Q1 2018 RESULTS Warsaw, June 12th, 2018 Agenda Q1 2018 key - - PowerPoint PPT Presentation

Warsaw, June 12th, 2018

Q1 2018 RESULTS

Agenda

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▪ Investment portfolio ▪ Financial results for Q1 2018 ▪ ArtN ▪ Strategic objectives ▪ Q1 2018 key highlights

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Q1 2018 KEY HIGHLIGHTS

Q1 2018 KEY HIGHLIGHTS

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▪ Execution of engineering and construction contract related to ArtN (flagship mixed-use project in heart of Warsaw) with Warbud S.A. for a total value of PLN 333 m. ▪ The openning of the Neptun House (Hampton By Hilton Old Town Gdańsk) scheduled for 15th of June 2018. ▪ Submission of the application for a building permit of Crowne (mixed use project comprising hotel and high-quality apartments for rent) on April 16, 2018. ▪ Redemption of 11 m PLN series E bonds (Q1 2018) and 35 m PLN series F bonds (Q2 2018). ▪ Repayment of the principal of EUR 2.5m contracted with Getin Noble Bank (multifunctional loan). ▪ 13,090 m2 of new area leased in 2018 in three key projects of the Group.

+18%

Increase in rental income in comparison to 3M 2017 due to completed projects

1.6x q/q

Increase in FFO in comparison to 3M 2017 due to increase in rental income and decrease in interest expense

• 4%

decrease in interest expense

• n bank borrowing in

comparison to 3M 2017

2.2 bn PLN

current value of the property portfolio

166 k m2

GLA of income generating investment projects

276 k m2

total portfolio GLA

5

91%

Occupancy in completed investment projects

13.090 m2

New area leased in 2018*

1.045 m2

Lease extension in 2018*

80% 95%

70% 75% 80% 85% 90% 95% 100% 31/12/2016 12/06/2018

EC Beta & Gamma

+15% 5%

44% 83%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 31/12/2016 12/06/2018

Delta

+39% 83% 96%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 31/12/2016 12/06/2018

Royal Wilanów

+13%

EC Alfa

92% 85%

60% 70% 80% 90% 100% 31/12/2016 12/06/2018

• 7%

7%

INCREASE IN AREA LEASED

* Reffers to Eurocentrum Office Complex, Royal Wilanów and ArtN.

Investment portfolio

Completed projects

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

Yield: 6.78 78%



Book value: 877 m PLN (207 m EUR)



Current occupancy: 90% 90%



WAULT1: 4.5 5

EURO ROCEN ENTRUM OFFIC ICE E COMPLEX, LEX, GLA: 84,636 m2

Completed projects

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EURO ROCEN ENTRUM ALFA, , GLA: 14,319 m2

 Acquisition date – March 2007 (Completion date – 2002)  Yield: 7.75%  Book value: 111 m PLN (26 m EUR)  Occupancy: 85%  WAULT: 3.7  Top tenants: Provident Polska, IPF Polska, QUMAK, GIDT

EURO ROCEN ENTRUM BETA, , GAMMA MMA, , GLA: 43,182 m2

 Completion date – June 2014  Yield : 6.30%  Book value: 469 m PLN (111 m EUR)  Occupancy: 95%  WAULT: 3.8  Top tenants: Unilever, Randstad, Coty, Comarch, Pelion, Group One

EURO ROCEN ENTRUM DELTA, , GLA: 27,135 m2

 Completion date – February 2016  Yield : 6.30%  Book value: 297 m PLN (70 m EUR)  Occupancy: 83%  WAULT: 6.0  Top tenants: Polskie Sieci Elektroenergetyczne, Centralny Ośrodek Informatyki, SAGE

ROYAL AL WILANÓW, GLA: 36 36,92 923 m2

 Completion date – August 2015  Yield: 6.5%  Book value: 421 m PLN (100 m EUR)  Occupancy: 96%  WAULT: 4.9  Top tenants: Sygnity S.A., ERBUD, Boehringer Ingelheim, Artis, Medicover

GALER LERIA IA ZASP SPA, GLA: 8,683 683 m2

 Completion date – April 2016  Yield: 7.50%  Book value: 63 m PLN (15 m EUR)  Occupancy: 93%  WAULT: 5.6  Top tenants: Intermarche, Rossmann, EURO RTV AGD, Calypso, Pepco, KIK, ZooKarina, Textil Market, DOZ Pharmacy, Dominos Pizza, YES, MAC

VIS A VIS ŁÓDŹ, GLA: 5,711 m2

 Completion date – December 2014  Yield: 8.0%  Book value: 36 m PLN (9 m EUR)  Occupancy: 99%  WAULT: 5.2  Top tenants: Intermarche, Fit Fabric, Rossmann, Pepco, Blue Medica Clinic

Completed projects

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Projects in progress

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ARTN RTN, , GLA: : 67,3 ,351 m2 (offic ice: : 40,4 ,405 m2 , , retail ail: : 26,9 ,946 m2 )

 Completion date – 4Q 2020  Yield: 5.38%  Planned capex1: 737 m PLN (81 m PLN of own contribution)  Book value: 338 m PLN (80 m EUR)  Current prelease2: 23% (office: 5%, retail: 51%)  Top tenants: OH Kino, Food Hall operator, BioBazar, Piotr i Paweł, SuperPharm, Car Spa, L'Oreal Professionel, Weranda, Etno Cafe, Soul Food, Kruk Rolex, Lambert, Paris Optique, MAC, YES, Frankie’s, TFH.

NEPTUN HOUSE, E, GLA: : 7,0 ,000 m2 (174 rooms)

 Completion date – June 2018  Yield: 8.50%  Book value: 58 m PLN (14 m EUR)  Current prelease2: 100%  Top tenants: VHM (hotel operator – Hampton by Hilton), Kos Delicatessen, Manufaktura Nalewki, Pan Kejk

CRO ROWNE, E, GLA: : 30,0 ,000 m2 (217 rooms and 370 apartme tments ts)

 Planned start of construction – 1Q 2019  Yield: 6,72%  Planned capex1 – 197 m PLN (30 m PLN of own contribution)  Book value: 48 m PLN (11 m EUR)  Current prelease2: 30%  Top tenants: VHM (hotel operator - Holiday Inn)

Closed-end investment funds

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Real Estate Incom

• me Assets

ts FIZAN ZAN, , GLA: : 15,0 ,010 m2



Number of properties - 39



Established – June 2013



Yield: 7.49%



Book Value: 174 m PLN (42 m EUR)



Occupancy: 93%

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NAV: PLN 13.6 m



Group’s ownership: 18%



Fund Management Company: Mount TFI

Real Estate Incom

• me Assets

ts II FIZAN ZAN, , GLA: : 15,5 ,550 m2



Number of properties - 8



Established – December 2016



Yield: 7.36%



Book Value: 144 m PLN (35 m EUR)



Occupancy: 95%

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NAV: 9.3 m PLN



Group’s ownership: 15%



Fund Management Company: Mount TFI

Joint venture projects

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ETC SWARZĘDZ, GLA: 20,104 m2

 Completion date – October 2017  Yield: 7.15%  Book value: 150 m PLN (36 m EUR)  Occupancy1: 82%  WAULT1: 4.9  Group’s interest: 60%  Top tenants: Intermarche, Reserved, EURO RTV AGD, CCC, Deichmann, KIK, Empik, Smyk, Martes Sport, Kids OK, Dealz, Pepco

VIS A VIS PRZYCZÓŁKOWA, GLA: 4,210 m2

 Completion date – 3Q 2018  Yield: 7.5%  Book value: 20 m PLN (5 m EUR)  Current prelease1: 75%  Planned capex2: 16 m PLN (to be financed from construction loan)  Group’s interest: 64%  Top tenants: Villa Nova Dental Clinic, RTV EURO AGD, Max Burgers, HEBE, Decathlon

REZYDENCJE PAŁACOWA II, GLA: : 5,760 m2

 Completion date – 3Q 2018  Book value: 24 m PLN (6 m EUR)  24 homes  Sold: 8, booked: 3  Planned capex: 10 m PLN (to be financed from construction loan)  Group’s interest: 64%

1 WAULT as at 30th April 2018, prelease and occupancy as at 12th June 2018 2 Capex as at 31st March 2018 in participatory budget.

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FINANCIAL RESULTS FOR Q1 2018

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FINANCIAL HIGHLIGHTS Q1 2018

29.6 35.0

2017 Q1 2018 Q1

10.2 9.8

2017 Q1 2018 Q1

8.4 13.2

2017 Q1 2018 Q1 RENTAL INCOME INTEREST EXPENSE FFO

+18% +57%

• 4%

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• 11
• 1

6 3 16

• 15
• 10
• 5

5 10 15 20 property revaluation bank loans&bonds financial instruments deffered tax

• ther

total impact on P&L

▪ +18% rental income in PLN 18Q1/17Q1 due to increase in

• ccupancy in completed projects

▪ 21 mPLN - non-cash revaluation of property value resulting mainly from exchange rate differences (+19 mPLN) ▪ +16 mPLN total net fx change impact on P&L

P&L - NOI/FX

RENTAL INCOME FX CHANGES IMPACT ON P&L

mPLN mPLN 15 GAIN/LOSS ON PROPERTY REVALUATION (mPLN) 3 months 2018 exchange gains 18.9 revenue recognition

• 1.0
• ther

3.6 Total gain on property revaluation 21.5 30 30 33 32 35 22 22 25 24 26 74% 74% 75% 74% 73% 67% 69% 71% 73% 75% 77% 79% 81% 83% 85% 5 10 15 20 25 30 35 40 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 Rental income Net operating income ROS

▪

• 4% decrease in interest expense (18Q1/17Q1) despite +8% increase in EUR debt balance

▪

• 3 m PLN yearly savings planned due to change of currency structure of bonds from PLN to EUR

▪

• 1,5 m PLN yearly savings on Royal Wilanów loan interest

P&L - INTEREST

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*Excluded the impact of measurement of financial liabilities at amortised cost, in accordance with IFRS 9. During 3 months of 2018, the adjustment increased interest expense by 0,3 mPLN. During 3 months of 2017, the adjustment increased interest expense by 0,4 mPLN.

Interest [mPLN]* March 31, 2018 March 31, 2017

Interest on bank loans in P&L 6,9 7,1 Interests on bank loans in Capex 0,5 0,1 Interest on bonds 2,6 2,7 Total interest 10 9,9 Average cost of debt 3,03% 3,31%

Average cost of debt Forecast Bank loans

2,75%

Bonds

4,09%

Cost of debt

2,97%

This forecasted cost is under assumptions that all PLN bond are refinanced with EUR bonds and new GNB multifunctional loan is drawn

Consolidated statement of profit or loss and other comprehensive income (mPLN) 3M 2018 12M 2017 3M 2017 Rental income 35,0 125,8 29,6 Direct property operating expenses (9,4) (32,7) (7,8) Net operating profit 25,6 93,1 21,8 Income from property management 0,6 1,5 0,3 Loss on disposal of investment property – 0,2 – Other income – Cost of SPV operations (1,2) (6,3) (1,8) Administrative expenses (1,6) (11,4) (2,4) Renovation and repair of property (0,2) (0,8) (0,0) Cost of incentive scheme measurement (0,8) (1,7) (0,1) Gain/(loss) on property revaluation 21,5 (84,7) (100,0) Other costs/Impairment losses (0,8) (3,6) (1,5) Share in net profit/(loss) of equity-accounted entities 0,4 8,7 (1,0) Operating profit/(loss) 43,4 (5,0) (84,8) Interest income 0,7 2,2 0,8 Interest expense (9,8) (40,1) (10,2) Loss on measurement of financial liabilities (10,8) 46,7 49,3 Profit/(loss) before tax 23,4 3,8 (44,9) Corporate income tax 5,8 (13,6) (7,6) Net profit/(loss) 29,2 (9,7) (52,5) Exchange differences on translating foreign

• perations

(0,0) 7,7 (0,1) Total comprehensive income 29,2 (2,0) (52,6) 17

PROFIT AND LOSS ACCOUNT

The observed increase in rental income (+18% 18q1/17q1) resulting from new lease agreements Non-cash revaluation of property value resulting mainly from exchange rate differences Including decrease in interest on bank borrowings and notes (-4% 18q1/17q1) due to refinance of bank loans and bonds. Mainly the effect of exchange rate differences on revaluation of liabilities in EUR (investment loans) and change in revaluation of derivatives securing construction loans. Receivables write off relating to Portfel

▪ +30 m PLN – capex paid mainly in ArtN and Neptun House ▪ +21mPLN - non-cash revaluation of property value resulting mainly from exchange rate differences (+19 m PLN)

BS - REAL ESTATE

CAPEX INVESTMENT PROPERTY MOVEMENT

mPLN

18 Eurocentrum Alfa PLN 1,1m Eurocentrum Beta & Gamma PLN 0,9m Eurocentrum Delta PLN 4,3m Royal Wilanów PLN 1,4m ArtN PLN 11,4m Neptun House PLN 9,9m Other PLN 0,6m

2 174 2 225 30 21

1 600 1 800 2 000 2 200 2 400 31/12/2017 Capex FX difference 31/03/2018

45 33 133 72 764 4 55 35 15 162

200 400 600 800

31.12.2018 31.12.2019 31.12.2020 31.12.2021 31.12.2022 31.12.2023 >31.12.2023

Bonds Bank loans 989 984 1 013

9,31 9,24 9,51

7 7,5 8 8,5 9 9,5 10 600 700 800 900 1000 1100 31/12/2016 31/12/2017 31/03/2018 NAV (mPLN) NAV/share (PLN)

224 236 241

2,14 2,11 2,22

1,9 1,95 2 2,05 2,1 2,15 2,2 2,25

31/12/2016 31/12/2017 31/03/2018

100 150 200 250 NAV (mEUR) NAV/share (EUR)

Eurocentrum – 445 mPLN FIZ II – 75 mPLN Royal Wilanów – 226 mPLN Belgradzka - 15 mPLN

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BS - Debt maturity & NAV

46% 46%

Net debt/total assets

DEBT MATURITY NAV/SHARE [EUR]

mEUR

NAV/SHARE [PLN]

mPLN mPLN

FIZ I – 94 mPLN Vis à Vis Łódź – 20 mPLN Neptun House – 35 mPLN Galeria Zaspa 35 mPLN Series J-M bonds Series F-G bonds Getin 21 mPLN

Balance Sheet (mPLN) 31/03/2018 31/12/2017 31/03/2017 Long-Term Assets 2.301,8 2.243,9 2.058,6 Real estate properties 2.225,6 2.174,4 2.001,7 Deferred tax assets 27,8 21,9 7,3 Other non-current investments 43,6 42,7 43,9 Other financial assets 2,4 2,6 3,5 Other assets 2,3 2,2 2,2 Current Assets 185,6 227,2 211,7 Inventory 0,0 0,0 – Other receivables 21,4 14,6 17,4 Tarde receivables 12,8 11,9 12,1 Other current investments 6,6 7,4 6,3 Cash 144,9 193,3 175,9 Balance Sheet (mPLN) 31/03/2018 31/12/2017 31/03/2017 Capital and Reserves 1.126,0 1.099,4 1.034,4 Share Capital 106,6 106,5 106,4 Receivable equity contribution 858,3 858,3 858,3 Profit (loss) of the year 6,9 6,4 (45,9) Non-cotrolling interest 112,7 114,9 94,6 Long-Term Liabilities 1.226,1 1.216,6 1.017,4 Bank borrowings and other financial liabilities 1.021,3 1.014,8 958,2 Bonds liabilities 168,9 165,7 54,7 Other long term liabilities 11,9 11,4 0,1 Provision for deferred tax 24,0 24,7 4,4 Current Liabilities 135,3 155,1 218,5 Bank borrowings and other financial liabilities 77,3 83,2 63,3 Bonds liabilities 35,7 44,1 123,1 Other liabilities and provisions 22,3 27,8 32,0 Total equity 2.487,4 2.471,1 2.270,3 Net debt 1.158,4 1.114,6 1.023,5 Net debt/(Capital and reserves) 1,0 1,0 0,99 Net debt/Total assets 47% 45% 45% 20

BALANCE SHEET

Decrease in cash due to: repayment of PLN 11m of bonds, EUR 2.5m of Getin loan, capex paid on ArtN and Neptun House. As of 31 March 2018 the owners of 82% of REIA FIZ AN and 85% in REIA II FIZ AN. Increase in 2017 due to sale of 85% in REIA II FIZAN. Investments in jointly controlled entities (ETC Swarzędz, Vis à Vis Pałacowa, Rezydencje Pałacowa II) Mainly the increase in the balance of on Neptun House’s construction loan. Decrease in balance of bonds as of 31 March 2018 due to repayment of 11 mPLN bonds in 2018. Capex relating to ArtN and Neptun House.

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ArtN

Artn – development update

Time meline ne

Q4 2017 Start of construction Q1 2018

• Transport of some historical machinery.
• Demolition of non-historical buildings.
• 520 press building – cut at the time of

widening Prosta street.

• Support to secure existing buildings.
• Start of diaphragm walls construction

(specialist foundations). Q2 2018 Entry of the Lead Contractor Q4 2018 Diaphragm walls completed Q3 2019 Level „0” completed Q4 2019 Shell and core of building A and B Q2 2020 Roofed shell of buildings A and B Q4 2020 Completion

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Strategic objectives

Strategic goals 2018 - 2021

►

To rent t out the remaining ining 9% of leasab able le area, , stabilise income and refiance projects to maximize cash surplus from dividends in the assets portfolio,

►

To complet lete ot

• ther develop

velopmen ent t projec ects ts (ArtN, Crowne and Vis à Vis Przyczółkowa) by 2020 and rent them

• ut to achieve the target net operating income (NOI) and return on investment,

►

To adjust the portfolio structure to become a a divide vidend nd paying ing compan any by 2020,

►

To raise new capital and develop velop the existin ing portfolio

• lio of real estate properties.

200 200 3 201 201 3 201 201 4 201 201 5 201 201 6 201 201 7 201 201 8 201 201 9 202 202 Ince cepti ption IPO Euroc

• cent

entrum Phase I Roya yal Wilanów Euroc

• cent

entrum Phase II II ArtN construct ction

• n start

ArtN compl pleti etion

• n

Crowne

• wne

24 Dividend end compan

• mpany

Disclaimer

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