Strong growth continuing

Globalworth Real Estate 21 May 2019 Update
Download PDF

Globalworth Real Estate Investment

Strong growth continuing

Update on equity raise
and acquisitions

Real estate

21 May 2019

Price

€9.00

Market cap

€1,714m

Net debt (€m) as at 31 December 2018

1,259

Net LTV as at 31 December 2018

43.9%

Shares in issue

190.5m

Free float

34.3%

Code

GWI

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(1.1)

10.7

(5.0)

Rel (local)

0.9

9.5

1.4

52-week high/low

€9.60

€7.90

Business description

Globalworth Real Estate is a real estate investment company, incorporated in Guernsey and listed on AIM. It is the leading office investor in the CEE region with a portfolio of more than €2.5bn in Romania and Poland. It targets a sustainable and growing dividend with capital growth.

Next events

AGM

24 June 2019

Analysts

Martyn King

+44 (0)20 3077 5745

Andrew Mitchell

+44 (0)20 3681 2500

Globalworth Real Estate is a research client of Edison Investment Research Limited

2018 was a year of dynamic growth for Globalworth (GWI), and this has continued into 2019. Since reporting FY18 results, it has completed the issue of 55m new shares, valued at c €500m, directed at funding continued portfolio investment and the acquisition of the outstanding minority in its Polish subsidiary. Further acquisitions with a value of c €283m have been reported, and the group has a new core shareholder.

Year end

NOI*
(€m)

EPRA earnings** (€m)

EPRA EPS
(c)

EPRA NAV/
share*** (€)

DPS
(c)

P/EPRA
NAV (x)

Yield
(%)

12/17

51.1

16.8

17.9

8.84

44

1.02

4.9

12/18

133.4

60.9

46.0

9.04

54

1.00

6.0

12/19e

154.3

88.3

50.1

9.52

54

0.94

6.0

12/20e

185.8

113.8

59.6

10.31

58

0.87

6.4

12/21e

201.6

127.1

66.6

10.89

62

0.83

6.9

12/22e

210.4

135.1

70.8

11.32

66

0.80

7.3

Note: *NOI is net operating income. **EPRA earnings is adjusted for revaluation movements and other non-recurring items. ***EPRA NAV is adjusted for deferred tax liabilities, fair value of interest rate derivatives and other items.

Equity raise, minority buy-out and acquisitions

Of the 55m new shares issued at €9.10 per share, a slight premium to end-FY18 EPRA NAV per share of €9.04, c 38.1m were placed for cash, raising gross proceeds of c €348m to part-fund continuing growth. The balance was exchanged for minorities in Globalworth Poland, in which GWI’s ownership is now 99.6% and de-listing of the Polish subsidiary has begun. The increased economic exposure to Poland and simplification of the group structure is a welcome move that should create efficiencies. Meanwhile, Growthpoint has reinforced its position as GWI’s largest shareholder (29.8%) and Aroundtown, one of Europe’s largest listed real estate companies, is a new core shareholder with 18.1%. The near-term acquisition pipeline of Polish office assets under exclusive negotiation has been completed, for an aggregate €283m at a blended average stabilised yield of 7.8%.

Per share forecasts lower but strong growth

In our updated multi-year analysis, FY22e EPRA earnings and NAV per share are reduced by 8–10% (see page 4), although the rate of growth in NAV, earnings and dividends in the years to end-FY22 remains strong. The drivers of growth are an increased contribution from recently completed acquisitions and developments, future developments, and rental growth, with a modest contribution from assumed further acquisitions of c €125m, partly re-gearing the balance sheet after the recent equity increase. Rental growth and development profits should drive capital growth and increasing EPRA NAV per share, and there is scope (not captured in our forecast) for market-wide yield tightening, especially in Romania, to further lift NAV.

Valuation: Growth should drive shareholder returns

GWI shares have performed well in recent weeks and now trade at a slight premium to FY18 EPRA NAV. We would expect shareholder returns to be driven by the strong upside potential in income and capital earnings, and we forecast a compound annual average NAV total return of 10.9% per year to FY22.

Strong growth continuing in 2019

Since it listed in 2013, GWI has grown rapidly to become one of the leading real estate companies in the CEE region. It is focused on Romania and Poland, where commercial property markets are supported by strong economic growth, above the EU average, and an increasing number of multinational companies operating in the region. 2018 was a year of dynamic growth for Globalworth and this has continued into 2019. During FY18, GWI consolidated the late 2017 acquisition of a controlling stake in Polish GPRE, closed acquisitions with a total value of more than €500m, mostly in Poland, and made further progress with its development pipeline in Romania. Already in 2019 it has completed the issue of 55m new shares with a value of c €500m, has closed or agreed acquisitions with an aggregate value of c €280m, and has greatly simplified the group structure by acquiring the minority interest in its Polish subsidiary. We commented briefly on the FY18 results in our update note published on 13 March 2019. In this note we update our multi-year financial forecasts for the period to end-FY22. Our forecasts assume a modest re-gearing of the balance sheet, including a notional €125m of acquisitions to take the LTV closer to the 40% medium term target. In practice, we would expect the group to do more than this, given its dynamic track record of growth and strategic goal of further portfolio expansion over time, locking in attractive returns, and building scale to become the landlord of choice, funded through a balance of new equity and debt resources. The recently completed issue of 55m new shares at slightly above EPRA NAV and recent upgrades to investment grade of the group’s issuer credit rating by both Moody’s and S&P (Fitch already rated GWI investment grade) underline the group’s access to capital markets on favourable terms. While we recognise this potential upside, we do not include it in our forecasts given the uncertainties surrounding the scale, terms and timing of such action.

Placing and exchange offer completed

Consistent with its growth strategy, GWI recently completed the issue of 55m new shares. These were directed at part-funding continuing portfolio investment and the acquisition of minority interests in Globalworth Poland. Of the 55m new shares issued at €9.10 per share, slightly ahead of the end-FY18 EPRA NAV per share of €9.04, c 38.2m shares were placed (“the placing”) with investors to raise gross proceeds of €347.6m. Growthpoint, South Africa’s largest REIT and since 2016 GWI’s largest shareholder, subscribed to c 1.6m of the placing shares and it also received c 16.8m new shares in exchange for its 21.6% direct investment in Globalworth Poland (formerly GPRE). Growthpoint acquired the stake in June 2018 when it subscribed to an equity raise by GWI’s Polish subsidiary.

As a result of the transactions, Growthpoint’s shareholding in the enlarged GWI share capital has increased slightly, to 29.8%, and including some other, smaller recent minority acquisitions, GWI’s ownership of Globalworth Poland has now increased to 99.6%. GWI has begun the procedure for delisting the Globalworth Poland subsidiary, which it expects to complete later in the year. This will represent a welcome rationalisation of the group structure, presenting a simpler equity story to investors, and has the potential to reduce administration costs and deliver operational synergies.

With an 18.1% stake, Aroundtown SA, one of the largest listed commercial and residential real estate companies in Europe, with a market capitalisation of more than €8bn, becomes GWI’s second large listed investor.

Exhibit 1: Shareholder structure

Shareholder

Ownership

Growthpoint

29.8%

Aroundtown

18.1%

Ioannis Papalekas

12.7%

Altshuler Shaham Ltd

6.3%

EBRD

5.8%

York Capital

4.2%

Others

23.7%

Total

100.0%

Of which free float*

34.3%

Shareholder

Growthpoint

Aroundtown

Ioannis Papalekas

Altshuler Shaham Ltd

EBRD

York Capital

Others

Total

Of which free float*

Ownership

29.8%

18.1%

12.7%

6.3%

5.8%

4.2%

23.7%

100.0%

34.3%

Source: Globalworth Real Estate. Note: *Free float as defined by the AIM Rules for Companies.

The net proceeds of the placing will be used to fund investment opportunities in both Romania and Poland, as well as for general corporate purposes, while providing support for GWI’s long-term gearing strategy, which targets an LTV of less than 40%. Since announcing the capital increase, the acquisitions of four office properties in Poland (the near-term pipeline of opportunities under exclusive negotiation, announced in March), for an aggregate €283m before debt, have been agreed. Two have already completed, for an aggregate consideration of c €170m, and two are expected to complete in July, for an aggregate c €113m, subject to conditions being met. GWI’s strategy is to seek further acquisitions of office assets in Poland, providing potential for economies of scale and asset management driven value creation. In Romania, GWI has a strong pipeline of office/light industrial and logistics developments, and management estimates future capital investment of c €250m including current and planned projects.

Reflecting the further strengthening of the group’s financial position, both Moody’s Investors Service and S&P, the international credit rating agencies, have recently upgraded their issuer credit ratings on GWI; Moody’s from to Baa3 from Ba1, and S&P from BBB- to BB+. GWI is now rated investment grade with each of Moody’s, S&P and Fitch. The impact on GWI’s unsecured bonds, listed on the Irish and the Bucharest stock exchanges, has been noticeably favourable, which is a positive indicator for future funding costs as the group looks to further grow its portfolio. The yield on the company’s 2.875% unsecured Eurobonds due in 2022 is now 1.23% (17 May 2019), having been at around 2% for most of 2018 before rising closer to 3% in the late-year worldwide market sell-off. The yield on the 3.0% unsecured loan notes due in 2025 is now at 2.3%, having been c 3% throughout 2018 and closer to 4% at end-2018.

Ongoing acquisitions

In line with its plans to further expand in Poland through acquisition, in March the company announced a pipeline of near-term opportunities consisting of four Class A office assets under exclusive negotiation, with an aggregate value of c €280m, and a blended stabilised yield of above 7.5%. The acquisitions of Rondo Business Park in Krakow and the Warsaw Trade Tower have been completed, and the acquisitions of Retro Office House in Wroclaw and Silesia Star in Katowice have been conditionally agreed and are expected to complete in July. Assuming full completion, the four assets represent an aggregate investment of €283.1m, and will add an immediate €20.7m to annual contracted rental income. We estimate reversionary potential to €22.1m of annual contracted rent, or a stabilised yield of c 7.8%.

Exhibit 2: Completed and agreed near-term acquisition pipeline

Location

Investment (€m)

GLA
('000 sqm)

Contracted rent (€m)

Occupancy

Rent potential (€m)

WALL* (years)

Stabilised yield

Completed transactions

Rondo Business Park

Krakow

37.0

17.8

3.0

90%

3.3

4.5

8.9%

Warsaw Trade Tower

Warsaw

132.9

45.4

9.0

88%

10.1

2.2

7.6%

Transactions conditionally agreed

Retro Office House

Wroclaw

58.8

21.9

3.9

100%

3.9

5.0

6.6%

Silesia Star

Katowice

54.4

29.2

4.8

100%

4.8

3.6

8.8%

Total

283.1

114.3

20.7

22.1

7.8%

Source: Globalworth Real Estate, Edison Investment Research. Note: *WALL is weighted average unexpired lease length.

Rondo Business Park is strategically located directly adjacent to the already owned Quattro Business Park. Warsaw Trade Tower benefits from AXA as the largest tenant, alongside other international companies including American Express and Mattel, with reversionary potential from letting vacant space. Retro Office House is a 100% let newly completed office development in central Wroclaw, benefiting from good transport links to other parts of the city. Silesia Star, fully let to multiple occupiers, is a complex of two interconnecting buildings in the centre of Katowice, developed in 2014 and 2016.

Forecast update

A strong FY18 performance included good underlying progress from the existing portfolio and a full-year earnings contribution from Globalworth Poland, fully reflected in the FY17 balance sheet but contributing to the FY17 income statement for less than one month. Underlying progress reflected strong leasing activity and an increasing contribution from recently completed developments, rental growth, ongoing acquisitions and operational efficiency. FY18 net operating income increased from €51.1m to €133.4m and EPRA earnings grew from €16.8m (17.9 cents per share) to €60.9m (46.0 cents per share). Including increased DPS and growth in EPRA NAV per share to €9.04, the NAV total return for the year was 7.8%.

Having reviewed the results in detail, and taken account of recent further acquisitions, the Globalworth Poland minority buy-out and the capital increase, we have updated our multi-year financial forecasts for the period to end-FY22 (Exhibit 3). Our forecasts for growth in rental income and capital values include an increased contribution from recently completed acquisitions and developments, assumed further acquisitions of €125m to partly re-gear the balance sheet following the recent equity raise, rental growth and a significant potential contribution from the active development programme. Not specifically included in our forecasts is the potential for additional capital growth that would result from a convergence of Bucharest office yields towards the lower levels seen in markets elsewhere around the CEE region.

Compared with our previous forecasts, income, earnings and net assets are all much higher, although in per share terms forecast EPRA earnings and NAV are lower. There are a number of factors contributing to the per share reductions including:

An increase in forecast administrative costs as a result of the significantly expanded property management platform in Poland.

A reduction in development gains implied by management’s revised development schedule, including slightly higher construction costs not matched by a similar uplift in expected asset values.

The surrender of the Polish master lease and NOI guarantees in late FY18 in return for a €21.5m one-off cash settlement. Although we anticipate that this will be broadly value-neutral to GWI, while providing cash up front and increasing its asset management flexibility with respect to the relevant assets, we expect some of the income recognised in FY18 to be offset by future costs, including near-term void costs and leasing costs.

Despite the assumed €125m of additional acquisitions, there is a small reduction in our forecast FY22 LTV, from 39.5% previously to 39.0%.

We are now assuming a flat DPS in the current year and have slightly trimmed our rate of DPS growth so as to build EPRA earnings cover and then maintain it at c 1.1x.

Exhibit 3: FY18 performance versus forecast and forecast revisions summary

NOI (€m)

EPRA earnings (€m)

EPRA EPS (c)*

EPRA NAV per share (€)*

DPS (c)

Actual

F'cast

Diff.

Actual

F'cast

Diff.

Actual

F'cast

Diff.

Actual

F'cast

Diff.

Actual

F'cast

Diff.

FY18

133.4

116.4

15%

60.9

55.3

10%

46.0

41.8

10%

9.0

9.1

-1%

54

54

0%

New

Old

Change

New

Old

Change

New

Old

Change

New

Old

Change

New

Old

Change

FY19e

154.3

149.3

3%

88.3

73.0

21%

50.1

55.1

-9%

9.5

9.7

-2%

54

56

-4%

FY20e

185.8

162.4

14%

113.8

84.3

35%

59.6

63.6

-6%

10.3

10.7

-4%

58

58

0%

FY21e

201.6

177.3

14%

127.1

97.2

31%

66.6

73.3

-9%

10.9

11.6

-7%

62

62

0%

FY22e

210.4

186.3

13%

135.1

104.4

29%

70.8

78.8

-10%

11.3

12.3

-8%

66

72

-8%

Source: Edison Investment Research. Note: Due to an Edison modelling error, the FY21 and FY22 EPRA earnings and EPRA EPS forecasts were previously mis-stated as €99.1m/€74.7 per share and €115.8m/€87.3 per share, respectively. There was no impact on the published IFRS earnings, EPRA NAV or total return forecasts.

Specifically, we have updated the detailed forecast set out in our outlook note to include:

All of the recently announced acquisitions shown in Exhibit 2 as well as an assumed €125m of additional acquisition of standing assets with an immediate yield on cost of 7.2% and yield potential at full occupancy of 8.0%. The assumed further acquisition is assumed to take place at the beginning of FY20.

The current and planned development projects, in line with the updated assumptions provided by management, shown in Exhibit 4. The expected capex remaining to complete these developments is c €250m, with an expected addition to contracted rental income of €31.5m.

Exhibit 4: Current and planned developments

Globalworth Campus Tower III

Globalworth Square

TAP II first phase

TAP & TAP II expansion*

Luterana

Green Court D

Globalworth West

Location

Bucharest new CBD

Bucharest new CBD

Timisoara

Timisoara

Bucharest new CBD

Bucharest new CBD

Bucharest new CBD

Type

Office

Office

Light ind./ logistics

Light ind./ logistics

Office

Office

Office

Status

Under
development

Under development

Under development

Future development

Future development

Future development

Future development

Expected/potential delivery

Q419

Q120

Q219

2019–20

Q221

Q420

Q121

Expected GLA ('000sqm)

34.8

26.4

17.7

150.6

26.4

16.2

33.4

Cost/capex to 31 December 2018 (€m)

17.0

14.2

3.3

5.0

7.1

2.6

3.0

As is value at 31 December 2018 (€m)

25.5

13.8

5.4

7.8

14.3

5.1

3.2

Estimated remaining capex (€m)

39.0

39.9

5.2

59.1

40.4

23.9

42.4

Estimated rental income (€m)

5.6

5.1

0.8

6.5

5.8

2.9

4.8

Estimated yield on cost (€m)

10.0%

9.5%

10.0%

10.2%

12.2%

11.0%

10.6%

Source: Globalworth Real Estate. Note: *To be developed in stages.

We assume that GWI acquires 100% of the now completed Renault Bucharest Connected (RBC), developed as a 50:50 joint venture and housing Groupe Renault’s new headquarters in Romania and a dedicated auto design centre, at the end of FY19. This adds €5.5m to contracted rental income, while during FY19 we allow for GWI’s 50% share of this through the JV line in the income statement.

We have indexed rents to the European Harmonised Index of Inflation (HICP) and have assumed a constant rate of 2.0% per year over the period, similar to the current level.

We assume the maintenance of a high level of occupancy across the portfolio as a whole. For the speculatively developed assets we assume 60–70% initial occupancy, followed by a steady increase towards the long-term level of c 95% that we assume for the portfolio as a whole (95.1% at end-FY18 for the standing commercial portfolio, including certain office rental guarantees).

We have assumed positive revaluation movement in line with rental growth and we have assumed a yield of 7% on the Romanian development assets, similar to the current blended yield on the completed Romanian portfolio post completion and letting. Specifically, we have not assumed any generalised market-driven changes in yield, either positive or negative, although as we discuss below there is potential for Romanian yields in particular to tighten, converging on the levels seen in more established regional markets.

NAV sensitivity to yield shift

Current market conditions suggest good potential for prime office yields to tighten in Bucharest in particular, where prime office yields remain well above the levels in other regional markets and valuations remain well below historical highs. Although prime office yields in Bucharest have declined over the past three years, the tightening has not kept pace with that seen in Warsaw, Budapest and Prague (1.0–1.5pp), and they remain noticeably higher. Bucharest prime yields of c 7.25% compare with c 5.0% in Warsaw, 6.0% in Budapest and c 4.75% in Prague, and remain well above the c 6.0% seen at the 2007 pre-financial crisis market peak. GWI management continues to anticipate that the gap with other CEE centres will narrow, which would have a positive impact on our EPRA NAV and total return forecasts.

The full occupancy yield on the Romanian commercial portfolio was c 7.4% at end-FY18 or 6.9% based on contracted rental income, a small discount to the Bucharest prime office yield of 7.25% and reflecting the quality and location of the assets.

In Exhibit 5 we show an updated sensitivity of our EPRA NAV forecasts to alternative full occupancy yield assumptions. We estimate that a 50bp tightening in yields across the portfolio would increase FY22 EPRA NAV per share by c €2, or c 17%. If confined to Romanian assets, this would equate to a c 100bp tightening in Romanian yields.

Exhibit 5: Impact of full occupancy yield change on EPRA NAV per share

EPRA NAV per share (€) for yield change of:

2019e

2020e

2021e

2022e

-1.00%

2.9

3.5

4.0

4.3

-0.75%

2.1

2.5

2.9

3.1

-0.50%

1.3

1.6

1.9

2.0

-0.25%

.6

.8

.9

1.0

No change in yield (ie as forecast)

0.0

0.0

0.0

0.0

+0.25%

(.6)

(.7)

(.8)

(.9)

+0.50%

(1.2)

(1.4)

(1.6)

(1.7)

Source: Edison Investment Research

Valuation

The FY18 aggregate dividend per share increased to €0.54 from €0.44, set with a view to the expected growth in income earnings, as recent acquisitions make a full contribution and current and planned developments complete. We expect dividends to represent a significant element of shareholder returns and our revised forecasts continue to indicate strong growth in DPS, to €0.66 (declared basis) in FY22, 1.07x covered by EPRA earnings.

Capital growth has been strong since the IPO and we forecast this to continue, enhancing income returns further. As noted above, our base forecasts assume no market-driven shifts in the portfolio valuation yield, with revaluation movements driven by expected inflation indexation of rents and our forecast for development gains. The latter are based on management’s expectations for the costs, timing and rent potential of the developments and our assumption that the post-completion yields will be similar to current portfolio levels.

Exhibit 6: EPRA NAV total return and forecasts

FY14

FY15

FY16

FY17

FY18

FY19e

FY20e

FY21e

FY22e

FY19–22e

Opening EPRA NAV per share (€)

5.57

8.09

9.08

8.57

8.84

9.04

9.52

10.31

10.89

9.04

Closing EPRA NAV per share (€)

8.09

9.08

8.57

8.84

9.04

9.52

10.31

10.89

11.32

11.32

DPS paid (€)

0.00

0.00

0.00

0.22

0.49

0.54

0.56

0.60

0.64

2.34

EPRA NAV total return

45.4%

12.2%

-5.6%

5.8%

7.8%

11.3%

14.1%

11.4%

9.8%

51.0%

Source: Globalworth Real Estate data, Edison Investment Research

Combining our DPS and capital return expectations, we estimate an aggregate 51% EPRA NAV total return between end-FY18 and end-FY22, or a compound annual average return of 10.9%. Dividends represent just under half of the forecast return and capital growth represents the balance. Although lower than the aggregate return of 60.7% and compound annual average return of 12.6% implied by our previous forecasts, we consider this to be an attractive prospect in the current low rate environment.

As noted above, yield convergence, especially in relation to the Romanian portfolio, has the potential to materially increase returns above the levels that we estimate.

Although there are no direct comparators to GWI, in Exhibit 7 we show a summary valuation and share price performance comparison of GWI with a small number of other quoted companies that are also significant investors in the CEE regional commercial property market within more broadly spread portfolios. The table uses historical (rather than forecast) financial data. On this basis, GWI offers a higher yield than the peer group average, while trading at a slightly higher P/NAV. The GWI share price has performed strongly over the past three months and we would expect future shareholder returns to be driven by growth in EPRA NAV per share and supported by the attractive yield and growing DPS.

Exhibit 7: Peer comparison table

Price
(local)

Market cap
(€m)

P/NAV
(x)

Yield
(%)

P/E
(x)

Share price performance (%)

1 month

3 months

12 months

From 12m high

NEPI Rockcastle

7.35

4,306

1.04

7.2

13.8

-2.0

-8.7

-13.0

-14.0

IMMOFINANZ

22.85

2,571

0.80

3.7

14.8

-0.3

1.7

9.2

-2.8

CA IMMO

33.50

3,310

1.01

2.7

26.4

6.7

10.9

15.3

-1.3

GTC

8.70

964

0.82

4.3

15.3

-6.6

-8.2

-3.3

-9.7

Average (ex-Globalworth)

0.92

4.5

17.6

-0.6

-1.1

2.1

-7.0

Globalworth

9.03

1,714

1.00

6.0

19.6

-1.4

9.1

-5.5

-8.6

Source: Globalworth Real Estate data. Note: Priced at 21 May 2019. NAV data is last reported and DPS data is trailing 12-month declared.

Exhibit 8: Financial summary

Year ended 31 December (€000's)

2016

2017

2018

2019e

2020e

2021e

2022e

INCOME STATEMENT

Rental income

46.2

53.9

137.6

159.3

191.8

208.2

217.4

Net property operating expenses

(2.6)

(2.8)

(4.2)

(5.0)

(6.0)

(6.7)

(7.0)

Net operating income (NOI)

43.6

51.1

133.4

154.3

185.8

201.6

210.4

Administrative expenses

(7.7)

(10.2)

(15.3)

(17.0)

(17.5)

(17.8)

(18.1)

Depreciation of long-term assets

(0.2)

(0.2)

(0.4)

(0.4)

(0.4)

(0.4)

(0.4)

Acquisition costs

(0.1)

(10.8)

(1.2)

0.0

0.0

0.0

0.0

Fair value gain on investment property

6.7

6.7

34.1

108.4

142.0

97.5

68.9

Bargain purchase gain on acquisition of subsidiaries

0.0

28.9

0.3

0.0

0.0

0.0

0.0

Share based payments

(0.0)

(0.1)

(0.5)

(0.5)

(0.5)

(0.5)

(0.5)

FX gain/(loss)

(0.1)

(0.3)

(1.2)

0.0

0.0

0.0

0.0

Other net operating income/(expense)

1.5

(4.1)

(4.0)

0.0

0.0

0.0

0.0

Gain on sale of financial instruments

0.0

0.0

5.5

0.0

0.0

0.0

0.0

EBIT

43.7

61.0

150.7

244.8

309.3

280.4

260.3

Net finance expense

(31.5)

(37.0)

(38.4)

(42.1)

(46.3)

(47.7)

(47.7)

JV

0.0

2.2

3.1

2.8

0.0

0.0

0.0

Profit before tax (PBT)

12.2

26.2

115.3

205.4

263.0

232.7

212.6

Tax charge

(0.9)

(2.4)

(15.4)

(23.2)

(30.0)

(23.7)

(19.6)

Profit after tax

11.3

23.7

99.9

182.2

233.0

209.0

192.9

Minorities

0.0

0.7

(19.7)

(2.9)

0.0

0.0

0.0

Attributable profit after tax (PAT)

11.3

24.4

80.3

179.4

233.0

209.0

192.9

EPRA earnings adjustments:

Fair value gain on investment property

(6.7)

(6.7)

(34.1)

(108.4)

(142.0)

(97.5)

(68.9)

Other EPRA adjustments

4.0

(0.9)

14.7

17.3

22.7

15.6

11.0

EPRA earnings

8.6

16.8

60.9

88.3

113.8

127.1

135.1

Basic average number of shares (m)

64.4

92.5

132.3

176.1

190.6

190.6

190.6

Fully diluted average number of shares (m)

64.4

93.8

132.5

176.3

190.8

190.8

190.8

IFRS EPS - basic (c)

17.6

26.4

60.7

101.9

122.3

109.6

101.2

Diluted EPRA EPS (c)

13.3

17.9

46.0

50.1

59.6

66.6

70.8

DPS (c)

0.0

44.0

54.0

54.0

58.0

62.0

66.0

Dividend cover

0.4

0.9

0.9

1.0

1.1

1.07

BALANCE SHEET

Investment property

980.9

1,792.4

2,391.0

2,953.1

3,336.7

3,466.3

3,535.1

Other non-current assets

17.7

49.2

69.0

30.7

30.7

30.7

30.7

Total non-current assets

998.6

1,841.6

2,460.0

2,983.8

3,367.4

3,497.0

3,565.9

Cash & equivalents

221.3

273.3

229.5

101.7

35.2

27.5

49.8

Other current assets

11.8

46.1

47.4

47.4

47.4

47.4

47.4

Total current assets

233.2

319.4

277.0

149.1

82.6

74.9

97.2

Interest bearing loans & borrowings

(375.6)

(834.0)

(1,235.1)

(1,243.6)

(1,399.1)

(1,404.6)

(1,410.1)

Deferred tax liabilities

(70.6)

(99.6)

(107.0)

(124.3)

(147.0)

(162.6)

(173.7)

Other non-current liabilities

(4.5)

(13.1)

(15.9)

(17.7)

(20.2)

(21.6)

(22.0)

Total non-current liabilities

(450.6)

(946.7)

(1,358.0)

(1,385.7)

(1,566.4)

(1,588.8)

(1,605.8)

Interest bearing loans & borrowing

(38.7)

(36.4)

(24.0)

(20.9)

(20.9)

(20.9)

(20.9)

Other current liabilities

(27.1)

(41.5)

(57.7)

(50.7)

(60.4)

(64.7)

(67.6)

Total current liabilities

(65.8)

(77.8)

(81.7)

(71.7)

(81.3)

(85.7)

(88.5)

Net assets

715.4

1,136.5

1,297.3

1,675.6

1,802.3

1,897.4

1,968.8

Non-controlling interests

0.0

(67.6)

(212.4)

0.0

0.0

0.0

0.0

Shareholders' equity

715.4

1,068.9

1,084.9

1,675.6

1,802.3

1,897.4

1,968.8

Adjustments to EPRA:

Add deferred tax liability

70.6

112.1

128.6

146.0

168.7

184.3

195.3

Deduct goodwill as a result of deferred tax

(5.7)

(5.7)

(5.7)

(5.7)

(5.7)

(5.7)

(5.7)

Add negative fair value of interest rate swap

3.6

2.6

2.1

2.1

2.1

2.1

2.1

Other

0.0

(6.5)

(9.8)

0.0

0.0

0.0

0.0

EPRA NAV

783.8

1,171.5

1,200.2

1,817.9

1,967.4

2,078.1

2,160.5

Period end number of shares, fully diluted (m)

91.5

132.5

132.7

190.9

190.9

190.9

190.9

Basic NAV per share (€)

7.91

8.09

8.19

8.79

9.45

9.95

10.33

EPRA NAV per share (€)

8.57

8.84

9.04

9.52

10.31

10.89

11.32

CASH FLOW

Net cash flows from operating activities

19.9

10.1

80.1

101.1

133.0

139.9

145.4

Cash flows from investing activities

(39.5)

(388.0)

(426.9)

(475.4)

(242.0)

(32.5)

(0.4)

Cash flows from financing

206.9

430.6

303.1

246.5

42.5

(115.1)

(122.7)

Change in cash

187.3

52.7

(43.7)

(127.9)

(66.5)

(7.7)

22.3

Opening cash

31.0

218.4

271.0

227.3

99.4

32.9

25.2

Closing cash

218.4

271.0

227.3

99.4

32.9

25.2

47.6

Adjustments to balance sheet cash

3.0

2.3

2.3

2.3

2.3

2.3

2.3

Balance sheet cash

221.3

273.3

229.5

101.7

35.2

27.5

49.8

Debt as per balance sheet

(414.2)

(870.4)

(1,259.1)

(1,264.6)

(1,420.1)

(1,425.6)

(1,431.1)

Debt fair value adjustment

0.0

(12.6)

(20.5)

(20.5)

(20.5)

(20.5)

(20.5)

Debt at nominal value

(414.2)

(883.0)

(1,279.6)

(1,285.1)

(1,440.6)

(1,446.1)

(1,451.6)

Net (debt)/cash

(192.9)

(609.7)

(1,050.1)

(1,183.4)

(1,405.4)

(1,418.6)

(1,401.8)

Net LTV

19.7%

34.0%

43.9%

39.9%

41.8%

40.5%

39.0%

Source: Globalworth Real Estate Investment, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Globalworth Real Estate and prepared and issued by Edison, in consideration of a fee payable by Globalworth Real Estate. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Globalworth Real Estate and prepared and issued by Edison, in consideration of a fee payable by Globalworth Real Estate. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues