In the first half of the year, Globalworth’s net profit significantly improved to €32.6 million (H1 2021: €12.5 million) due to a fair value gain on investment property and an increase in the share of profit of equity-accounted investments in joint ventures. Globalworth released its interim report and unaudited consolidated financial results for H1 2022.
Investments
Globalworth’s portfolio is predominantly comprised of Class A offices. In the last 12 months, however, following the delivery of Globalworth Square and in response to market demand, the company has focused its development programme on high-quality logistics facilities in Romania and the redevelopment of two mixed-use properties in Poland.
As a result, in H1 2022, the company finalised the construction of four logistics facilities with a total of 61.7k sqm of GLA. These facilities all represent subsequent phases in existing successful projects of Globalworth.
During the year so far, the company also formed a new strategic partnership with a very experienced local developer to invest in the "small business units" segment in logistics and warehouse facilities in Romania. As part of this partnership in which Globalworth owns a majority (75%) stake, the comapany acquired its first small business units project (standing) in the North-Western part of Bucharest and is developing a second project (in phases) in the North-Eastern part of the capital. In addition, they have another industrial project under construction in Bucharest, expected to be delivered this year.
The company also focused on actively improving its existing properties. Of the three mixed-use properties its owns in Poland, two are currently under refurbishment to improve their Class A office space and their retail and commercial offerings in line with current market trends. For the remainder of Globalworth’s standing properties, its keeps investing in maintaining and, where required, improving their quality.
As a result, the values of Globalworth’s like-for-like standing commercial, and total combined, portfolio increased by 0.8% to €2.8 billion, and 1.7% to €3.2 billion, respectively.
Leasing and occupancy
In the first half of 2022, Globalworth successfully negotiated the take-up or extension of 106,100 sqm of commercial spaces at an average WALL of 5.0 years despite the continued challenging market conditions
It is also important to note that, although most of Globalworth’s tenants are large multinationals or national corporates, their operations within Globalworth’s portfolio had no material exposure to either Ukraine or Russia. Thus, Globalworth’s business has not been directly affected by the war.
The average standing occupancy of Globalworth’s combined commercial portfolio was 88.1% (88.4% including tenant options) on 30 June 2022, marginally lower compared to year-end 2021 (88.5% or 88.7% including tenant options). Lower occupancy was driven by the four newly completed industrial facilities, two of which are in the lease-up phase. Like-for-like occupancy marginally increased by 0.9% despite the challenging market conditions and the fact that WARTA Tower is now effectively vacant.
In Poland and Romania, increased construction costs and reduced development activity due to the COVID-19 pandemic have limited new supply in these markets. This means that the supply of high-quality offices in central locations in the coming years will be lower than the average levels recorded in the past, which may result in higher tenant demand for such properties.
In addition, the gap between Class A properties with strong ESG credentials and Class B properties has been widening both from an investment and a leasing perspective, which should benefit Globalworth’s portfolio of high-quality properties in the future.
Headline rental levels have remained stable, and the combination of lower supply and higher inflation should be a strong mitigant against the negative effects of a potential slowdown in tenant demand due to the weakening economic conditions.
The total annualised contracted rent increased by 2.5% to €188.4 million compared to year-end 2021, with like-for-like annualised commercial contracted rents in Globalworth’s standing commercial portfolio increasing by 2.1% to €178.1 million at the end of the first half of 2022.
Financial results
Gross rent remained effectively unchanged compared to the first half of last year, as the positive impact from standing properties added to the portfolio during the year, the addition of Globalworth Square in June 2021 (lease-up phase) and the higher occupancy, were offset by Warta Tower which is now effectively empty.
In addition, an increase in the cost of non-recoverable service charges and property operating costs covered by the Group as part of its ESG spaces used in response to the Ukrainian Refugee Crises, resulted in the Net Operating Income decreasing by 3.2% compared to H1-2021.
However, Globalworth’s adjusted normalised EBITDA decreased by 2.1% to €63.4 million due to the positive impact of savings in recurring administrative and other expenses.
Globalworth’s net profit significantly improved to €32.6 million (H1 2021: €12.5 million) due to fair value gain on investment property and an increase in the share of profit of equity-accounted investments in joint ventures.
Outlook
“The current challenging global macroeconomic conditions are expected to continue over the near to mid-term, resulting in an uncertain outlook. As a result, Globalworth’s primary focus continues to be maintaining a solid and resilient operating performance and a prudent financial position with moderate leverage and high levels of liquidity,” says Chief Executive Officer Dimitris Raptis.
