 24.3;
¡ Subsidiaries acquisitions, see note 26;
¡ Goodwill, see note 27;
¡ Investment in Joint venture, see note 28; and
¡ Investment in Subsidiaries, see note 29.
NOTES TO THE FINANCIAL STATEMENTS
SECTion i: BASiS oF PREPARATion
This section contains the Group’s significant accounting policies that relate to the consolidated 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’ or ‘Globalworth’) is a company with liability limited by shares
and incorporated in Guernsey on 14 February 2013, with registered number 56250. The registered office of the Company is
at Ground Floor, Dorey Court, Admiral Park, St Peter Port, Guernsey GY1 2HT. Globalworth, being a real estate Company,
has had its ordinary shares admitted to trading on AIM (Alternative Investment Market of the London Stock Exchange)
under the ticker “GwI” since 2013. The Company’s Eurobonds have been admitted to trading on the Official List of the Irish
Stock Exchange and the bucharest Stock Exchange since 2017. The Group’s principal activities and nature of its
operations are set out on pages 2 to 49, 82 to 89 and 178 of the Annual Report.
basis of Preparation and Compliance
These consolidated financial statements have been prepared in conformity with the International Financial Reporting
Standards (‘IFRS’), as adopted by the European Union (‘EU’), give a true and fair view of the state of affairs at 31
December 2018 and of the profit or loss for the year then ended, and are in compliance with the Companies (Guernsey)
Law 2008, as amended.
These consolidated financial statements (‘financial statements’) have been prepared on a historical cost basis, except for
investment property, financial assets at fair value through other comprehensive income and financial assets at fair value
through profit or loss 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 2018. 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.
These financial statements are prepared on a going concern basis. The Directors believe that it is appropriate to adopt the
going concern basis in preparing the financial statements. The Directors based their assessment on the Group’s detailed
cash flow projections for the period up to 30 June 2020. 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 2020, 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.
basis of Consolidation
These consolidated financial statements comprise the financial statements of the Company and its subsidiaries (‘the
Group’) as of and for the year ended 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 interest represents 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 functional currency of the Company and its subsidiaries’ are retranslated at the rates of exchange prevailing on
the statement of financial position date. Gains and losses on translation are taken to profit and loss. Non-monetary items
that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of
the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange
rates at the date when the fair value was determined.
122
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123
PORTFOLIO REVIEW NOTES TO THE FINANCIAL STATEMENTS
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 82 to 89 of the
Annual Report
3. Investment Property
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
Acquisition of investment property
land acquisition
Transfer to investment property under development
Subsequent expenditure and net lease incentive movement
other operating lease commitment
Capitalised borrowing costs
Transfer to completed investment property
Disposal during the year
Fair value movement on investment property
Note
26
Completed
investment
property
€’000
891,722
767,190
15,323
(1,003)
18
(13,614)
(3,401)
56,129
Investment
property
under
development
€’000
Land bank
for further
development
€’000
Total
€’000
71,120
18,050
980,892
–
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
507,474
–
–
24,972
(378)
–
55,700
(8,608)
23,170
–
–
14,351
23,599
–
411
(55,700)
–
7,689
–
15,500
(14,351)
1,522
–
–
–
–
3,229
507,474
15,500
–
50,093
(378)
411
–
(8,608)
34,088
31 December 2018
2,314,694
44,700
31,600
2,390,994
Policy
Investment property comprises completed property, property under construction that is held to earn rentals or for capital
appreciation or both, and land bank for further development. Investment properties are initially measured at cost, including
transaction costs. Transaction costs include transfer taxes and professional fees for legal services to bring the property to
the condition necessary for it to be capable of operating.
After initial recognition, investment property is carried at fair value. Fair value is based on valuation methods such as
discounted cash flow projections and recent market 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.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
3. Investment Property continued
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.
Judgements
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 the
business, then it is classified as inventory property.
Disposal of investment property not in the ordinary course of business
The Group enters into contracts with customers to sell properties that are complete. The sale of completed property is
generally expected to be the only performance obligation and the Group has determined that it will be satisfied at the point
in time when control transfers. For unconditional exchange of contracts, this is generally expected to be when legal title
transfers to the customer. For conditional exchanges, this is expected to be when all significant conditions are satisfied.
The determination of transfer of control for both unconditional and conditional exchanges were not affected on the
transition to IFRS 15 from IAS 18 at 1 January 2018.
The recognition and measurement requirements in IFRS 15 are applicable for determining the timing of derecognition and
the measurement of consideration (including applying the requirements for variable consideration) when determining any
gains or losses on disposal of non-financial assets when that disposal is not in the ordinary course of business. The Group
has determined that no changes are needed on transition to IFRS 15 for past disposals of investment properties previously
held for rental income in the ordinary course of business.
3.1 Other operating lease commitment
Other operating lease commitment of €1.9 million (2017: €2.3 million) as of 31 December 2018 (a similar corresponding
amount was recorded as provisions for tenant lease incentives under current and non-current liabilities) 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 at fair value investment properties (non-financial assets), equity investments (through other
comprehensive income) and financial assets at fair value through profit or loss at fair value (recurring) at each statement of
financial position date. 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.
Further information on financial assets such as equity investments and financial assets measured at fair value through profit
and loss at fair value can be found in notes 13, 16 and 17.
Investment Property Measured at Fair Value
The Group’s investment property portfolio for Romania was valued by Colliers Valuation and Advisory SRL, CbAR Research
& Valuation Advisors SRL, Cushman & wakefield LLP and for Poland by Knight Frank Sp. z o.o. and CbRE Sp. z o.o.,
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.
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125
PORTFOLIO REVIEW NOTES TO THE FINANCIAL STATEMENTS ConTinuED
SECTion ii: inVESTmEnT PRoPERTY
4. Fair Value Measurement and Related Estimates and Judgements continued
Our Property Valuation Approach and Process
The Group’s investment department includes a team that reviews twice in a financial year the valuations performed by the
independent valuers for financial reporting purposes. For each independent valuation performed, the investment team
along with the finance team:
¡ verifies all major inputs to the independent valuation report;
¡ assesses property valuation movements when compared to the initial valuation report at acquisition or latest period end
valuation report; and
¡ holds discussions with the independent valuer.
The fair value hierarchy levels are specified in accordance with IFRS 13 Fair Value Measurement. Some of the inputs to the
valuations are defined as “unobservable” by IFRS 13 and these are analysed in the tables below. Any change in valuation
technique or fair value hierarchy (between Level 1, Level 2 and Level 3) is analysed at each reporting date or as of the date
of the event or variation in the circumstances that caused the change. As of 31 December 2018 (2017: same) the values of
all investment properties were classified as Level 3 fair value hierarchy under IFRS 13 and there were no transfers from or
to Level 3 from Level 1 and Level 2.
Valuation Techniques, Key Inputs and Underlying Management’s Estimations and Assumptions
Property valuations are inherently subjective as they are made on the basis of assumptions made by the valuer.
Valuation techniques comprise the income approach (such as discounted cash flows and cash flow capitalisation), 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.
Key information about fair value measurements, valuation technique and significant unobservable inputs (Level 3) used in
arriving at the fair value under IFRS 13 are disclosed below:
Carrying value
2018
€’000
2017
€’000
Valuation
technique
Country
Input
2018
2017
Range
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
4. Fair Value Measurement and Related Estimates and Judgements continued
All classes 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 €34.1 million (2017: €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 2018 and 2017, the
independent valuation experts used their market knowledge and professional judgement and did not rely solely on
comparable historical transactions. In these circumstances, there was a greater degree of uncertainty in estimating the
market values of investment properties than would have existed in a more active market.
Other Disclosures Related to Investment Property
Interest-bearing loans and borrowings are secured on investment property, see note 14 for details.
The Company capitalised borrowing costs in the value of investment property, amounting to €0.4 million (2017: €0.16 million),
using a capitalisation rate of 3.45% (2017: 3.45%).
Sensitivity Analysis on Significant Inputs
The assumptions on which the Property Valuation Reports have been based include, but are not limited to, rental value per
sqm, discount rate, exit yield, cost to complete, comparable market transactions for land bank for further development,
tenant profile for the rented properties, and the present condition of the properties. These assumptions are market
standard and in line with the International Valuation Standards (‘IVS’). Generally, a change in the assumption made for the
rental value (per sqm per annum) is accompanied by a similar change in the rent growth per annum and discount rate (and
exit yield) and an opposite change in the other inputs.
A quantitative sensitivity analysis, in isolation, of the most sensitive inputs used in the independent valuations performed,
as of the statement of financial position date, are set out below:
Investment
Property
– Completed
€0.5 change in rental
value per month, per
sqm1
25 bps change in
market yield
5% change
in Capex
€50 change in sales
prices per sqm2
2.5% change in vacancy
in Perpetuity3
Year
Country
Increase
€’000
Decrease
€’000
Increase
€’000
Decrease
€’000
Increase
€’000
Decrease
€’000
Increase
€’000
Decrease
€’000
Increase
€’000
Decrease
€’000
2018
Poland 30,680 (30,380) (50,280) 54,550
2018 Romania 29,300 (29,300) (28,000) 30,000
2017
Poland 16,148 (16,184) (26,128) 28,237
2017 Romania 39,820 (40,020) (22,530) 23,870
–
–
–
–
–
–
–
–
–
1,685
–
1,931
–
(1,687)
n.a
(9,700)
n.a
6,500
–
n.a
(1,930) (17,450) 17,720
n.a
Class of property
Completed
investment
property
investment
property under
development
land bank –
for further
development
1,216,790
680,130
Discounted
cash flows
Poland
1,029,390
955,495
income approach Romania
2,246,180
1,635,625
68,514
76,739
comparison Romania
Sales
2,314,694
1,712,364
44,700
54,350
Residual
method Romania
25,200
–
Residual
method Romania
Sales
Rental
value (sqm)
Discount
rate
Exit yield
Rental
value (sqm)
Discount
rate
Exit yield
Sales
value per
net surface
(sqm)
Rental
value (sqm)
Exit yield
Capex (€m)
Rental
value (sqm)
Exit yield
Sales
value (sqm)
€11.5-€22
€12-€28
4.84%-10.32% 5.85%-8.58%
5.37%-8.75% 5.58%-8.58%
€2.82-€44.64
€2.77-€65
7.50%-9.50% 7.20%-9.20%
6.25%-8.50% 6.65%-8.75%
– Under
development
– Further
development
2018
Poland
2018 Romania
2017
Poland
2017 Romania
2018
Poland
2018 Romania
2017
Poland
2017 Romania
–
4,900
–
3,280
–
1,800
–
–
–
(4,800)
–
(4,200)
–
(3,370)
–
(3,120)
–
(1,900)
–
(2,400)
–
–
–
–
–
4,500
–
3,230
–
2,500
–
–
–
(3,500)
–
(2,880)
–
(2,600)
–
–
–
3,600
–
2,880
–
2,600
–
–
–
–
–
–
–
–
–
–
–
(200)
–
–
–
(1,900)
–
1,950
–
1,100
–
1,150
–
(1,000)
–
(1,330)
–
–
–
–
–
–
–
–
1. The rental value per month per sqm sensitivity analysis for one industrial property was based on €0.25 (2017: €0.5).
2. The sales price per sqm sensitivity analysis for one industrial property was based on €1.5.
3. The vacancy in perpetuity sensitivity analysis is not followed for the Polish properties portfolio as it is not considered a significant valuation variable.
€1,867
€1,852
5. Advances for Investment Property
Advances for land and other property acquisitions
Advances to contractors for investment properties under development
2018
€’000
2,000
2,209
4,209
2017
€’000
2,000
1,355
3,355
€4.00-€15
€3.33-€17.00
7.00%-8.50% 7.25%-8.75%
€33.96
€78.26
€14-€20
7.00%-7.25%
–
–
€24 €1,819-€1,896
TOTAL
2,390,994
1,792,414
6,400
25,700
comparison Romania
126
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127
PORTFOLIO REVIEW
NOTES TO THE FINANCIAL STATEMENTS ConTinuED
SECTion ii: inVESTmEnT PRoPERTY
SECTion iii: FinAnCiAl RESulTS
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
6. Commitments
Commitments for Investment Property Under Construction
As at 31 December 2018 the Group had agreed construction contracts with third parties and is consequently committed to
future capital expenditure in respect of completed investment property and fit-out works for tenants of €11.0 million (2017:
€10.7 million), as well as investment property under construction of €34.6 million (2017: €13.6 million).
The Group’s joint venture was committed for the construction of investment property for the amount of €2.1 million (2017:
€37.2 million) at 31 December 2018.
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 and such lease agreements fall within the scope of IAS 17; see note 7 for policies on revenue recognition
for properties under operating leases.
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 (2017: 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
2018
€’000
148,865
393,813
130,825
673,503
2017
€’000
117,290
366,182
126,849
610,321
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 50 to 55 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
7.1 Rental Income
For investment properties held primarily to earn rental income, the Group enters as a lessor into lease agreements that fall
within the scope of IAS 17. 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.
7.2) Revenue from contract with customers
7.2 a) Service Charge Income
The lease agreements include certain services offered to tenants comprising the overall property management, including
common area maintenance services as well as other administrative and support services. The Group has determined that
these services constitute distinct non-lease components (transferred separately from the right to use the underlying asset)
and are within the scope of IFRS 15. These services are specified in the lease agreements and separately invoiced.
The Group has concluded that these services represent a series of daily services that are satisfied over time and apply a
time-elapsed measure of progress. The consideration charged to tenants for these services includes fees charged based
on the area occupied by the tenant and reimbursement of certain expenses incurred. The Group has determined that this
variable consideration generally relates to this non-lease component and that allocating it over the period of service meets
the variable consideration allocation criteria under IFRS 15. The Group has identified a few lease agreements with capped
service charge which required the reclassification of €0.8 million from the rental revenues to service charge revenue
during 2018.
7.2.b) Fit-out services income
For contracts relating to fit-out services, the Group is responsible for the overall management of the project and identifies
various goods and services to be provided, including architectural work, procurement of materials, site preparation, framing
and plastering, mechanical and electrical work, installation of fixtures and finishing work. In such contracts, the Group has
determined that the goods and services are not distinct and has accounted for them as a single performance obligation.
In prior year, the revenue from rendering fit-out services was recognised by reference to the stage of completion (i.e. over
time instead of a point-in-time). Under IFRS 15, the Group continued to recognise revenue over time because it expects
that control will transfer over time. In certain fit-out contracts, its performance creates an asset that the tenant controls as
the asset is created. In other cases, its performance does not create an asset with alternative use to the Group and the
Group has concluded that it has an enforceable right to payment for performance completed to date.
Consistent with prior year policy, the Group has measured the stage of completion (i.e. performance measurement over
time) for the revenue recognition from distinctive fit-out project using a cost input method, by reference to the costs
incurred to date on a project for the satisfaction of a performance obligation relative to the total budgeted costs of the
project to the completion.
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129
PORTFOLIO REVIEW NOTES TO THE FINANCIAL STATEMENTS ConTinuED
SECTion iii: FinAnCiAl RESulTS
7. Revenue continued
7.2.c) Rendering of Services
Revenue from asset management fees, marketing and other income which are recognised at the time the service is
provided.
Gross Rent
Adjustment for lease incentives
Rental income
Revenue from contracts with customers
Service charge income
Fit-out services income
Asset management fees
marketing and other income
2018
€’000
2017
€’000
144,634
59,055
(7,006)
(5,199)
137,628
53,856
47,438
6,717
300
718
19,107
4,616
250
37
55,173
24,010
192,801
77,866
The total contingent rents and surrender premiums recognised as rental income during the year amounted to €0.6 million
(2017: €0.8 million) and €0.3 million (2017: €0.3 million), respectively. On 21 December 2018 the Group signed an
agreement for the settlement of Master lease and NOI guarantee agreement related to some properties in Poland which
were acquired as part of GPRE acquisition in 2017. The Group recognised in the current year's income statement an
amount of €11.5 million for rental guarantees and €10.0 million for NOI guarantees as compensation for early termination.
Principal rather than agent
The Group arranges for third parties to provide certain services to the tenants either as part of service charges or fit-out
services. Under IAS 18, the Group concluded it was the principal because it is primarily responsible for fulfilling the promise
to perform the specific services and the Group bears all risk (e.g. credit risk, inventory risk on these transactions as it is
obliged to pay the service provider even if the customer defaults on a payment). IFRS 15 requires assessment of whether
the Group controls a specified good or service before it is transferred to the customer. The Group has determined that it
controls the service before it is provided to the tenant and, hence, is principal rather than agent in these contracts. As a
result, similar to prior year, 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, see note 7.
b) Works Carried Out on Properties
works carried out which are the responsibility of the building’s owner and which do not add any extra functionality to, or
enhance significantly, the standard of comfort of the building are considered as current expenditure for the period and
recorded in the income statement as expenses.
Property management, utilities and insurance
Property maintenance costs and other non-recoverable costs
Property expenses arising from investment property that generate rental income
Fit-out services costs
2018
€’000
52,249
1,398
2017
€’000
21,927
850
53,647
22,777
5,713
3,995
59,360
26,772
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
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 as
“Acquisition cost”.
Directors’ emoluments (pages 113-114)1
Salaries and wages1
Accounting, secretarial and administration costs
legal and other advisory services
Audit and non-audit services page (108)
Corporate social responsibility costs
Travel and accommodation
marketing and advertising services
Post, telecommunication and office supplies
Stock exchange expenses
2018
€’000
2,734
5,371
2,562
912
1,349
816
364
270
492
383
2017
€’000
2,779
4,003
483
458
1,003
514
184
224
166
417
15,253
10,231
1. Costs of €1 million (2017: €0.5 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, €0.9 million (2017: €0.5 million) was capitalised
as debt issue costs. During the year, the Group contributed €0.04 million (2017: €0.6 million) and €0.01 million (2017: €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 Fixed rate Bonds
Debt cost amortisation and other finance costs
other financial expenses
Bank charges
2018
€’000
5,468
27,806
7,715
39
699
2017
€’000
11,367
8,427
17,683
237
751
41,727
38,465
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.
130
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131
PORTFOLIO REVIEW NOTES TO THE FINANCIAL STATEMENTS ConTinuED
SECTion iii: FinAnCiAl RESulTS
11. Taxation continued
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
2018
€’000
8,021
7,404
15,425
2017
€’000
870
1,535
2,405
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 €8.0 million (2017: €0.9 million) represents tax charges on profit arising in the subsidiaries located in Romania,
Poland and Cyprus (2017: Romania, Poland 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 €1.2 million for taxpayers starting a new business for their first tax year in operation), 26.01% (15% tax rate
for small entities if taxable profit does not exceed €25,000), 16%, 25% (20% for tax on profit up to €0.2 million), and
12.5%, respectively.
In 2018 the Polish tax authorities introduced the minimum tax applied to income from ownership of certain high-value fixed
assets at a rate of 0.035 percent per month of the initial value of the asset that exceeds PLN 10.0 million (€2.33 million).
The minimum tax may be deducted from the advance corporate income tax and annual CIT liability in a year for which
minimum tax is due. The tax is applied only to leased buildings while no tax applies on vacant buildings or on vacant space
in partially occupied buildings.
The Group’s subsidiaries registered in Luxembourg, Cyprus and the Netherlands 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 tax exempt under certain conditions in Cyprus, the Netherlands and Luxembourg,
respectively; on the other hand, 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 has had a corporate
income tax audit in the last five years while in Poland some entities are currently under tax audits for the fiscal year 2017.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
11. Taxation continued
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 2018 and the year ended 31 December 2017 is as follows:
Profit before tax
At Company’s income tax rate 0% (2017: 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 the netherlands
– 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 in 2017
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
2018
€’000
115,342
–
2017
€’000
26,152
–
1,180
9,056
4,966
4,090
577
–
6,264
(1,652)
15,425
13.4%
7.0%
120
(324)
2,492
(2,816)
748
–
2
1,859
2,405
9.2%
3.0%
Consolidated statement
of financial position
Consolidated statement
of comprehensive income
2018
€’000
2017
€’000
2018
€’000
2017
€’000
–
–
–
128,639
(11,227)
54
(7)
532
(11,013)
27,464
(27,464)
(5,087)
32,551
82,075
1,678
82
(7)
(428)
(11,290)
–
–
46,564
(12,905)
(28)
–
960
277
–
–
–
4,954
1,966
(229)
–
144
(5,300)
106,978
99,574
7,404
1,535
The Group has unused assessed tax losses carried forward of €80.3 million (2017: €103.1 million) and €24 million (2017:
€76.7 million) 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 €11.0 million (2017: €12.9 million) in
Romania and Poland out of the total available deferred tax assets of €17.2 million (2017: €31.1 million) calculated at the
corporate income tax rate of 16% in Romania and 19% (15% for small entities) in Poland, respectively.
Expiry year
Available deferred tax assets (€m)
2019
0.4
2020
1.5
2021
3.0
2022
4.5
2023
2.8
2024
4.9
2025
0.1
TOTAL
17.2
There are also temporary non-deductible interest expenses and net foreign exchange losses of €15.3 million (2017: €nil)
related to intercompany and bank loans. Such amounts can be carried forward indefinitely, and each year an amount up to
30% of EbITDA would become tax deductible, for which no deferred tax asset was recorded.
132
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133
PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
12. Earnings Per Share continued
IFRS Earnings Per Share
Profit attributable to equity holders of the Company for basic and diluted earnings per share
80,263
24,426
2018
€’000
2017
€’000
IFRS earnings per share
– Basic
– Diluted
Subsequent to 31 December 2018, 3,135,459 shares were issued.
EPRA Earnings per share
Cents
60.67
60.57
Cents
26.40
26.04
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)
Changes in fair value of financial instruments and associated close-out costs
Fair value gain on investment property
losses on disposal of investment properties
Changes in value of financial assets at fair value through profit or loss
Acquisition costs
Bargain purchase gain on acquisition of subsidiaries
Tax credit relating to losses on disposals
Deferred tax charge in respect of above adjustments
Adjustments in respect of joint ventures for above items
non-controlling interest in respect of the above
EPRA earnings attributable to equity holders of the Company
EPRA earnings per share
– Basic
– Diluted
2018
€’000
2017
€’000
80,263
298
(34,088)
2,701
(5,463)
1,182
(251)
(13)
17,501
(4,088)
2,853
60,895
24,426
15,247
(6,727)
3,807
–
10,809
(28,897)
(80)
1,218
(2,528)
(467)
16,808
Cents
Cents
46.03
45.95
18.17
17.92
NOTES TO THE FINANCIAL STATEMENTS ConTinuED
SECTion iii: FinAnCiAl RESulTS
11. Taxation continued
Judgements, Estimates and Assumptions Used for Assessed Tax Losses and Related Deferred Tax Assets
At each statement of financial position date, the Group assesses whether the realisation of future tax benefits is sufficiently
probable to recognise deferred tax assets. This assessment requires the exercise of judgement on the part of management
with respect to, among other things, benefits that could be realised from available tax strategies and future taxable income,
as well as other positive and negative factors. based on the above assessment performed at year end, the Group
derecognised €1.9 million (2017: recognised additional €5.3 million) deferred tax asset, representing derecognition of
€4.1 million mainly due to improved actual results and transformation of some subsidiaries in Romania in taxable profit
position and additional recognition of €2.2 million due to improved forecasts in the Polish subsidiaries.
The recorded amount of total deferred tax assets could be reduced if estimates of projected future taxable income and
benefits from available tax strategies are lowered, or if changes in current tax regulations are enacted that impose
restrictions on the timing or extent of the Group’s ability to utilise future tax benefits.
12. Earnings Per Share
The following table reflects the data used in the calculation of basic and diluted earnings per share and number of shares
used in the basic and diluted NAV and EPRA NAV per share:
2017
At the beginning of the year
July 2017
Aug 2017
Shares issued for:
– Subsidiaries’ Employee Share Award Plan (treasury shares)
– Subsidiaries’ Employee Share Award Plan (vested and
exercised)
Dec 2017
Dec 2017
Dec 2017
April-Dec 2017
– cash
– transaction costs on issue of shares
– Executive share option plan (vested and exercised)
– the Executive Directors and other senior management
employees
2017
Shares in issue at year end (basic)
Jan 2017
April 2017
Aug 2017
Dilutive effect of:
– transaction costs on issue of shares
– Shares issued for Executive share option plan
– Shares purchased for Subsidiaries’ Employee Share Award
nov 2017
– Shares issued to Executive share option plan (vested and
Plan (unvested)
nov 2017
Dec 2017
2017
Jan 2018
Jan 2018
April 2018
exercised)
– Share warrants vested but not exercised during the year
– Shares to be issued for Executive share option plan
Shares in issue at year end (diluted)
At the beginning of the year
– Executive share option plan (vested and exercised)
– Shares issued for executive share plan – shares released
subsequent to Dec 2017
Aug 2018
– Shares purchased for Subsidiaries’ Employee Share Award
Plan (vested)
Dec 2018
– Shares issued for Executive share option plan – transferred
2018
Shares in issue at year end (basic)
Jan 2018
mar 2018
Jun 2018
Dilutive effect of:
– Share warrants vested but not exercised during the year
– Shares issued for Executive share option plan
– Shares issued for Subsidiaries’ Employee Share Award Plan
(unvested)
Aug 2018
– Shares purchased for Subsidiaries’ Employee Share Award
Plan (vested)
Dec 2018
– Shares issued for Executive share option plan (vested and
Dec 2018
– Shares to be issued for Executive share option plan
exercised)
Note
Number of
shares
(000)
90,397
% of the
period
Weighted
average
(000)
90,397
(57)
48.4
(28)
21
38,857
1,073
1,755
137
132,183
–
69
17
–
50
165
132,484
132,183
30
98
33
114
39.8
5.2
2.5
2.5
38.0
97.5
69.8
39.8
8.8
11.3
–
99
74
38
4
8
2,028
27
43
52
92,527
1,046
48
7
154
6
–
93,788
132,183
30
73
13
5
132,458
132,304
20
47
48
–
–
126
100
87
51
60
96
–
20
41
24
20
109
–
24.1
24.2
24.4
24.2
24.4
24.4
24.2
24.2
2018
Shares in issue at year end (diluted)
132,699
132,518
134
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PORTFOLIO REVIEW NOTES TO THE FINANCIAL STATEMENTS ConTinuED
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 yearend.
13. 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.
From 1 January 2018 the Group has adopted IFRS 9 and classifies its financial assets in the two main measurement
categories, those to be measured subsequently at fair value (either through OCI or through profit or loss) and those to be
measured at amortised cost. Refer to note 33 for transitional effect on adoption of IFRS 9 from IAS 39. The classification of
the financial asset in either of the above categories depends on the Group’s business model for managing the financial
asset and the contractual terms of the cash flows. The Group reclassifies the financial instrument when and only when its
business model for managing those assets changes.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity
instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the
time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).
Under IFRS 9 transaction costs that are directly attributable to the acquisition of the financial asset are recognised in the
carrying amount at initial date in case of a financial asset not at fair value through profit or loss (FVPL). Transaction costs of
financial assets carried at FVPL are expensed in profit or loss.
A financial asset and a financial liability are 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, equity investments and financial assets at fair value through profit or loss.
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.
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits
to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial
assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards
of ownership
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. In prior year, long term restricted cash in held in separate
debt service reserve accounts for the obligation resulting from bank loans in Poland and was not available to the Group
for general purposes.
Other Financial assets at amortised costs
The Group classifies its financial assets as at amortised cost only if both of the following criteria are met:
¡ the asset is held within a business model whose objective is to collect the contractual cash flows, and
¡ the contractual terms give rise to cash flows that are solely payments of principal and interest.
Interest income from the financial assets is included in finance income using the effective interest rate method. Any gain or
loss arising on derecognition is recognised directly in profit or loss and presented in other gains or losses.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
13. Financial Instruments continued
Trade and Other Receivables
Trade receivables (being loans and receivables category in accordance with IAS 39 and financial assets measured under
IFRS 9 are amounts due from tenants for rent and services performed in the ordinary course of business. They are generally
due for settlement within 30 days and therefore are all classified as current. Trade receivables are recognised initially at the
amount of consideration under IFRS 15 that is unconditional unless they contain significant financing components, when
they are recognised at fair value. The Group holds the trade receivables with the objective to collect the contractual cash
flows and therefore measures them subsequently at amortised cost using the effective interest method.
Trade and other receivables, together with the associated provision if any, 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.
Equity investments through other comprehensive income
Financial assets at fair value through other comprehensive income (FVOCI) comprise equity investments which are not held
for trading and at initial recognition the Group, at its sole irrevocable option under IFRS 9, designates the equity investment
as financial assets at fair value through other comprehensive income. This classification was opted for strategic
investments for which the Group considers this category to be more relevant.
Under this option, qualifying dividends are recognised in profit or loss. Changes in fair value, net of deferred tax if any, are
recognised in other comprehensive income and will not be reclassified to profit and loss on future impairment or
derecognition.
Financial assets at fair value through profit or loss (formerly Available for Sale Financial Assets under IAS 39)
The above investments have been reclassified to financial assets at fair value through profit or loss on adoption of IFRS 9
Financial Instruments, see further details in note 33. Under IAS 39 which was applicable until 31 December 2017, the
available for sale assets were those non-derivative financial assets that were designated as available for sale or were not
classified as 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 financial assets at fair value through profit or loss (formerly Available for Sale Financial Assets under IAS 39), the
Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments
is impaired.
Impairment losses 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.
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. The impact of IFRS 9 on the financial liabilities at the transition date of 1 January 2018 has been disclosed in note
33.
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.
136
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PORTFOLIO REVIEW NOTES TO THE FINANCIAL STATEMENTS ConTinuED
SECTion iV: FinAnCiAl ASSETS AnD liABiliTiES
13. Financial Instruments continued
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.
14. 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 20.
Current
Current portion of secured loans and accrued interest
Accrued interest on unsecured fixed rate bonds
Sub-total
Non-current
Secured loans
unsecured fixed rate bonds
Sub-total
TOTAL
14.1 Key terms and conditions of outstanding debt:
Facility
Currency
Nominal interest rate
Maturity date
loan 16
loan 17
loan 25
loan 26
loan 27
loan 28
loan 29
loan 30
loan 31
loan 32
loan 33
loan 34
loan 35
loan 36
loan 37
loan 381
loan 40
Total
EuR
Ron
EuR
EuR
EuR
EuR
EuR
EuR
EuR
EuR
Pln
EuR
EuR
EuR
EuR
EuR
EuR
EuRiBoR 1 month+ margin
RoBoR 1 month+ margin
Fixed rate bond
EuRiBoR 3 months + margin
EuRiBoR 3 months + margin
EuRiBoR 3 months + margin
EuRiBoR 3 months + margin
EuRiBoR 3 months + margin
EuRiBoR 3 months + margin
nBP rate less social indicator
WiBoR 1 month + margin
EuRiBoR 1 month + margin
EuRiBoR 1 month + margin
EuRiBoR 3 months + margin
Fixed rate bond
Fixed rate & Floating rate EuRiBoR
3 months + margin
EuRiBoR 3 months + margin
Jun 2022
Apr 2019
June 2022
April 2019
march 2020
June 2018
January 2034
June 2018
July 2034
June 2034
February 2019
August 2026
June 2026
June 2027
march 2025
2018
€’000
2017
€’000
3,039
20,926
27,795
8,565
23,965
36,360
155,642
1,079,464
296,641
537,403
1,235,106
834,044
1,259,071
870,404
2018
2017
Face value
€’000
17,946
85
558,404
–
–
–
–
–
–
3,434
187
36,840
–
–
562,522
Carrying
value
€’000
17,946
85
548,120
–
–
–
–
–
–
2,535
187
36,782
–
–
552,271
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
–
1. Loan 38 was drawndown in two tranches – 95% of the facility bearing a fixed interest rate and 5% bearing a floating interest rate.
may 2025
April 2025
100,299
2,011
99,306
1,839
–
–
–
–
1,281,728 1,259,071
886,716
870,402
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
14. Interest-Bearing Loans and Borrowings continued
Unsecured Corporate bond
In June 2017, the Group issued a €550 million unsecured Eurobond (Loan 25). The five-year euro-denominated bond
matures on 20 June 2022 and carries a fixed interest rate of 2.875%.
In March 2018, the Group issued a €550 million unsecured Eurobond (Loan 37). The seven-year euro-denominated bond
matures on 29 March 2025 and carries a fixed interest rate of 3.0%. The net proceeds were used for refinancing existing
debt (Loans 26-31 and 35-36), acquisition of investment properties and general corporate purposes.
Secured facilities
In the second quarter of 2018 the Group has entered into new loan agreements (Loan 38). The new facility carries fixed
interest rates (95% of the facility amount) and partly floating interest rates (5% of the facility amount). The net proceeds
were used to fund the acquisition of investment property. Similarly, during the year the Company drawdown an amount of
€2 million (loan 40) from an existing revolving loan facility of €30 million from Erste Group bank AG (part of Erste bank
Group). The facility is secured on our TAP property. The bank loans are secured by investment properties with a carrying
value of €320.7 million at 31 December 2018 (2017: €796.0 million) and also carry pledges on rent receivable balances of
€4.02 million (2017: €9.6 million), tenant deposits of nil (2017: €6.1 million), VAT receivable balances of €0.9 million
(2017: €1.3 million) and a moveable charge on the bank accounts (see note 19).
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 years 2018 and 2017. Financial covenants mainly include the gross loan-to-value ratio
(“LTV”) with ranges from 60%-83%, 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 120%-300% and the secured leveraged ratio of
maximum value of 30%. 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 2018, the Group had undrawn borrowing facilities of €30.84 million
(2017: €32.7 million).
15. Trade and Other Payables
Current
Payable for property service charges
Payable to suppliers for properties under development
Consideration payable for business acquisition
Advances from customers
Deferred income
Deferred income for rent
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
Consideration payable for business acquisition
2018
€’000
2017
€’000
10,526
8,317
193
–
–
4,888
937
937
1,088
2,490
1,892
1,688
8,021
9,235
1,208
800
4,402
–
1,075
857
2,327
4,725
1,040
1,086
32,956
34,776
694
–
33,650
34,776
138
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SECTion iV: FinAnCiAl ASSETS AnD liABiliTiES
16. Financial assets at fair value through profit and loss
In prior year, the Group acquired the following financial instruments through the acquisition of a subsidiary, which had been
classified as available for sale financial assets under IAS 39 and subsequently as at fair value through profit and loss under
IFRS 9, see more detail in note 33.
As at 31 December 2018
(measured at fair value through profit or loss under IFRS 9)
Project name
Beethovena i
Beethovena ii
Browary Stage J
As at 31 December 2017
(available for sale under IAS 39)
Project name
Beethovena i
Beethovena ii
Browary Stage J
Interest rate
Project
completion date
Total
€’000
Long-term
€’000
Short-term
€’000
fixed
fixed
fixed
September 2019
September 2020
April 2019
3,608
2,829
9,270
15,707
–
2,829
–
2,829
3,608
–
9,270
12,878
Interest rate
Project
completion date
Total
€’000
Long-term
€’000
Short-term
€’000
fixed
fixed
fixed
march 2019
June 2019
December 2018
3,002
2,895
4,346
10,243
3,002
2,895
–
5,897
–
–
4,346
4,346
Right of First Offer Agreements ('ROFO')
The fair value of the 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 each ROFO project. As at
31 December, a gain of €5.5 million (2017: nil) from the fair valuation of the above financial instruments was recognised in
the statement of comprehensive income.
In 2017 prior to acquisition date, GPRE and its subsidiaries signed an agreement for the acquisition of 25% stakes in
ROFO projects, being developed by Echo Investment S.A. (“ROFO bonds”). Under the agreement, GPRE (the
“bondholder”) purchased 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) made by the Company under the ROFO Agreement amounts to €9.9 million.
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.
The final amount of interest will be adjusted based on the terms of the accompanied option agreement so that it reflects
the actual development profit realised on each of the projects. The ROFO bonds have been issued as unsecured bonds.
17. Equity investments
Policy
Financial assets at fair value through other comprehensive income (FVOCI) comprise equity investments which are not held
for trading, and at initial recognition the Group, at its sole irrevocable option under IFRS 9, designates the unquoted equity
investment as financial assets at fair value through other comprehensive income. Under this option, qualifying dividends
are recognised in profit or loss. Changes in fair value, net of deferred tax if any, are recognised in other comprehensive
income and will not be reclassified to profit and loss on future impairment or derecognition. This is a strategic investment
and the Group considers this classification to be more relevant. For further details see note 32.
Equity investments (unquoted)
2018
€’000
8,837
2017
€’000
–
On 27 June 2018, the Group entered into an agreement with Mindspace Ltd. by investing in Preferred A-2 class shares for
an amount of €8.6 million (US$10 million), receiving a 4.99% stake in Mindspace Ltd.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
17. Equity investments continued
Judgements and estimates
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques.
The fair value under these valuation techniques is classified as Level 3. The Group uses its judgement to select a variety of
methods (including external transactions with third parties to raise equity or convertible debt by the investee, enterprise
value using future cashflows, performance of investee, annual budget and future business plans) and make assumptions
that are mainly based on market conditions existing at the end of each reporting period.
At 31 December 2018, the Group assessed the fair value of its investments based on latest convertible debt raised by the
investee with third parties. based on analysis performed no fair value gain or loss was recognised in other comprehensive
income as there was no significant change in the valuer per share of the investee since the acquisition date and there were
no indicators of impairment.
18. Trade and Other Receivables
Current
Rent and service charge receivable
VAT and other taxes receivable
Consideration receivable from property acquisitions
Advances to suppliers for services
Advances to Directors
Sundry debtors
Non-current
VAT and other taxes receivable
2018
€’000
2017
€’000
14,050
7,653
2,523
382
12
661
15,316
5,683
290
92
–
1,038
25,281
22,419
–
416
25,281
22,835
Rent and Service Charges Receivable
Rent and service charges receivable are shown, in above table, net of an allowance for bad or doubtful debts. 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 20). For the terms and conditions for related party receivables, see note 32.
19. Cash and Cash Equivalents
Cash at bank and in hand
Short-term deposits
Cash and cash equivalents as per statement of cash flows
Guarantee deposits – cash reserve
Cash and cash equivalents as per statement of financial position
Long-term restricted cash balance
Note
2018
€’000
2017
€’000
99,087
128,190
227,277
2,250
158,773
112,249
271,022
2,250
229,527
273,272
–
2,958
14
Details of cash and cash equivalents denominated in foreign currencies are disclosed in note 20.
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 0.62% to nil (2017: -0.60% to nil) for EUR deposits, from nil to 3.16% (2017: nil to
0.25%) for RON deposits and from nil to 0.97% (2017: nil) for PLN deposits per annum. Cash at bank and in hand includes
restricted cash balances of €10.5 million (2017: €9.7 million) and short-term deposits includes restricted deposits of
€3.0 million (2017: €9.3 million).
20. Financial Risk Management – Objective and Policies
The Group is exposed to the following risks from its use of financial instruments:
¡ market risk (including currency risk, interest rate risk);
¡ credit risk; and
¡ liquidity risk.
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SECTion iV: FinAnCiAl ASSETS AnD liABiliTiES
20. Financial Risk Management – Objective and Policies continued
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 most of its 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
2018
Denominated
2017
denominated
ASSETS
Cash and cash equivalents
Trade and other receivables
Contract assets
income tax receivable
Total
LIABILITIES
interest-bearing loans and
borrowings
Trade and other payables
income tax payable
Guarantees from subcontractors
Deposits from tenants
Total
Net exposure
15,658
14,160
3,937
202
18,952
7,543
–
193
33,957
26,688
85
10,644
474
–
2,981
2,722
9,117
3,146
1,754
4,126
14,184
20,865
69
–
–
–
69
–
–
–
–
–
–
19,773
5,823
69
2
–
–
–
2
–
–
–
–
–
–
2
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
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 year-end for a 5% appreciation in the Euro against other currencies.
All amounts in €’000
Ron
Pln
GBP
uSD
2018
2017
Profit and
(loss)
(989)
(291)
(3)
–
Equity
(989)
(291)
(3)
–
Profit and
(loss)
(825)
26
1
–
Equity
(825)
26
1
–
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 flow risk is the risk that the interest
cost will fluctuate over time.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
20. Financial Risk Management – Objective and Policies continued
The Group’s interest rate risk principally arises from interest-bearing loans and borrowings. As at 31 December 2018, 5.1% (2017:
37.3%) of the total outstanding borrowings carried variable interest rates (including the 1 month and 3 months EURIbOR, National
bank Poland reference rate less social indicator and 1 month wIbOR as bases) which expose the Group to cash flow interest rate
risk. In order to minimise the cash flow interest rate risk, the Group hedged 27.9% (2017: 5.9%) 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 2018, 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 €0.9 million (2017: €9.3 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, 37 and 38 (2017: Loan 25) at fixed rates which constitute
94.9% (2017: 62.7%) of total debt portfolio. The facilities are payable in June 2022, March 2025 and May 2025 respectively.
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 2018, the fair value was lower by €8.3 million (2017: higher
with €33.7 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
Financial assets measured at fair value through profit or loss
Debentures
loan receivable from joint venture
Restricted cash long term
Trade receivables – net of provision
Contract assets
other receivables
Guarantees retained by tenants
VAT and other taxes receivable
income tax receivable
Cash and cash equivalents
Note
16
16
28
18
18
19
2018
€’000
2017
€’000
–
15,707
–
32,997
–
14,050
3,937
3,184
11
7,653
395
229,527
10,243
–
18,389
19,721
2,958
15,316
–
1,328
304
6,099
295
273,272
307,461
347,925
Financial assets at fair value through profit or loss
The Group places funds in financial instruments issued by the reputable real estate companies with high creditworthiness.
Contract Assets and Trade Receivables – Net of Provision
There is no significant concentration of credit risk with respect to trade receivables, as the Group has many large tenants,
a few of which are part of multinational groups, internationally dispersed, as disclosed in the subsection ‘Leasing review’
on pages 42 to 49 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 and Contract Assets
The Group’s trade receivables do not contain any financing component and mainly represent lease receivables.
Therefore, the Group adopted the simplified approach under IFRS 9 and measured the loss allowance based on a
provision matrix that is based on historical collection and default experience adjusted for forward looking factors in order
to estimate the provision on initial recognition and throughout the life of the receivables at an amount equal to lifetime ECL
(Expected Credit Losses). The assessment will be performed on a six-month basis and any change in original allowance
will be recorded as gain or loss in the income statement. The lifetime ECL allowance and specific loss allowance recorded
in the current year are classified as other expenses as the amounts were not material.
For individual trade receivables, the Group assesses when there is sufficient objective evidence to require the impairment.
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:
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143
PORTFOLIO REVIEW NOTES TO THE FINANCIAL STATEMENTS ConTinuED
SECTion iV: FinAnCiAl ASSETS AnD liABiliTiES
20. Financial Risk Management – Objective and Policies continued
opening balance
Provision for specific doubtful debts
Provision for impairment based on the simplified approach under iFRS 9
Reversal of provision for doubtful debts
utilised
Acquired through asset acquisitions
Acquired through business combination
Closing balance
Note
26
2018
€’000
3,321
612
500
(25)
(278)
416
–
4,546
2017
€’000
2,009
33
–
–
–
–
1,279
3,321
The analysis by credit quality of financial assets, cumulated for rent, service charge and property management,
is as follows:
2018 (€’000)
2017 (€’000)
Neither past
due nor
impaired
Past due but not impaired
<90 days
<120 days
<365 days
TOTAL
4,828
9,457
7,682
4,007
1,153
350
387
1,502
14,050
15,316
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. Consideration receivable from property acquisitions are not due yet.
Other Receivables
This balance relates to sundry debtors of €0.7 million (2017: €1.0 million) and consideration receivable from the seller of
€2.5 million (2017: €0.3 million). Management has made due consideration of the credit risk associated with these balances
resulting in no impairment being identified.
Corporate Income tax, 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+ (2017: A+) and short term credit rating of A-1 (2017: A-1) and
in Romania in local branches of reputable international banks with credit rating of bbb (2017: ba3) 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. Management has made due consideration of the credit
risk associated with these balances resulting in no impairment being identified.
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.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
20. 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
2018
<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
Provision for tenant lease incentives
Deposits from tenants
income tax payable
1,699
37,188
714,121
708,661 1,461,669 (202,598) 1,259,071
25,410
1,688
–
499
3,730
4,310
–
1,300
1,761
–
1,373
–
900
11,205
–
26
–
–
3,063
–
31,119
1,688
2,200
16,528
3,730
–
–
(209)
(533)
–
31,119
1,688
1,991
15,995
3,730
Total
33,026
44,559
727,599
711,750 1,516,934 (203,340) 1,313,594
All amounts in €’000
2017
<3 months
3 months–1
year
1-5 years
>5 years
Total
Difference
from
carrying
amount
Carrying
amount
Contractual payment
interest-bearing loans and borrowings
Trade payables and guarantee retained from
contracts
(excluding advances from customers)
other payables
Provision for tenant lease incentives
Deposits from tenants
income tax payable
17,779
27,856
768,883
201,494 1,016,012 (145,608)
870,404
7,188
1,435
–
332
869
17,810
–
923
390
–
6,626
–
923
5,063
–
537
–
879
4,603
–
32,161
1,435
2,725
10,388
869
–
–
(357)
(201)
–
32,161
1,435
2,368
10,187
869
Total
27,603
46,979
781,495
207,513 1,063,590 (146,166)
917,424
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 14)
other current financial liabilities
Debentures
Financial asset at fair value through profit or loss
Available for sale asset
Fair value hierarchy
Year
Carrying
amount
Level 1
Level 2
Level 3
TOTAL
2018 1,259,071 1,071,147
571,137
2017
870,404
–
–
179,606 1,250,753
899,326
328,189
2018
2017
2018
2017
2018
2017
2018
2017
2,084
2,638
–
18,390
15.706
–
–
10,243
–
–
–
–
–
–
–
–
2,084
2,638
–
–
–
–
–
–
–
–
–
18,390
15,706
–
–
10,243
2,084
2,638
–
18,390
15,706
–
–
10,243
144
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145
PORTFOLIO REVIEW NOTES TO THE FINANCIAL STATEMENTS
SECTion iV: FinAnCiAl ASSETS AnD liABiliTiES
SECTion V: SHARE CAPiTAl AnD RESERVES
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
20. Financial Risk Management – Objective and Policies continued
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 a
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 based on its quoted market price. The own non-performance risk at the statement of
financial position date was assessed to be insignificant.
Other current financial liabilities
Other current financial liabilities represent the mark-to-market value of an interest rate swap, obtained from the
counterparty financial institution, at €2.08 million (2017: €2.6 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 1 month EURIbOR at a notional amount of €18.15 million and is required to
pay a fixed rate of interest of 3.62% p.a. on the said notional amount in four quarterly instalments, with maturity date of
June 2022. The movement in fair value recognised in the income statement for the year was a financial income of
€0.5 million (2017: €1.0 million).
The Group assessed that the fair values of other financial assets and financial liabilities, such as trade and other
receivables, guarantees retained by tenants, cash and cash equivalents, income tax receivable and payables, trade and
other payables, guarantees retained from contractors and deposits from tenants, provision for leases incentives,
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.
Reconciliation of liabilities arising from financing activities in cash flows
Description
interest-bearing loans and borrowings (note 14)
other current financial liabilities
Description
Non-cash changes movement
2017
€’000
Net Cash
flows
€’000
870,404
2,638
347,227
–
Acquisition
€’000
–
(554)
Foreign
exchange
€’000
Debt cost
amortisation
€’000
2018
€’000
15
–
41,425 1,259,071
2,084
–
Non-cash changes movement
2016
€’000
Net Cash
flows
€’000
Acquisition
€’000
Foreign
exchange
€’000
Debt cost
amortisation
€’000
2017
€’000
interest-bearing loans and borrowings (note 14)
other current financial liabilities
414,235
3,574
118,776
–
330,475
(936)
(183)
–
7,101
–
870,404
2,638
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.
21. 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 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 the Executive share option plan
Treasury shares
2018
2017
Note
€’000
Number
(’000)
€’000
Number
(’000)
894,509
132,288
538,114
90,397
24.2
1,874
143
1,132
137
–
–
(40)
–
153
818
47
–
–
–
30
91
–
340,000
(2,271)
8,584
8,950
–
69
38,857
–
1,073
1,755
–
24.1
24.4
Balance at 31 December
897,314
132,599
894,509
132,288
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 directors see fit.
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. Financial Position Key Performance Measures
The net asset value ("NAV"), EPRA NAV and the numbers of shares used for the calculation of each key performance
measure on the financial position of the Group and the reconciliation between IFRS and EPRA measures are shown below.
net assets attributable to equity holders of the Company
NAV per share
Diluted NAV per share
Number of ordinary shares used for the calculation of:
nAV and diluted nAV per share
EPRA nAV per share
Note
2018
€’000
2017
€’000
1,084,915 1,068,884
8.19
8.18
8.09
8.07
Number
(’000)
Number
(’000)
12
12
132,458
132,699
132,183
132,484
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147
PORTFOLIO REVIEW
NOTES TO THE FINANCIAL STATEMENTS
SECTion V: SHARE CAPiTAl AnD RESERVES
22. Financial Position Key Performance Measures continued
EPRA Net Asset Value (‘EPRA NAV’) Per Share
net assets attributable to equity holders of the Company
Exclude:
Deferred tax liability on investment property
Fair value of interest rate swap instrument
Goodwill as a result of deferred tax
Adjustment in respect of the 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
10
2018
€’000
2017
€’000
1,084,915 1,068,884
128,639
2,084
(5,697)
1,341
(11,111)
112,092
2,638
(5,697)
533
(6,983)
1,200,171 1,171,467
€
9.04
€
8.84
23. 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.
2018
€’000
2017
€’000
Declared and paid during the year
interim cash dividends: 49 cents per share (2017: 22 cents per share)
64,870
19,933
On 3 January 2018, the 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, which was paid on 26 January 2018 to the eligible
shareholders.
On 11 July 2018, the board of Directors has approved the payment of second interim dividend in respect of the six-month
financial period ended 30 June 2018 of €0.27 per ordinary share, which was paid on 17 August 2018 to the eligible
shareholders. During 2018, the total dividends per ordinary share distributed amounted to €0.49 and there were no income
tax consequences related to the payment of these dividends by the Group to its shareholders.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
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 the market or non-vesting condition is satisfied, provided that all service conditions are satisfied.
The cost of equity-settled transactions is recognised in the 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, considering the terms
and conditions. The following table analyses the components of the share-based payment reserve and total cost
outstanding at year end.
2018
2017
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
Treasury
shares
Number
(‘000)
–
(47)
(94)
(141)
€’000
158
1,528
431
2,117
Note
24.1
24.2
24.4
Note
24.1
24.4
Treasury
shares
Number
(‘000)
–
(69)
(36)
(105)
2017
€’000
17
126
143
€’000
161
1,911
168
2,240
2018
€’000
–
509
509
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.
The following table analyses the total cost of the executive share option plan (warrants), together with the number of
options outstanding.
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 31 December
2018
2017
Cost
€’000
161
–
(3)
158
Number
(‘000)
2,880
–
(30)
2,850
4.58
20
–
Cost
€’000
319
17
(175)
161
Number
(‘000)
4,635
–
(1,755)
2,880
5.58
50
30
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. On 3 January 2018, 30,000 of the vested warrants were
exercised at €5.00 per share under the contractual terms for an amount of €0.15 million and a corresponding €3,000
share-based payment reserve was also transferred to share capital.
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149
PORTFOLIO REVIEW
NOTES TO THE FINANCIAL STATEMENTS
SECTion V: SHARE CAPiTAl AnD RESERVES
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
24. Share-Based Payment Reserve continued
24.2 Shares granted to Executive Directors and other senior management employees
24. Share-Based Payment Reserve continued
24.4 Subsidiaries’ Employee Share Award Plan
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
2018
€’000
1,911
1,491
–
(1,874)
2017
€’000
1,820
1,423
(200)
(1,132)
1,528
1,911
Shares issued to the Executive Directors and other senior management employees
On 28 March 2018, the Company issued 0.2 million Ordinary shares (Ordinary shares of no par value), out of which
0.09 million Ordinary shares were delivered to the Executive Directors and other senior management employees, from the
share-based payment reserve, in their capacity as Globalworth Investment Advisers Limited’s (“GIAL”) preference
shareholders, on behalf of its subsidiary GIAL, in order to settle part of the liability of €1.66 million owed by the Company
to its subsidiary, related to the fees charged by GIAL to the Company pursuant to the Investment Advisory Agreement
concluded between the Company and GIAL. The 0.2 million new shares rank pari passu with the existing shares of the
Company. The Ordinary shares have been issued at €8.75 per Ordinary share (market price on the issue date being
€9.15 per Ordinary share) and are subject to the vesting conditions set out in the performance incentive scheme for
the Investment Adviser.
On 12 December 2018, pursuant to the above decision, GIAL transferred the following shares to the Executive Directors
and certain other preference shareholders of GIAL:
¡ the third tranche of 0.07 million Ordinary shares, comprising part 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; and
¡ the second tranche of 0.05 million Ordinary shares, comprising part 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 2017.
As at 31 December 2018, 0.05 million shares held by GIAL and not transferred yet are accounted for as treasury shares.
Subsidiaries’ Employee Share Award Plan
Under the share award plan, the subsidiaries’ employees are required to remain in service for one-year period following the
date of acceptance of the share offer letter. During the year, the Company recorded €0.5 million as share-based payment
expense in the income statement for the lapsed vested period. Therefore, as of 31 December 2018 a total of 93,976
Ordinary shares were held by the Company as treasury shares.
24.3 Performance Incentive Scheme
Following discussions during 2018 by the Company’s management with the Company’s major shareholders, as well as
other key shareholders and potential new investors, regarding the LTF, concerns were raised over the potential uncapped
dilutive future effect of the LTF. As a result the board requested the Remuneration Committee to conduct a detailed
analysis of what could be the potential pay-out to the Investment Adviser (and subsequently to its preference shareholders,
which comprise the Executive Directors and other members of senior management of the Company) in the future should
the LTF’s related conditions be met and what would be a reasonable and fair value to terminate the Plan today.
The Remuneration Committee, supported by international expert remuneration consultants, conducted such detailed
analysis and has recommended to the board an appropriate termination value for the LTF should the board decide to
terminate the LTF. The board is currently in the process of further assessing and analysing the proposal of the
Remuneration Committee, and since no final decision has been taken and implemented, no accounting entries have been
recorded in the current financial year.
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 exercised during the year
Closing balance
Weighted average remaining unvested period (years)
Weighted average price per share – vested and exercised share
Weighted average price per share – unvested shares
2018
€’000
168
–
509
(246)
431
0.5
€7.55
€8.95
2017
€’000
–
200
126
(158)
168
0.5
€7.55
–
The Company estimated that all employees will remain in service until the expiry of the unvested period.
Treasury shares
opening balance
Shares purchased under the subsidiaries’ employee share award plan
Shares issued under the subsidiaries' employee share award plan
Shares vested and exercised under the subsidiaries’ employee share award Plan
Shares held in treasury under the subsidiaries’ employee share award plan
2018
2017
Amount
€’000
Number
(‘000)
Amount
€’000
Number
(‘000)
(270)
–
(818)
246
(842)
(36)
–
(91)
33
(94)
–
(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 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 (Group’s
debt balance plus 50% of joint venture’s debt balance), less cash and cash equivalents (Group cash balance plus 50% of
joint venture’s cash balance), divided by the open market value of its investment property portfolio (Group’s investment
property portfolio plus 50% of joint venture’s investment property value) as certified by external valuers. As at 31 December
2018 the LTV ratio amounted to 43.9% (2017: 34.0%).
interest-bearing loans and borrowings (face value)
Less:
Cash and cash equivalents
Group Interest-bearing loans and borrowings (net of cash)
Add:
50% Share of Joint Venture interest-bearing loans and borrowings
50% Share of Joint Venture cash and cash equivalents
Combined Interest-bearing loans and borrowings (net of cash)
investment property
Less:
other operating lease commitment
Group open market value as of financial position date
Add:
50% Share of Joint Venture open market value as of financial position date
Combined open Market value as of financial position date
Loan-to-value ratio (“LTV”)
Note
14.1
2018
€’000
2017
€’000
1,281,728
886,716
19
229,527
1,052,201
273,272
613,444
14,348
(1,930)
–
(145)
1,064,619
613,299
3
2,390,994
1,792,414
1,514
1,432
2,389,480
1,790,982
36,300
12,200
2,425,780
1,803,182
43.9%
34.0%
150
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OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
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. Subsidiaries Acquisitions continued
The aggregate cash consideration in respect of the subsidiaries’ acquisitions
26. Subsidiaries Acquisitions
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
interest in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest 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 and asset acquisitions
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 a 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. Considering the absence of existing
strategic management functions and associated processes in underlying subsidiaries owning the properties, the
management considered these transactions as acquisitions of an asset rather than a business acquisition.
Asset acquisitions
During 2018 the Group acquired 100% of the issued shares in warta Tower Sp. z o.o. Sp. k., holding an office building
named “warta Tower”, west Gate II - Projekt Echo - 114 Sp. z o.o. Sp. k., holding an office building named “west Link”,
blackwyn Investments Sp. z o.o., holding an office building named “Quattro business Park”, Spektrum Tower spolka z
ograniczona odpowiedzialnoscia, holding legal rights to the office building Spektrum Tower in warsaw, Poland, and Gold
Project Spolka z ograniczona odpowiedzialnoacia Sp. j. holding two office buildings, called “Skylight & Lumen”.
The acquisitions were judged as asset acquisitions on acquisition date as per the criteria outlined above for a gross cash
consideration of €508.8 million. The aggregate fair values of investment properties, cash and cash equivalents, other
current assets and current liabilities acquired were €513.6 million, €7.2 million, €4.1 million and €11.04 million, respectively.
No deferred tax liability was recognised on the acquisition date, being an asset acquisition.
Acquisition price
less:
net working capital of the subsidiary
investment property acquired
Cash of acquired entities
Sub-total
less:
Debentures (outstanding from the acquiree)1
Cash consideration paid
other incidental costs paid
Consideration receivable from the seller
1. Non-cash settlement.
2018
€’000
508,857
(1,383)
507,474
(7,200)
500,274
18,684
481,876
1,947
2,233
During 2018, the Group acquired 100% of the equity stake in Corinthian Twin Tower SRL, holding a land plot in the Gara
Herastrau / barbu Vacarescu corridor of bucharest’s new CbD, for a total consideration of €13 million. The land plot is
located between Globalworth Plaza and Green Court b office properties owned by the Group. No deferred tax liability was
recognised on the acquisition date, being an asset acquisition.
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 interest, 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.
Balance at 31 December
2018
€’000
2017
€’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.
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27. Goodwill continued
At 31 December 2018, the goodwill related to property management activity with a carrying value of €6.7 million
(2017: 6.7 million) was tested for impairment. As permitted by IAS 36 Impairment of Assets, the detailed calculations of
recoverable amount performed in 2017 were used for the 2018 impairment test as the criteria in that standard were
considered to be satisfied: the assets and liabilities comprising the CGU have not changed significantly since the prior
year; the previously calculated recoverable amount exceeded the carrying amount by a substantial margin; and the
likelihood that an updated calculation of the recoverable amount would be less than the CGU's, carrying amount at the
time of the test was remote.
No impairment charge arose as a result of this assessment at year end. Management believes that as of 31 December 2018
no reasonable change in the main assumptions could result in an impairment charge (31 December 2017: same).
At 31 December 2018 and 2017 respectively, the value-in-use of the property management activity was determined based
on the following main assumptions:
¡ budgets for 4 years;
¡ discount rate of 6.7% p.a.; and
¡ extrapolation in perpetuity from year 4 onwards, considering a growth rate of 1.0% p.a.
The goodwill related to deferred tax liabilities recognised on acquisition was not tested for impairment as there were no
changes in the tax circumstances of the relevant entities or other events that would indicate an impairment thereof.
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 2018, 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.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
28. Investment in Joint venture continued
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 (classified as office segment for the Group) in bucharest,
Romania. The property is fully occupied by Groupe Renault Romania being its new headquarters in bucharest. The joint
venture was funded by loans from venture partners, which carry fixed interest rates, and an interest-bearing bank loan.
The joint venture had no other contingent liabilities or commitments as at 31 December 2018, except construction
commitments as disclosed in note 6. Elgan Offices SRL cannot distribute its profits without the consent from the other
venture partner.
The summarised financial information of the joint venture is disclosed below which represents the amounts from the joint
venture’s financial statements without adjusting the transactions with the Group.
non-current assets
Current assets
Total assets
non-current liabilities
Current liabilities
Total liabilities
net equity
2018
€’000
73,697
9,010
82,707
2017
€’000
26,655
1,926
28,581
65,755
4,138
21,574
2,018
69,893
23,592
12,814
4,989
Above financial information includes cash and cash equivalent balance of €3.86 million (2017: €0.3 million), investment
property €72.6 million (2017: €24.4 million), interest-bearing loans and borrowings of €28.7 million (2017: €nil).
Profit before financing costs
net finance cost
income tax expense
Profit for the year
2018
€’000
9,617
(174)
(1,618)
7,825
2017
€’000
6,063
(8)
(1,066)
4,989
Above financial information includes gain from revaluation of investment property of €9.8 million (2017: €6.0 million).
Investments
opening balance
Cost of investment in Joint venture at acquisition date
Additions in investment
Share of profit during the year
Sub-total
Loans receivable from joint venture
opening balance
loan given to the joint venture
loan repayments from the joint venture
interest repayment
interest income for the year
Sub-total
TOTAL
154
2018
€’000
2,218
–
6
3,095
5,319
2017
€’000
–
30
–
2,188
2,218
19,721
26,202
(12,875)
(1,470)
1,419
–
19,330
–
–
391
32,997
19,721
38,316
21,939
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SECTion Vi: inVESTmEnT in SuBSiDiARiES, JoinT VEnTuRES AnD RElATED DiSCloSuRES
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 the appointment of an 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 has consolidated as of
31 December 2018 and 2017, are disclosed in the table below.
As of 31 December 2018, and 31 December 2017, the Group consolidated the following subsidiaries, being holding
companies as principal activities.
Subsidiary Name
2018
Shareholding
interest (%)
2017
Shareholding
interest (%)
Globalworth investment Advisers limited, Globalworth Finance Guernsey limited
100
100
Place of
incorporation
Guernsey,
Channel
islands
Globalworth Holding B.V.
Globalworth Poland Real Estate n.V. (GPRE Group or GPRE), formerly known as
Griffin Premium RE. n.V.
Elgan Automotive Kft.
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
iB 14 Fundusz inwestycyjny Zamkniety Aktywow 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., Wetherall investments Sp. z o.o., iris Capital Sp. z o.o.,
GPRE management Sp. z o.o., lima Sp. z o.o., luapele Sp. z o.o., Warta Tower
Sp. z o.o., Warta lP Sp. z o.o., GPRE Property management Sp. z o.o., Elissea
investments Sp. z o.o., West link Sp. z o.o. (previously Projekt Echo – 114 Sp. z
o.o.), ormonde Sp. z o.o., Emfold investments Sp. z o.o., West Gate Wroclaw
Sp. Z.o.o., Gold Project Sp. z o.o. (formerly: Haola Sp. z o.o.), light Project
Sp.z.o.o.
100
69.70
100
100
100
netherlands
71.66
netherlands
100
100
Hungary
Cyprus
69.70
71.66
Poland
Griffin Premium RE lux S.a.r.l., Charlie SCSp, December SCSp,
69.70
71.66
luxembourg
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
29 Investment in Subsidiaries continued
As of 31 December 2018, and 31 December 2017, the Group consolidated the following subsidiaries, who own real estate
assets in Romania and Poland, being asset holding companies as their principal activities, except Globalworth building
Management SRL with building management activities.
2018
Shareholding
interest (%)
2017
Shareholding
interest (%)
Place of
incorporation
100
100
Romania
69.70
71.66
Poland
Subsidiary Name
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,
Globalworth EXPo SRl (formerly 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,
Corinthian Twin Tower SRl
DH Supersam Katowice Sp. z o.o., Hala Koszyki Sp. z o.o., Dolfia Sp. z o.o.,
Ebgaron Sp. z o.o., Bakalion Sp. z o.o., Centren Sp. z o.o., Tryton Business Park
Sp. z o.o. (formerly Emfold investments Spolka z ograniczona odpowiedzialnoscia
Sp. k.), A4 Business Park Sp. z o.o. (formerly A4 Business Park – “iris Capital”
– Spolka z ograniczona odpowiedzialnoscia Sp. k.), West link Spółka z
ograniczona odpowiedzialnoscia Sp. k. (formerly West Gate ii – Projekt Echo
– 114 Sp. z o.o. Sp. k.), Dom Handlowy Renoma Spolka z ograniczona
odpowiedzialnoscia Sp. k., lamantia Spolka z ograniczona odpowiedzialnoscia
Sp. k., nordic Park offices Spolka z ograniczona odpowiedzialnoscia Sp. k.,
Warta Tower investments Sp. z o.o. (formerly Warta Tower Spolka z ograniczona
odpowiedzialnoscia Sp. k.), Quattro Business Park Sp. z o.o. (formerly Blackwyn
investments Sp. z o.o.), West Gate Wroclaw Spolka z ograniczona
odpowiedzialnoscia Sp. k. (formerly: Echo – West Gate Spolka z ograniczona
odpowiedzialnoscia Sp.k.), Gold Project Spolka z ograniczona
odpowiedzialnoscia Sp. j. (formerly: Zlote Tarasy Tower Warsaw iii S.a.r.l. Sp. j.),
Spektrum Tower Sp. z o.o.
Changes in Group structure during 2018
Liquidations during the year
Circolo Holding Limited, a holding company and a wholly owned subsidiary which was incorporated in 2017 in Cyprus was
liquidated. Circolo had held no assets and was a dormant company. GwI Finance b.V. and Gw Real Estate Finance b.V.,
holding companies in The Netherlands and Akka SCPs holding company in Poland were liquidated during the year ended
2018. These wholly owned subsidiaries held no real estate assets.
Incorporations during the year
During the year ended 31 December 2018, the Group also incorporated in Poland GPRE Property Management Sp. z o.o.
(asset management company), Luapele Sp. z o.o. (intra-group loan financing company) and warta Tower Sp. z o.o., warta
LP Sp. z o.o., Gold Project sp. z o.o, Light Project Sp. z o.o. (being holding companies). All companies were wholly owned
subsidiaries of the Group as at 31 December 2018.
Fundatia Globalworth was incorporated in Romania during 2018 as non-profit organisation to execute activities related to
corporate social responsibility.
Globalworth Tech Ltd. was incorporated in Cyprus, a holding subsidiary, which is 80% owned by the Group and 20% by
Mr. Ioannis Papalekas. The total cost of investment was €1,000.
Acquisitions during the year
On 23 February 2018, the Group acquired 100% of the equity stake in Corinthian Twin Tower SRL.
On 14 March 2018, the Group acquired 100% of the equity stake in warta Tower Investments Sp. z o.o. (formerly warta
Tower Spolka z ograniczona odpowiedzialnoscia Sp. k.), holding an office building called “warta Tower”. On 25 May 2018,
the Group acquired 100% of the equity stake in west Link Spolka z ograniczona odpowiedzialnoscia Sp. k. (formerly: west
Gate II - Projekt Echo - 114 Spolka z ograniczona odpowiedzialnoscia Sp. k.), holding an office building called “west Link”,
and on 21 June 2018 the Group acquired 100% of the equity stake in Quattro business Park Sp. z o.o. (formerly: blackwyn
Investments Sp. z o.o.), holding an office building called “Quattro business Park”.
On 12 July 2018, the Group concluded an agreement based on which it purchased 100% of the issued shares in Spektrum
Tower Sp. z o.o, holding legal rights to the office building Spektrum Tower in warsaw, Poland. On 21 December 2018, the
Group acquired 100% of the shares of Gold Project Spolka z ograniczona odpowiedzialnoscia Sp. j. holding two office
buildings, “Skylight & Lumen”. See more details regarding acquisitions in note 26.
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STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
NOTES TO THE FINANCIAL STATEMENTS ConTinuED
SECTion Vi: inVESTmEnT in SuBSiDiARiES, JoinT VEnTuRES AnD RElATED DiSCloSuRES
30. Subsidiary with significant non-controlling interest
GPRE Group represents a material subsidiary not fully owned by the Group as of 31 December 2018, where non-controlling
interest had 30.3% (31 December 2017: 28.3%) interest in the GPRE Group. On 12 June 2018, the Group participated in
GPRE’s €450 million capital raise by an additional investment of €300 million in the subsidiary (representing 66.67% of the
shares issued), the remaining €150 million being invested by Non-controlling interest holders. This decreased the Group’s
interest in GPRE from 71.66 to 68.43%.
In December 2018, the Group acquired 1.27% of non-controlling interest (representing 5.7 million shares) from non-
controlling interest holders in cash for an amount of €9.0 million, which increased the Group’s share from 68.43% to
69.70% as at 31 December 2018.
The summary of key statements from GPRE’s consolidated financial statements as of and for the years ended
31 December 2018 and 31 December 2017 is presented below. The amounts are presented before inter-
company eliminations.
30. Subsidiary with significant non-controlling interest continued
Summarised statement of comprehensive income
Revenue
operating expenses
Administrative expenses
Acquisition costs
other net income
net finance cost
income tax expense
Profit/(Loss) for the year
2018
€‘000
2017
€‘000
other comprehensive income
Profit/(loss) attributable to non-controlling interest
For the year
31 December
2018
€’000
Period from 6 to
31 December
2017
€’000
102,709
(24,452)
(6,407)
–
24,155
(26,819)
(4,506)
64,680
–
19,654
4,905
(1,036)
(370)
(2,657)
814
(2,191)
(1,862)
(2,397)
–
(679)
For the year
31 December
2018
€’000
Period from 6 to
31 December
2017
€’000
62,414
2,736
(493,062)
(157,583)
474,823
44,175
158,873
4,026
Summarised statement of cash flow
operating
investing
Financing1
net increase in cash and cash equivalents
1. Cash flow from financing activities includes a €3.5 million dividend payment to non-controlling interest holders during the year.
Summarised statement of financial position
Non-current assets
investment property
Available for sale financial assets
Financial assets at fair value through profit or loss
other long-term assets
long-term restricted cash
Current assets
Trade and other receivables and other current asset
Debentures and available for sale financial assets
Financial assets at fair value through profit or loss
Cash and cash equivalents
Non-current liabilities
interest-bearing loans and borrowings
intra-group loans
other long-term liabilities and deferred tax liability
Current liabilities
interest-bearing loans and borrowings
intra-group loans
Dividends payable1
other current-term liabilities
EQUITY
Attributable to:
Equity holders of parent
non-controlling interest
1,216,790
–
2,828
378
–
13,431
–
12,878
72,746
135,124
392,233
33,443
3,686
–
35,421
18,734
700,410
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
488,003
212,407
172,361
67,572
1. At 31 December 2018, GPRE had €35.4 million dividend payable to its shareholders out of which €10.7 million was payable to non-controlling interest holders.
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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.
31. Segmental Information
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.
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 (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,
the 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 High street Mixed use segment, 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:
2018
2017
High street
Inter
segment
High street
Inter
segment
Office
€’000
Mixed use
Residential
Other
eliminations
€’000
€’000
€’000
€’000
Total
€’000
Office
€’000
Mixed use
Residential
Other
eliminations
€’000
€’000
€’000
€’000
Total
€’000
1,966,202
306,466
76,432
114,729
(3,788) 2,460,041
1,331,727
309,197
84,719
116,102
(150) 1,841,595
1,048,944
–
76,432
114,729
(167) 1,239,938
951,823
–
84,719
116,102
(150) 1,152,494
917,258
306,466
–
–
(3,621) 1,220,103
379,904
309,197
–
–
–
689,101
Segments
Segment non-current
assets
Romania
Poland
Total assets
2,048,863
332,080
78,530
281,764
(4,238) 2,736,999
1,407,799
331,530
89,336
333,283
(1,003) 2,160,945
Total liabilities
1,282,366
52,921
26,844
81,195
(3,649) 1,439,677
728,216
207,674
27,465
62,038
(904) 1,024,489
Additions to
non-current assets
– Romania
– Poland
50,163
–
1,047
3,477
7,856
3,461
–
–
–
–
54,687
41,321
11,317
–
–
–
569
10,332
–
–
–
–
52,222
–
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
31. Segmental Information continued
Income statement reported to executive management on a segmental basis are set out below:
2018
2017
High
Street
Mixed
Inter-
segment
High
Street
Mixed
Inter-
segment
Office
€’000
use
Residential
Other
eliminations
€’000
€’000
€’000
€’000
Total
€’000
Office
€’000
use
Residential
€’000
€’000
Other
€’000
eliminations
€’000
Total
€’000
Rental income -
Total
Romania
Poland
Revenue from
contract with
customers
- Total
Romania
Poland
95,836
31,298
47,462
–
48,374
31,298
2,251
2,251
–
42,490
8,172
27,624
–
14,866
8,172
683
683
–
8,735
8,735
–
4,658
4,658
–
(492)
137,628
43,012
2,269
(492)
57,956
41,416
–
–
79,672
1,596
2,269
2,315
2,315
–
6,768
6,768
(508)
53,856
(313)
50,186
–
(195)
3,670
(830)
55,173
19,890
(830)
32,135
19,536
–
23,038
354
881
–
881
634
634
–
3,720
(1,115)
24,010
3,720
(1,115)
22,775
–
–
1,235
Revenue-total
138,326
39,470
2,934
13,393
(1,322)
192,801
62,902
3,150
2,949
10,488
(1,623)
77,866
operating expenses
(44,236)
(8,711)
(1,253)
(5,075)
(85)
(59,360)
(21,902)
(492)
(1,220)
(3,451)
293
(26,772)
Segment NOI
94,090
30,759
NOI - Romania
46,027
–
NOI – Poland
48,063
30,759
1,681
1,681
–
8,318
(1,407)
133,441
41,000
2,658
8,318
(1,012)
55,014
39,595
–
–
(395)
78,427
1,405
2,658
1,729
1,729
–
7,037
(1,330)
51,094
7,037
(1,135)
47,226
–
(195)
3,868
Administrative
expenses
(6,124)
(510)
(607)
(8,956)
944
(15,253)
(4,346)
(233)
(777)
(6,059)
1,184
(10,231)
Acquisition costs
(1,182)
–
–
–
Change in fair value
of investment
property
Depreciation on
other long-term
assets
38,474
(7,120)
2,339
395
Gain on acquisition
of subsidiary
251
(323)
(63)
(3)
(9)
–
–
other expenses
(1,335)
(286)
*(2,711)
other income
230
94
Foreign exchange
loss
(992)
(170)
Finance cost
(38,538)
(2,091)
Finance income
2,685
90
–
31
(4)
7
Segment results
87,236
20,757
673
Share-based
payment expense
–
Gain from fair
valuation of
financial
instruments
Share of profit of joint
ventures
5,463
3,095
–
–
–
–
–
–
–
(11)
3
(83)
(1,094)
507
(924)
(509)
–
–
–
–
–
–
(1,182)
(5,810)
(4,492)
–
(507)
34,088
7,170
(398)
(84)
–
–
(3,801)
3,358
(64)
(2)
251
14,600
11,658
–
2,639
11
(4,332)
(153)
330
–
–
–
*(3,938)
5
–
–
(1,214)
(109)
(71)
(29)
(108)
(41,727)
(31,801)
(168)
(3,469)
(3,027)
3,289
1,357
47
–
43
3
–
–
–
–
–
–
–
–
–
–
–
–
(10,809)
6,727
(150)
28,897
(4,091)
5
(317)
(38,465)
1,447
(449)
107,293
21,824
9,399
(10,344)
3,374
(146)
24,107
–
–
–
(509)
5,463
–
–
3,095
2,188
–
–
–
–
–
–
(143)
–
–
–
–
–
(143)
–
2,188
Profit before tax
95,794
20,757
673
(1,433)
(449)
115,342
24,012
9,399
(10,344)
3,231
(146)
26,152
* Other expenses represent loss on sale of non-core investment property (apartments).
Revenues are derived from a large number of tenants and no tenant contributed more than 10% of the Group’s rental
revenues for the year ended 31 December 2018 (2017: nil).
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.
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PORTFOLIO REVIEW NOTES TO THE FINANCIAL STATEMENTS ConTinuED
SECTion Vii: oTHER DiSCloSuRES
32. Transactions with Related Parties
The Group’s related parties are the Company’s Executive and Non-Executive Directors, key other Executives, as well as all
companies controlled by them or under their joint control, or under significant influence.
The related party transactions are set out in the table below:
Name
Nature of transactions/balance amounts
Elgan offices SRl
(50% Joint Venture)
Shareholder loan receivable
Finance income
management fees
office rent
mindspace ltd2
Trade and other receivables
Revenue
Deposits from tenant
lease incentives cost1
Trade and other payables
mr. Adrian Danoiu
(Chief operating officer)3
Advances received for sale of commercial
property
Revenue
Income statement
Statement of financial position
Income/(expense)
Amounts owing (to)/from
2018
€’000
2017
€’000
2018
€’000
2017
€’000
–
1,419
300
24
–
896
–
–
–
–
6
–
32,997
19,330
391
250
14.5
–
–
–
–
–
–
–
–
–
–
267
–
(1,142)
2,868
(175)
(70)
–
–
–
–
–
–
–
–
–
–
1. Lease incentive cost granted in the period was capitalised in the value of Investment Property.
2. A key Executive of Mindspace Ltd. is a close family member of a non-Executive Director of the Company. The transactions disclosed in above table were
entered between the subsidiaries of Mindspace Limited (namely Mindspace Co-working SRL and Mindspace Poland S.A) and certain subsidiaries of the
Company.
3. During the year, Upground Estates SRL, a fully owned subsidiary of the Group, signed a preliminary agreement for the sale of a commercial space for an
amount of up to €215 thousand, depending on the final determination of the exact surface of the space to be sold. The completion of the sale and the final
price determination are subject to the completion of a final sale and purchase agreement. During the year, the subsidiary received an advance based on the
preliminary agreement of €70 thousand. In addition, during the year, Upground Estates SRL sold two exterior parking spaces for an amount of €5 thousand
and a storage room for an amount of €1 thousand. The sale proceeds were collected during the year 2018.
33. New and Amended Standards
Starting from 1 January 2018 the Group adopted the following new and amended standards and interpretations.
The impact from the adoption of IFRS 9 and IFRS 15 on the Group’s financial position and performance is disclosed below.
Narrow scope amendments and new Standards
iFRS 9 Financial instruments
iFRS 15 Clarifications: Revenue from Contracts with Customers
iAS 40: (Amendments) Transfers of investment Property
iFRS 2 Classification and measurement of Share-based Payment Transactions
Annual improvements to iFRS Standards 2014-2016 Cycle
iFRiC 22 Foreign Currency Transactions and Advance Consideration
a) Adoption of IFRS 15
The Group adopted IFRS 15 on 1 January 2018 without restarting prior year figures.
Effective
date
Jan-18
Jan-18
Jan-18
Jan-18
Jan-18
Jan-18
IFRS 15 does not apply to rental income, but only applies to service charge income, marketing income and fit-out services
income generated by the Group. The Group has identified few lease agreements which required the reclassification of
€0.8 million from the rental revenues to service charge revenue starting during 2018. However, this did not impact the net
operating income (NOI) and only reclassified revenues from ‘Rental income’ to ‘Service charge income’. The reclassification
of such amounts was not material for the Group as at 31 December 2017. There was no impact on fit-out services income
for contracts in progress at 31 December 2017.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
33. New and Amended Standards continued
Furthermore, as result of IFRS 15 adoption on 1 January 2018 Group also reclassified deferred income from trade and
other payables to contract liability for an amount of €1.4 million on the face of financial position which was recognised as
revenue from contracts with customers during the year ended 2018. Similarly, form trade receivables balance as of
1 January 2018 for which services had been performed in 2017 but invoices were not issued until 31 December 2017 an
amount of €3.9 million was reclassified as contract asset on the face of financial position.
Classification category
IAS 18
Classification category IFRS 15
Rent and service
Rent and service
Rent and service
charges receivables
charges receivables
charges receivables
31 December
2017
Reclassification
15,316
(3,937)
1 January
2018
11,379
Contract Assets
Rent and service
Contract Assets
–
3,937
3,937
charges receivables
Deferred income
Deferred income
Deferred income
Contract liability1
Deferred income
Contract liability
4,402
–
(1,401)
1,401
3,001
1,401
1. The amount was recognised during 2018 in the profit and loss account as revenue from contracts with customers.
b) Classification and reconciliation of financial assets and liabilities upon the initial application of IFRS 9
The classification of Group’s financial assets and liabilities according to IAS 39 and IFRS 9 as at 1 January 2018 are
presented below. The table below summarises the carrying value reconciliation of the Group's financial assets upon the
transition from the previous classification categories under IAS 39 at 31 December 2017 to the new classification
categories under IFRS 9 at 1 January 2018. From the adoption of IFRS 9 there was an impact of €0.5 million on the
statement of profit or loss for the twelve months ended 31 December 2018.
The Group’s financial liabilities were classified and measured at amortised cost according to IAS 39 (except when required
to be measured at fair value through profit or loss such as financial liabilities related to derivatives) until 31 December 2017
and according to IFRS 9 starting from 1 January 2018. From adoption of IFRS 9 there was no impact on the statement of
profit or loss for the twelve months ended 31 December 2018 and statement of financial position as at 31 December 2018.
Financial instruments
Classification category
IAS 39
Classification category IFRS 9
31 December
2017
€’000
Reclassification
€’000
1 January 2018
€’000
Available for sale financial
Financial assets
Financial assets measured at fair
10,243
(10,243)
–
assets
available for sale
value through profit or loss
Financial assets at fair
value through profit
or loss
Equity investments
–
–
Financial assets measured at fair
value through profit or loss
Financial assets measured at fair
value through other
comprehensive income
–
–
Debentures
Financial assets
measured at
amortised cost
Financial assets measured at
18,389
amortised cost
loan receivable from joint
venture
Financial assets
measured at
amortised cost
Financial assets measured at
19,721
amortised cost
Restricted cash long
term
Financial assets
measured at
amortised cost
Financial assets measured at
2,958
amortised cost
Trade receivables – net of
provision
other receivables
Financial assets
measured at
amortised cost
Financial assets measured at
15,316
amortised cost
Financial assets
measured at
amortised cost
Financial assets measured at
1,420
amortised cost
10,243
10,243
–
–
–
–
–
–
–
18,389
19,721
2,958
15,316
1,420
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GLObALwORTH AnnuAl REPoRT AnD FinAnCiAl STATEmEnTS 2018
163
PORTFOLIO REVIEW 31 December
2017
€’000
Reclassification
€’000
1 January 2018
€’000
33. New and Amended Standards continued
Impact on Consolidated statement of financial position:
NOTES TO THE FINANCIAL STATEMENTS ConTinuED
SECTion Vii: oTHER DiSCloSuRES
33. New and Amended Standards continued
Financial instruments
Contract assets
Guarantees retained
by tenants
VAT and other taxes
receivable
income tax receivable
Cash and cash
equivalents
Classification category
IAS 39
Financial assets
measured at
amortised cost
Financial assets
measured at
amortised cost
Financial assets
measured at
amortised cost
Financial assets
measured at
amortised cost
Financial assets
measured at
amortised cost
Classification category IFRS 9
Financial assets measured at
amortised cost
Financial assets measured at
amortised cost
–
304
Financial assets measured at
6,099
amortised cost
Financial assets measured at
295
amortised cost
Financial assets measured at
273,272
amortised cost
–
–
–
–
–
–
304
6,099
295
273,272
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 except for IFRS 16 which is disclosed below.
Narrow scope amendments and new Standards
iFRS 16 leases
iFRS 9 Amendments: Prepayment Features with negative Compensation
iFRiC 23 uncertainty over income Tax Treatments
Annual improvements to iFRS Standards 2015-2017 Cycle
iAS 19: Plan Amendment, Curtailment or Settlement
iAS 28 Amendments: long-term interests in Associates and Joint Ventures
Narrow scope amendments and new Standards
iFRS 14 Regulatory Deferral Accounts
iFRS 17 insurance Contracts
Amendments to iAS 1 and iAS 8: Definition of material
Amendment to iFRS 3 Business Combinations
Amendments to References to the Conceptual Framework in iFRS
Effective
date
Jan-19
Jan-19
Jan-19
Jan-19
Jan-19
Jan-19
Effective date (EU endorsement)
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
IFRS 16 leases and impact on the consolidated financial statements
The Group performed a detailed analysis of the impact of IFRS 16 on the consolidated financial statements. The analysis of
the Group’s contracts has identified the right of perpetual usufruct of the land (the “RPU”) contracts for the property
portfolio in Poland which meet the criteria of leases under IFRS 16.
RPU is a contract with a term from 40 up to 99 years. Neither the right-to-use asset nor the lease liability regarding RPU
were recognised on the Group’s balance sheet as of 31 December 2018 under IAS 17. Thus, the values of both right-to-use
asset and lease liability were calculated at the date of initial application of IFRS 16, 1 January 2019.
The value of right-to-use assets was estimated as the Net Present Value ("NPV") of future annual fees with the following
assumptions:
¡ Initial application date: 1 January 2019;
¡ End date: RPU end date for each land right individually;
¡ Discount rate: 5.77%;
¡ Annual RPU fee: €1.5 million for 2018; and
¡ Total annual RPU charge is reinvoiced to tenants as a part of service charge reconciliation.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Assets
Investment property
Liabilities
Total current liabilities
Total non-current liabilities
Total liabilities
1 January 2019
IAS 17
€000
Right to use asset
Effect of IFRS 16
transition
€000
1 January 2019
(restated)
IFRS 16
€000
2,390,994
26,196
2,417,190
1 January 2019
IAS 17
€000
81,672
1,358,007
1,439,679
Lease liability for
RPU
Effect of IFRS 16
transition
€000
1,512
24,684
26,196
1 January 2019
(restated)
IFRS 16
€000
83,184
1,382,691
1,465,875
The right-to-use asset will be presented as part of the value of investment property. The corresponding lease liability will be
presented in the consolidated financial statements as a part of:
¡ Trade and other payables (current) – not discounted annual RPU charge.
¡ Trade and other payables (non-current) – discounted RPU cost until the end date of each RPU agreement.
In the following years, as at balance sheet date the Group will continue the approach regarding the valuation of the right-to-
use asset in the amount of lease liability calculated as NPV of future lease payment until RPU closing date.
Impact on Consolidated statement of comprehensive income and consolidated statement of cash flows:
At initial application date, the right-to-use asset equals the related lease liability recognised in the consolidated financial
position as of 1 January 2019, therefore the impact on the consolidated statement of comprehensive income is nil.
The Group does not expect impact on cash flows in 2019 as RPU payments remains unchanged.
To arrive at the carrying amount of the investment property using the fair value model, recognised right-to-use asset
representing the same amount as lease liability will be added back to a valuation obtained for a property (that is net of all
payments expected to be made under RPU). Any change in carrying amount of investment property will be charged to
profit and loss and presented under the line “Fair value movement”.
Subsequent years effect on consolidated statement of comprehensive income
The Group is planning to implement the cost model for the depreciation charge of right-to-use assets amounts to
approximately €1.5 million being the annual RPU charge. The depreciation of right-to-use asset will be presented in the
Statement of profit and loss under the line “Fair value movement”. The amortised cost valuation effect of lease liability will
be presented in the Statement of profit and loss under the line “Finance cost”.
The recognition of RPU right-to-use asset and lease liability related to RPU as at 1 January 2019 does not have impact on
profit or loss statements.
In the following years, as at balance sheet date the Group is going to continue approach regarding the valuation of the
right-to-use asset in the amount of lease liability calculated as NPV of future lease payment till RPU closing date.
As at the date of first application of IFRS 16, the Group recognized new right-of-use asset relating to perpetual usufruct
right only. For these lease contracts, previously classified as operating leases in accordance with IAS 17, the Group
recognized leases as leasing liabilities measured at the present value of remaining lease payments as described above.
The amount of future minimum lease payments expected to be paid under non-cancellable operating lease can be
summarized as follows:
2018
€ ‘000
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
1,535
5,347
19,314
2017
€ ‘000
1,582
5,512
19,913
Other operating leases
The Group is planning to use a simplified approach i.e., not to calculate lease assets/liabilities for short-term leases and
low-value leases (e.g., coffee machines, low-value electronic equipment).
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165
PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
35. Subsequent Events
On 14 January 2019, the Company announced that its board of Directors had approved the payment of an interim dividend
in respect of the six-month financial period ended 31 December 2018 of €0.27 per ordinary share, which was paid on
8 February 2019 to the eligible shareholders.
On 23 January 2019, the Group acquired 4.03% of non-controlling interest (representing 17.8 million shares of GPRE) from
minority in exchange for 3.1 million newly issued ordinary shares of the Company. There was no cash consideration.
On 11 March 2019, the Group acquired an additional 16.5 million shares of GPRE from minorities in GPRE for a cash
consideration of €26.4 million. On 13 March 2019, the Group acquired a further 0.35 million shares of GPRE from minorities
for a cash consideration of €0.44 million. As a result of these transactions with minorities in GPRE, the Group’s interest in
GPRE increased from 69.70% at 31 December 2018 to 77.54%.
On 11 March 2019, the €65 million long-term debt facility, secured in December 2018 from Erste bank Group AG, was
drawdown in full. This facility is secured on investment property and matures in year 2029. The proceeds from the loan will
be used for future investments and general corporate purposes.
On 26 March 2019, the Group concluded an agreement based on which it purchased legal rights to the office building
Rondo business Park in Kraków, Poland. The gross asset value consideration for the acquisition was set at €37 million
subject to customary adjustments. The transaction was funded from Group’s existing cash resources. The annual
contracted rental income of the property, generated by the occupancy ratio of 90%, amounts to €3.0 million.
NOTES TO THE FINANCIAL STATEMENTS ConTinuED
SECTion Vii: oTHER DiSCloSuRES
34. Contingencies
Legal Claims
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.
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. On 20 March 2019 the court of appeal rejected the
appeal and upheld the initial court decision. The decision of the court of appeal is still subject to a second appeal and
based on the legal advice it has received, management believes the decision is unjustified and awaits for the court of
appeal to deliver its argumentation in order to formulate and submit the second appeal.
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.
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PORTFOLIO REVIEW
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 2018, 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 2018 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
Recognition of rental income (€137.6 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.
Moreover, on 21 December 2018, the Group signed an
agreement for the settlement of Master lease and NOI
guarantee agreement related to some properties in Poland
which were acquired as part of GPRE acquisition in 2017.
The Group recognised the total cash settlement received,
an amount of €11.5 million for rental guarantees (RGA)
and €10.0 million for NOI guarantees (NOIGA), as
compensation for early termination in the current year’s
income statement.
Accounting for lease incentives, as well as, the magnitude
and judgment of RGA and NOIGA settlement affect one of
the most significant metrics of the Group (Revenue), as
such we consider recognition of rental income a key audit
matter.
The Group’s disclosures regarding its accounting policy
for rental income and lease incentives, as well as RGA
and NOIGA guarantees settlement, are in note 7 of the
consolidated financial statements.
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 gross 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 2018 we
reviewed 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 have evaluated that the accounting treatment of
the termination of the RGA and NOIGA was in line with
requirements of IFRS; and
¡ we also considered the adequacy of disclosures in relation
to rental income.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Key Audit Matter
How our audit addressed the Key Audit Matter
Valuation of Investment Property (€2,391 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 judgements, estimates and assumptions
and 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 judgments, estimates
and assumptions used for investment property are in
notes 3 and 4 of the consolidated financial statements.
Accounting treatment of major acquisitions in 2018
(€522 million value of consideration paid)
During the year, the Group completed various acquisitions
as disclosed in Note 26.
The Group has determined these acquisitions to be
asset acquisitions.
The assessment of accounting treatment as asset
acquisitions or business combinations requires
significant judgement.
For this reason, as well as the impact the new acquisitions
are having on the Group consolidated financial
statements, we consider this a key audit matter.
The Group’s disclosures regarding its accounting policy,
judgments and assumptions used for the acquisitions
made in 2018 are in note 26 of the consolidated
financial statements.
The audit procedures performed on the valuation of investment
property included among others the following:
¡ we performed a detailed 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 Group’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 involved our own internal valuation specialists from
Romania and Poland to assist us to:
¡
¡
¡
evaluate using their knowledge of the market and
corroborate the market related judgements and valuation
inputs (including discount rates, exit yields and sales
values) used by the specialists for a sample of properties
(properties with significant value, risky or with significant
changes in values or conditions);
assess the conformity of the valuation methods
applied; and
evaluate the competence, capability and objectivity of
the external valuation specialists.
¡ we have assessed the impact of the termination of the
guarantee agreements (RGA and NOIGA) on the valuation of
the investment properties; and
¡ we also considered the adequacy of disclosures in relation
to the investment property valuation.
The audit procedures performed for auditing the accounting for
major acquisitions included among others the following:
¡ we reviewed the transactions’ documents to evaluate
management’s assessments that the transactions fall
within the assets acquisition accounting, and thus, are in
line with IFRS;
¡ we tested the value of the consideration paid and the
identification and valuation of the identifiable assets and
liabilities acquired;
¡ we involved our valuation specialists in our audit of the
fair values of the properties included in the acquired legal
entities; and
¡ we also considered the adequacy of disclosures in relation
to the acquisitions.
Other information included in the Group’s 2018 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 consolidated financial statements does not cover the other information and we do not express any form
of assurance conclusion thereon.
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PORTFOLIO REVIEW OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
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
27 March 2019
INDEPENDENT AUDITOR’S REPORT TO THE MEMbERS OF
GLObALwORTH REAL ESTATE INVESTMENTS LIMITED ConTinuED
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 determine 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 scepticism
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.
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.
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PORTFOLIO REVIEW
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
ADDITIONAL
INFORMATION
Schedule of properties
investing policy
Glossary
Company directory
174
178
179
186
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PORTFOLIO REVIEW
SCHEDULE OF PROPERTIES: ROMANIA
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Property name
Number of
Properties
Location
Address
Year of completion /
Latest Refurbishment
GLA
(k sqm)(1)
Office (Standing or Under Construction)
BoB
BoC
City office
Gara Herastrau
Green Court Complex
Globalworth Campus
Globalworth Plaza
Globalworth Square
Globalworth Tower
Renault Bucharest
Connected (3)
TCi
unicredit HQ
1
1
2
1
3
3
1
1
1
2
1
1
Bucharest
6A Dimitrie Pompeiu Blvd.
Bucharest
3 George Constantinescu St.
Bucharest
2 – 4A oltenitei St.
Bucharest
4B Gara Herastrau St.
2008 / 2017
2009 / 2014
2014 / 2017
2016
Bucharest
4 Gara Herastrau St.
2014 / 2015 / 2016
Bucharest
4-6 Dimitrie Pompeiu Blvd.
Bucharest
42 Pipera Rd.
Bucharest
44 Pipera St.
Bucharest
201 Barbu Vacarescu St.
Bucharest
Preciziei 3G St.
Bucharest
15-17 ion mihalache Blvd.
Bucharest
1F Expozitiei Blvd.
Tower 1: 2017
Tower 2: 2018
Tower 3: 2019(E)
2010 / 2017
2020E
2016
2018
2012
2012
2010
2011 - ‘17
2019E
22.4
57.0
36.1
12.0
54.3
29.0
28.2
34.8(E)
24.1
26.4(E)
54.7
42.3
22.4
15.5
68.4
103.4
17.7(E)
Industrial (Standing or Under Construction)
Dacia Warehouse
TAP
TAP ii
1
4
1
Pitesti
1 Dacia A1 St.
Timisoara
lipovei Way, Giarmata
Timisoara
lipovei Way, Giarmata
Retail / Residential (Standing)
upground Towers
1
Bucharest
9B Fabrica de Glucoza St.
2011
43.5
Land for future development
GCD
TAP ii (additional land)
GW West
luterana lands
TAP (expansion)
Herastrau one
–
–
–
–
–
–
Bucharest
1 Dimitrie Pompeiu Blvd.
2020(E)
4.0 / 16.2(E)
Timisoara
lipovei Way
Bucharest
Preciziei 3F
Bucharest
7-13 luterana Street
Timisoara
lipovei Way
Bucharest
48-50 Soseaua nordului
2019-2020(E)
263.2 / 122.1(E)
2021(E)
2021(E)
n/a
n/a
7.6 / 33.4(E)
6.6 / 26.4(E)
31.9 / 28.5(E)
3.2 / n/a
Occupancy
(%)
Contracted
rent
(€m)
Potential rent
at 100%
occupancy
(€m) (2)
WALL
(years)
GAV
(€m)
Select Tenants
95.2%
99.5%
71.0% (77.8%*)
77.5% (86.5%*)
98.1%
85.6% (96.8%*)
71.6% (90.9%*)
–
94.7%
–
3.5
10.0
3.8
1.7
9.9
3.9
3.2
–
4.4
–
99.3%
11.5
100.0%
99.6%
100.0%
100.0%
100.0%
–
5.5
5.1
3.9
4.2
4.6
–
4.3
3.8
7.7
4.4
3.7
10.2
7.8
–
4.4
–
7.3
11.0
4.6
3.4
6.5
8.9
–
3.7
10.1
5.9
2.1
48.6
145.2
61.5
29.5
Deutsche Bank, Stefanini, nX Data
Honeywell, HP, nBG Group
Vodafone, mindspace, Global Compass, RCS-RDS
ADP, Saipem, Baker Tilly
10.1
142.6
orange, Carrefour, General motors
4.5
4.3
5.6
4.6
5.1
145.6
Amazon, Stefanini, Dell, Honeywell, mindspace
61.7
13.8
microsoft, Patria Bank, Bayer, Coface
–
11.7
179.0
Vodafone, Huawei, nnDKP, Wipro
5.5
5.1
3.9
4.2
4.6
0.8
69.4
73.5
52.3
46.8
Automobile Dacia
EY, Hidroelectrica, Cegeka, mindspace
unicredit
Automobile Dacia
54.6 Continental, Valeo lighting, Honeywell, litens, Coca Cola
5.4
–
Retail: 99.7% /
Resi: 64.0%
Retail: 0.8 /
Resi: 1.5
Retail: 8.8 /
Resi: 1.1
Retail: 0.9 /
Resi: 1.5
7 9.6
World Class, Delhaize group
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5.1
6.4
3.2
14.3
1.4
5.8
Total Standing Commercial Portfolio
no of Commercial
investments: 13 21
Notes
(1) GLA of “Land for future development” represents size of land plot / expected GLA upon completion of development.
(2) Contracted rent at 100% occupancy (including ERV on available spaces).
(3) 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.
(4) Potential rent at 100% occupancy, excludes residential.
(*)
Includes tenant options.
576.1
94.9% (97.0%*)
76.1
6.1
81.2
1,095.4
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PORTFOLIO REVIEW
SCHEDULE OF PROPERTIES: POLAND
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Number of
Properties
Location
Address
Year of completion /
Latest Refurbishment
GLA
(k sqm)(1)
Occupancy
(%)
Contracted
rent (€m)
WALL
(years)
Potential rent
at 100%
occupancy
(€m) (1)
Property name
Office (2)
Batory Building 1
Bliski Centrum
nordic Park
Philips
Skylight & lumen
Spektrum Tower
WARTA Tower
Tryton
A4 Business Park
CB lubicz (3)
Quattro Business Park
Green Horizon
West Gate
West link
Mixed-Use (2)
Hala Koszyki
Supersam
Renoma
1
1
1
1
2
1
1
1
3
2
5
2
1
1
5
1
1
Warsaw
Warsaw
Warsaw
Warsaw
Warsaw
Warsaw
Warsaw
Gdansk
212A Jerozolimskie Av.
8 Zurawia St.
8 Herberta St.
195A Jerozolimskie Av.
59 Zlota St.
18 Twarda St.
85 Chmielna St.
11 Jana z Kolna St.
Katowice
42 Francuska St.
Krakow
23, 23A lubicz St.
Krakow
lodz
Wroclaw
Wroclaw
25 Bora-Komorowskiego Av.
106a Pomorska St.
12 lotnicza St.
2 Szybowcowa St.
Warsaw
63 Koszykowa St.
Katowice
40 Swidnicka St.
Wroclaw
8 Piotra Skargi St.
Right of First Offer (ROFO) (5)
Beethovena i
Beethovena ii
1
1
The Gatehouse offices (3) 1
Warsaw
Warsaw
Warsaw
Beethovena Street
Beethovena Street
Grzybowska Street
Total Standing Commercial Portfolio
No of Commercial
Investments: 17
30
Notes
(1) Contracted rent at 100% occupancy (including ERV on available spaces).
(2) All properties are 100% owned by Globalworth Poland. Globalworth at 31 December 2018 held 69.1%
in Globalworth Poland, subsequently increasing its stake in the company to 77.5% on 11 March 2019.
(3) Cb Lubicz - I, property currently under refurbishment (partially completed).
(4) The Gatehouse Offices, is the investment previously known as browary J.
(5) Globalworth Poland has a 25% economic interest in the ROFO assets.
2000 / 2017
2000 / 2018
2000 / 2018
1999 / 2018
2007
2003 / 2015
2000
2016
2014 - ‘16
2000 & ‘09 / 2018
& ‘09
2010, ‘11, ‘13, ‘14
& ‘15
2012 - ‘13
2015
2018
5x2016
2015
2009 / 2016
2019(E)
2020(E)
2018
6.6
4.9
9.0
6.2
45.4
32.1
33.7
24.1
30.6
24.0
60.2
33.5
16.6
14.4
22.2
24.2
40.9
18.9
16.9
15.7
91.9%
96.5%
87.2%
91.9%
88.8%
96.8%
92.4%
100.0%
100.0%
96.1%
98.3%
98.9%
99.5%
100.0%
96.9%
91.6%
91.7%
63.6%
–
100.0%
0.9
1.0
1.6
1.1
11.5
6.7
5.9
3.9
5.1
4.7
10.7
5.2
2.9
2.5
6.9
3.6
7.6
n/a
n/a
3.8
2.7
7.6
3.8
3.3
3.7
4.6
2.5
3.3
3.7
2.7
2.6
4.7
6.6
6.2
5.8
4.1
3.5
n/a
n/a
n/a
GAV
(€m)
12.0
12.5
23.8
13.7
191.2
107.2
63.1
56.3
68.6
70.5
Select Tenants
Solid Group, impuls leasing,
Eurozet, eToto
Baxter, ZBP
Philips, Trane
Pernod Ricard, mars, inoffice, orbis, PGE Energia Ciepla
CityFit, Ecovadis, BnP Paribas
TuiR Warta, iTmagination
intel, Kainos, Ciklum
Rockwell, PKP Cargo, iBm
international Paper, Capita, Deutsche Bank
1.0
1.0
1.8
1.2
13.0
7.0
6.5
3.9
5.1
5.0
10.9
141.7
Capgemini, Google, luxoft, EPAm
5.3
2.9
2.5
7.0
4.0
8.2
3.4
2.9
3.8
72.0
41.8
37.0
120.3
57.8
127.4
17.8
4.2
65.0
infosys, Capita, PKo BP
nokia, Deichmann
nokia, Hilti
mindspace, multimedia, Eneris
Groupon, lPP Group, Sports Direct
HP, inditex, TK maxx
Havas, masterCard
–
l’oreal, WeWork, Epam and Sony
428.7
95.4%
81.8
3.9
86.3
1,216.8
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PORTFOLIO REVIEW
INVESTING POLICY
GLOSSARY
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Investing strategy
The Company’s primary focus is to invest in a diversified portfolio of real estate assets situated in Romania and Poland,
the two largest markets in Central and Eastern Europe. The Company may also invest in real estate assets located in other
South-Eastern European and Central Eastern European countries. The Directors believe its primary markets of investment
represent 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.
Assets or companies in which the Company can invest
Investments made by the Company may take the form of, but are not limited to, single real estate assets, real estate portfolios and
companies, joint ventures, loan portfolios and equity and debt instruments.
Strategy through which the investing policy is achieved
The Company’s strategy is to focus on acquiring underperforming or undervalued properties (due to financial distress,
mismanagement or otherwise) and, through active asset management, to transform these into performing and marketable assets.
Most of the current or expected income from these assets is derived from multinational corporate groups and institutional financial
tenants on long, triple net and annually indexed leases.
Investment approach
The Company assumes a proactive approach to every real estate investment in the Company’s portfolio and pursues various
asset management initiatives according to the most appropriate business plan for each investment. These initiatives may include:
repositioning of existing assets (including re-letting, refurbishment or re-development); 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 per cent.
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 which are as follows:
¡ for any logistics or warehouse property, pre-letting commitments for a minimum of 60 per cent. of the gross leasable area of
such property; and
¡ for any other commercial property, pre-letting commitments for minimum of 50 per cent. 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.
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.
CIT
Corporate income tax
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.
Discounted Cash Flow Analysis (“DCF”)
Valuation method that implies income projections of the
property for a discrete period of time, usually between 5-10
years. The DCF method involves the projection of a series
of periodic cash flows either to an operating property or a
development property. Discounted cash flow projections
based on significant unobservable inputs taking into
account the costs to complete and completion date.
Earnings Per Share (“EPS”)
Profit after tax divided by the basic/diluted weighted
average number of shares in issue during the year or
period.
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.
Adjusted EBITDA
Earnings before finance cost, tax, depreciation,
amortisation of other non-current assets and purchase gain
on acquisition of subsidiaries. This includes the share of
minority interests.
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.
Adjusted EBITDA (normalised)
Earnings 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. This includes the share of minority interests.
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.
EPRA
The European Public Real Estate Association is a not-for-
profit association representing Europe’s publicly listed
property companies.
Contracted Rent
The annualised headline rent as at 31 December 2018 that
is contracted on leases (including pre-leases) before any
customary tenant incentive packages.
Debt Service Cover Ratio (“DSCR”)
It is calculated as net operating income for the year as
defined in specific loan agreements with the respective
lenders, divided by the principal plus interest due over the
same year.
Discount Rates
The discount rate is the interest rate used to discount a
stream of future cash flows to their present value.
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.
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PORTFOLIO REVIEW GLOSSARY ConTinuED
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.
EPRA NAV Per Share
EPRA NAV divided by the basic/diluted number of shares
outstanding at the year or period end.
Estimated Vacancy Rates
Represent vacancy rates computed based on current
and expected future market conditions after expiry of any
current lease.
EURIBOR
The Euro Interbank Offered Rate: the interest rate charged
by one bank to another for lending money, often used as a
reference rate in bank facilities.
Financial Year
Period from 1 January to 31 December.
FFO
Free funds from operations, estimated as the EPRA
Earnings for the relevant period.
GLA
Gross leasable area.
IFRS
International Financial Reporting Standards as adopted by
the European Union.
NBP
National bank of Poland.
Property Under Development
Properties that are in 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
Represents a location 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.
Loan to Value (“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
the financial position date. both outstanding debt and the
appraised value of owned assets include our share of these
figures for joint ventures, which are accounted for in the
consolidated financial statements under the equity method.
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.
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 let sqm (GLA) as a percentage of the total
estimated total sqm (GLA) 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 the
financial position date).
Portfolio Open Market Value (“OMV” or “GAV”)
Portfolio open market value means the fair value of the
Group’s investment properties determined by CbAR
Research & Valuation Advisors SRL (“Coldwell banker”),
Colliers Valuation and Advisory SRL, Cushman & wakefield
LLP (C&w), 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.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
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 Offices SRL and its investment is included in the
financial statements under “share of net assets and loans
provided”.
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.
SPA
Share sale purchase agreement.
SQM
Square metres.
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.
Total Accounting Return
Total accounting return is the growth in EPRA NAV per share
plus dividends paid, expressed as a percentage of EPRA
NAV per share at the beginning of the period.
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.
WIBOR
warsaw Interbank Offered Rate.
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PORTFOLIO REVIEW Philips
Quattro
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Hala Koszyki
THE LANDLORD OF CHOICE
FOR BUSINESS
Renorma
Globalworth Tower
Globalworth Tower
Globalworth Tower
warta
Hala Koszyki
Tryton
TCI
Unicredit HQ
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PORTFOLIO REVIEW Gw Green Court
bOb
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATION
A4
Gw Plaza & Gw Tower
TAP
Hala Koszyki
THE LANDLORD OF CHOICE
FOR PEOPLE
Hala Koszyki
Gw Campus
Dacia warehouse
bOb
Gw Campus
Skylight & Lumen
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PORTFOLIO REVIEW COMPANY DIRECTORY
NOTES
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
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 Street
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 Street
2nd district
bucharest 020276
Romania
* wholly owned subsidiaries of the Company.
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NotES
188
Globalworth AnnuAl RepoRt And FinAnciAl StAtementS 2018
Globalworth Real Estate Investments Limited
Ground Floor
dorey court
Admiral park
St peter port
Guernsey GY1 2Ht
Globalworth tower
26th Floor
201 Barbu Vacarescu Street
2nd district
Bucharest 020276
Romania
tel: +40 (0) 372 800 000
Fax: +40 (0) 371 600 000
email: enquiries@globalworth.com
www.globalworth.com