Globalworth Real Estate Inv Ltd Audited Results for the year to 31 December 2017 (0525H)

TIDMGWI

RNS Number : 0525H

Globalworth Real Estate Inv Ltd

08 March 2018

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this information is considered to be in the public domain.

8 March 2018

Globalworth Real Estate Investments Limited

("Globalworth" or the "Company")

Audited Results for the year ended 31 December 2017

Further to its Business Update on 28 February 2018, Globalworth is pleased to release its Annual Report and Audited Consolidated Financial Results for the year ended 31 December 2017.

Dimitris Raptis, Deputy Chief Executive Officer and Chief Investment Officer of Globalworth, commented: "These results highlight the significant progress achieved by Globalworth in 2017 across the business, with the strengthened capital structure placing us in a strong position going into 2018. Our two markets, Romania and Poland, continue to offer above-average economic growth prospects and we see a strong backdrop of tenant demand. 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. We are focused on our objective of establishing Globalworth as the region's leading office landlord and to build on our ambition of being the partner of choice for the wide variety of high-quality tenants in the region."

Operational Highlights

-- Completion of our strategic investment in Griffin Premium RE.. N.V. ("GPRE") in December 2017, resulting in a shareholding of 71.66%, at a price reflecting a discount of 20% to its last reported EPRA NAV per share. GPRE has now been fully consolidated into Globalworth's financial statements for the year ended 31 December 2017. As announced on 28 February 2018, GPRE is being rebranded Globalworth Poland.

-- As at 31 December 2017, Globalworth's combined real estate portfolio([1]) was valued at EUR1,815.4 million

(31 December 2016: EUR977.5 million), comprising EUR1,135.3 million in Romania and EUR680.1 million in Poland via GPRE. Total annualised contracted rental income for the combined portfolio stood at EUR115.9 million (31 December 2016: EUR49.5 million), including pre-leases on developments, an increase of 134% compared to 31 December 2016.

-- Occupancy of the commercial standing portfolio was 93.3% (95.4% including tenant expansion options) at 31 December 2017, compared to 83.1% at 31 December 2016. Like-for-like occupancy of the Romanian portfolio improved by 10.2% in 2017.

-- In 2017, the Company successfully negotiated the take-up or extension of 57.4k sqm of commercial space in its Romanian portfolio, resulting in 747.9k sqm of commercial space let or pre-let in Romania and Poland as at 31 December 2017, with a weighted average lease length of 5.7 years. The Company has a diversified tenant base with some 440 national and multinational corporates from 28 countries and 37 different sectors / industries.

-- During 2017, the Company more than doubled its commercial standing GLA to 748.1k sqm (2016: 370.0k sqm), including the addition of 242.6k sqm through GPRE in Poland and the delivery of 51.0k sqm of developments. A further two development projects, comprising 70.5k sqm, remain under construction in Romania. Together with the further pipeline of investments, and additional projects in the planning stages, the Company will continue to grow the standing portfolio, whilst further reinforcing its quality.

-- The Company's portfolio now includes 18 properties certified with LEED Gold / BREEAM Very Good or higher certifications, including Globalworth Tower which was the first property in South-Eastern Europe (SEE) to be awarded LEED Platinum certification.

Financial Highlights

-- Successful closing of a EUR340 million equity placing on 8 December 2017 with solid support from both existing and new shareholders, increasing the free float of the Company's shares. Combined with Globalworth's debut EUR550 million Eurobond in June 2017, the Company raised EUR890 million from the capital markets in 2017.

-- EPRA NAV of EUR1,171.5 million (31 December 2016: EUR783.8 million), an increase of 49.5% over end 2016. EPRA NAV per share of EUR8.84 per share (31 December 2016: EUR8.57 per share), an increase of 3.2% over end 2016, and of 6.5% over 30 June 2017 (EUR8.30 per share) following completion of the GPRE transaction.

-- Net operating income (NOI) of EUR51.1 million (2016: EUR43.6 million), an increase of 17.3% over 2016 mainly as a result from new lease agreements signed, the addition of further properties, as well as a limited contribution from our strategic investment in GPRE since it closed in December 2017;

-- Normalised EBITDA([2]) from ongoing operating activities of EUR41.2 million (2016: EUR36.3 million), with an increase

of 13.5% over 2016;

-- EPRA earnings of EUR16.8 million (2016: EUR8.6 million), an increase of 95.6% over 2016. EPRA earnings per share amounted to 18.17 cents (2016: 13.34 cents), an increase of 36.2% over 2016.

-- Earnings before tax of EUR26.2 million (2016: EUR12.2 million), an increase of 114.6% over 2016. This increase was supported by the growth in operational results (NOI) and the contribution of the c.EUR28.9 million (unrealised) gain recorded on the acquisition of the 71.66% shareholding in GPRE and two other property acquisitions in Romania. However, it also reflects the significant costs associated with the increased investment and refinancing activities during 2017, including the full amortisation of unamortised debt issue costs of c.EUR16.1 million. Earnings per share amounted to 26.40 cents (2016: 17.57 cents), an increase of 50.3% over 2016;

-- Net LTV of 34.3% (31 December 2016: 20.7%), and Gross LTV of 49.5% (31 December 2016: 43.4%). Cash and cash equivalents of EUR273.3 million at 31 December 2017.

-- The weighted average interest rate on debt financing at group level was 2.62% as at 31 December 2017 (31 December 2016: 5.25%).

-- The Company paid its maiden dividend in 2017, with a payment of 22 cents per share in July 2017, followed by a second dividend of 22 cents per share paid in January 2018 (resulting in a dividend of 44 cents per share for 2017). Consistent with the target of a sustainable and growing dividend, paid on a semi-annual basis, the Company has indicated a prospective H1-18 dividend of not less than EUR0.27 per share (or not less than EUR0.54 per share annualised).

Availability of Annual Report and notice of AGM

The Company's 2017 Annual Report and Financial Statements is now available on the Company's website http://www.globalworth.com/investor-relations/financial-reports-and-presentation and will shortly be posted to shareholders.

The Annual General Meeting of the Company will be held on 18 June 2018 at 10.00 am British Summer Time at Ground Floor, Dorey Court, Admiral Park, St Peter Port, Guernsey. The notice of this year's AGM will be included in a separate circular to shareholders, will be issued to shareholders and notified via RNS at least 10 clear days before the meeting, and will also in due course be available on the Company's website in accordance with AIM Rule 20.

For further information visit www.globalworth.com or contact:

Enquiries

Andrew Cox Tel: [phone]

Head of Investor Relations & Corporate Development

Jefferies (Joint Broker)

Tel: [phone]

Stuart Klein

   Panmure Gordon (Nominated Adviser and Joint Broker)                           Tel: [phone] 

Andrew Potts

Milbourne (Public Relations) Tel: [phone]

Tim Draper

About Globalworth / Note to Editors:

Globalworth is an AIM-listed real estate company active in Central and Eastern Europe. It has become the leading office investor in the Romanian real estate market and now has established a significant platform in Poland, through a 72% shareholding in Griffin Premium R.E.. N.V. (GPRE), a pure-play Polish real estate platform listed on the Warsaw Stock Exchange. Globalworth acquires, develops and directly manages high-quality office and logistics/light-industrial real estate assets in prime locations, through which it benefits from a strong rental income profile from high quality tenants from around the globe. Managed by approximately 110 professionals across Romania and Poland, the combined value of its portfolio is EUR1.8 billion, of which over 90% is in income-producing assets, predominately in the office sector, and leased to some 440 national and multinational corporates from 28 countries and 37 different sectors. In Romania, Globalworth is present in Bucharest, Timisoara and Pitesti, whilst assets in Poland span Warsaw, Wroclaw, Lodz, Krakow, Gdansk and Katowice. For more information, please refer to http://www.globalworth.com/.

IMPORTANT NOTICE: This announcement has been prepared for the purposes of complying with the applicable laws and regulations of the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom. This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "targets", "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward looking statements include all matters that are not historical facts and involve predictions. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business, results of operations, financial position, liquidity, prospects, growth or strategies and the industry in which it operates. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance. Save as required by law or regulation, the Company disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements in this announcement that may occur due to any change in its expectations or to reflect events or circumstances after the date of this announcement.

STRATEGIC REVIEW

CHIEF EXECUTIVE'S REVIEW

2017 was a truly transformational year for our Company, as demonstrated by a number of significant landmark achievements in investment and capital markets

Our leading portfolio in Romania continued to strengthen and is now complemented by our strategic expansion in Poland, providing us with exposure to a portfolio in excess of EUR1.8 billion and approximately 791k sqm of leasable area, in the two largest markets in the CEE region. Beyond this, we have an exciting pipeline of new investment and development opportunities.

Highlights of the year

Strategically, 2017 was marked by our expansion into Poland, via the acquisition of a 71.7% shareholding in GPRE, a Polish real estate platform with a portfolio valued at 31 December 2017 at EUR680.1 million, and which we are now taking steps to rebrand as Globalworth Poland. We are delighted to be working with such a strong team, and to have achieved immediate, local critical mass in this market. This is an important step to us becoming the leading landlord in Central and Eastern Europe, with a dominant presence in two of the most significant markets, Poland and Romania.

Besides our geographic expansion, we are pleased to report on the good ongoing progress in Romania. Our portfolio has been complemented, amongst others, by the first of three buildings comprising Globalworth Campus and we were delighted to welcome Amazon as our largest tenant, which we see as testament to the quality of our product. Overall, the commercial occupancy of our portfolio at year end stood at 93.3%, and against a backdrop of ongoing healthy tenant demand, we are taking steps to initiate our next phase of developments, delivering more than 100k sqm of prime office space in Bucharest and Warsaw, as well as more than 150k sqm of light-industrial / logistics space in Timisoara.

Over the course of 2017 Globalworth has raised EUR890 million of capital from both the equity and debt capital markets, which included the listing of our debut Eurobond on the Bucharest and Dublin exchanges.

Market conditions

We are strategically positioned to benefit from geographic exposure to the two most significant economies in Central and Eastern Europe, Poland and Romania, which are both enjoying economic growth far ahead of the wider European region. 2017 real GDP growth in both Romanian and Poland is forecast to have significantly outperformed the European Union average, and is estimated to continue to do so over the next two years. In addition, both principal focus markets exhibit similar characteristics, benefiting from low public debt to GDP ratios, increasing disposable incomes and private consumption, low levels of unemployment rates and healthy inflation rates.

This strong economic backdrop is supportive for the real estate markets, alongside the structural expansion of many multi-national tenants which continue to be attracted to the region by a young, educated and ambitious labour force, as they expand their operations in the region. This is a key driver of demand for the office and industrial real estate sectors on which we focus. In turn investor interest has been increasing. In our view however there is still room for further yield contraction, supported by continued economic expansion and while property yields remain higher than those of more mature real estate markets.

Portfolio

In 2017, Globalworth invested approximately EUR694.4 million, primarily through the expansion into Poland, but also further acquisitions in Romania and our ongoing development progress to bring to market high quality new space. Our focus on buying well and unlocking value was evident at the compelling valuation we acquired the controlling interest in GPRE, at 20% below the reported EPRA NAV per share at 30 September 2017, and by far better than the level we could replicate in the direct market, not least given the inherent potential within the operating platform established. We also completed three developments over the period, and remain on-site on a further two. Today our footprint is 791.0k sqm, of which 548.4k sqm is high quality office space (including the proportion of office in mixed-use properties), and a total combined portfolio size in excess of EUR1.8 billion.

By value, this is 85.7% higher than the comparable period last year, principally due to the investments in Poland. In Romania, our leasing team recorded excellent progress with the lease-up of 57.4k sqm over the year in Romania and, combined with acquisitions, our contracted rent roll has increased by EUR21.9 million, up 45.1%, and now combined with Poland stands at EUR115.9 million.

Our commercial occupancy rate at December 2017 was 93.3% (2016: 83.1%). Reflecting the strong progress we have made to date, but also in light of the further opportunities ahead, in December 2017 we communicated our intentions to make further acquisitions and initiate the next phase of developments, in both Romania and Poland.

Financial performance

We are pleased with the ongoing progress in our financial performance, as we lay down strong foundations for the future through growth in contracted rent and enhancements to our debt structure. It is also important to note the significance of our Polish investment which, in accordance with accounting rules, we now consolidate 100% of the activities of GPRE, offset by a minority interest for the 28.3% we do not own. From December 2017, this is fully consolidated on Globalworth's balance sheet, albeit that the earnings and cash flow statements only recognise the impact from 6 December 2017. The attractive acquisition price paid by Globalworth for the 71.7% shareholding, which reflected a discount to the underlying net asset value resulted in a one-off bargain purchase gain of EUR25.7 million recognised in our 2017 profit. Notwithstanding this, our key financial metrics are as follows.

-- Total revenue generated by our portfolio increased to EUR77.9 million, 14.1% higher than the previous year.

   --         Normalised EBITDA increased to EUR41.2 million (EUR36.3 million in 2016). 

-- EPRA NAV rose by 49.5% to EUR1.17 billion (EUR783.8 million in 2016, which on a per share basis is EUR8.84 (EUR8.57 in 2016). Shareholders' Equity rose to EUR1.1 billion (EUR0.7 billion in 2016).

   --         Net LTV was 34.3% (20.7% in 2016). 

Capital structure

Globalworth raised EUR890.0 million of capital in 2017, which is testimony to the compelling investment proposition the Company offers. We were delighted to list our inaugural Eurobond on the Bucharest and Irish stock exchanges in June 2017, having raised EUR550.0 million of new debt, with an investment rating of BB+ from S&P and Ba2 from Moody's, the performance of which has been noteworthy since launch. In December 2017, following a successful investor engagement program, we raised EUR340 million through a non-pre-emptive equity placing. In addition to receiving good support from our existing shareholders, we were delighted to welcome a number of new shareholders to Globalworth and also to see improved liquidity in our shares in recent months. The investors in both the debt and equity issues we conducted, which included the European Bank of Reconstruction and Development (EBRD), were of notable quality. This new capital has enabled us to unlock new investment opportunities, and will continue to do so, as well as reduce our overall cost of capital and diversify our sources of that capital.

Dividend

In July 2017, Globalworth paid its first interim dividend of EUR0.22 per share, with a second interim dividend for 2017 paid in January 2018. Reflecting the ongoing growth in underlying operations and in particular the growth in future contracted rent roll, the Company has been pleased to provide guidance for 2018, with the intention of paying an interim dividend in August 2018 of no less than EUR0.27 per share and a second interim dividend in January 2019 of no less than EUR0.27 per share, or in aggregate no less than EUR0.54 per share in respect of the 2018 financial year.

Environmental, corporate and social responsibility

At Globalworth, we are serious proponents of the importance and benefits of maintaining high environmental and sustainable standards and acting with the highest standards or ethical behaviour. We pride ourselves on delivering best-in-class real estate to our tenants. Today, we are pleased to announce that in Romania 10 of our 12 standing offices are green certified with LEED Gold or BREEAM Very Good or higher accreditation. Overall in our portfolio we have 18 properties which are green certified, representing over 55% of our standing portfolio value, and we will be adding new properties to our environmentally friendly portfolio in the next 12 months. As a Company, we are also proud to be able to give back to the community and once again in 2017 we were pleased to have been able to actively support existing and new worthy causes.

Team

I would once again like to thank the team at Globalworth for their dedication, expertise and enthusiasm, without which our continued growth would not be possible. As our staff of 75 professionals continue to grow, and now following our close collaboration with the GPRE team in Poland, we will focus on attracting, developing and supporting talent in an efficient and open environment that will support our business needs into the future.

Priorities for 2018 and beyond

Our strategy adopts a total return philosophy for our shareholders, targeting the delivery of a sustainable and progressive dividend, as well as net asset value growth. We seek to do this through well-executed acquisitions, value creating developments and ongoing asset and property management to maintain the highest quality portfolio. We are pleased with how our strategy has evolved alongside our growth and the dynamic market conditions. We focus on being innovative, for example we have been proactively exploring the trends in co-working and flexible office space and the next generation of tenant needs.

We have started 2018 with confidence, knowing our business is well positioned and recognising that the market opportunity, notwithstanding global uncertainties, continues to offer a good backdrop for growth. Our priorities are to expand our footprint through value-enhancing acquisitions and developments, further improve our occupancy rate while enhancing our tenant experience and satisfaction, whilst maintaining capital discipline and a prudent capital structure as we seek to maximise returns for our shareholders.

We are committed to our goal of being the leading office investor in the CEE region through our investments in Romania and Poland, and to be the partner of choice for the wide variety of high-quality tenants active or seeking to become established in the region.

Ioannis Papalekas

Chief Executive Officer

7 March 2018

MANAGEMENT REVIEW

Expansion in Poland and focusing on the two largest markets in CEE, while benefiting from a strong balance sheet, is the next step in the evolution of Globalworth

2017 was a very busy year for Globalworth, with our efforts focused on reinforcing our position as the dominant office investor in Romania, expanding our footprint in Poland, and further strengthening the fundamentals of our business.

Over the course of the year, Globalworth successfully completed several newsworthy transactions including two sizeable capital market issues, raising EUR890.0 million in total, the acquisition of a majority stake in the Warsaw-listed GPRE, and the subsequent acquisition of a portfolio of class "A" properties in Poland.

In Romania, we continued to strengthen our presence in our primary operating market through selective acquisitions, making progress with our development program, and actively managing our portfolio. In addition, we took further steps to optimise the way in which the Company operates, a process which will intensify as we increasingly collaborate with the team at GPRE.

Expansion in Poland

As part of its ongoing effort to become a reference provider of high quality office space in the CEE region, Globalworth launched a public tender offer in October 2017 for the acquisition of a minimum of 50.01% and up to 67.90% of the issued share capital of GPRE.

GPRE is a pure-play Polish real estate platform which, at the time of the offer, owned a portfolio of high quality office and mixed-use investments located in Warsaw and five other key regional cities in Poland. Its portfolio comprised six office and three mixed-use (office and retail) investments, offering 171k sqm of GLA with an aggregate value of EUR509.2 million (as at 30 September 2017). GPRE had also secured an attractive investment pipeline, including a forward funding agreement for a class "A" office in Wroclaw/ Poland (under construction) and a 25% interest in three class "A" offices in Warsaw (at various stages of development), for which GPRE has an option to acquire the remaining 75% stake on completion.

Through GPRE, the Company also contracted to acquire a further three high quality office properties in Wroclaw, Gdansk and Katowice from Echo Polska Properties ("EPP") for an aggregate purchase price of EUR160 million. The acquisition of the EPP portfolio was, amongst other things, conditional on Globalworth completing the GPRE transaction.

Globalworth successfully acquired an initial 67.9% stake in GPRE at the end of November, and an additional 3.8% in December, raising its total stake in GPRE to 71.7%. In total, the Company invested EUR145.7 million for the acquisition of 111.9 million shares in GPRE, at a 20% discount to its EPRA NAV per share as at 30 September 2017.

At 31 December 2017, GPRE held a portfolio of standing properties with 242.6k sqm of GLA, valued at EUR680.1 million.

Investments in Romania

In 2017, Globalworth continued to acquire and develop high quality real estate properties in Romania while maintaining its commitment to owning a modern and environmentally friendly portfolio.

During the year we completed the acquisition of two standing properties, which not only meet our standalone investment criteria but are also of strategic importance to the Company.

Through the acquisition of Green Court Building "C", Globalworth added the third and last class "A" office building within the award-winning Green Court development in the New CBD of Bucharest, thus controlling 100% of the 54.3k sqm of the complex.

Elsewhere, through the acquisition of the Dacia Warehouse (Groupe Renault) and the subsequent partnership with the Elgan Group for the development of Groupe Renault's new headquarters in Bucharest, Globalworth has formed a strong and long-term partnership with one of Romania's largest corporates.

Globalworth's very active development programme continued in 2017, with our main targets being delivering Tower I of the Globalworth Campus project in Bucharest to market and, within our TAP park, completing the expansion of Valeo Lighting's light-industrial facility and a new, light-industrial facility leased to Litens. We are very pleased to have met these targets and to have added 51.0k sqm of GLA of new high quality office and light-industrial space to our portfolio, which was developed by the Company.

Since we acquired TAP in July 2014, we have progressively developed the park by adding four new light-industrial / logistics facilities with a total of c.76.0k sqm of GLA, increasing its total size to c.103.4k sqm. Encouraged by tenant interest for high quality space in the area, we have acquired an additional 30 hectares of land that we will be looking to develop in the future.

In addition, we currently have 70.5k sqm of office space under construction in two projects which we expect to complete in Q1-2018 and Q1-2019 respectively.

As part of our ongoing efforts to maintain and improve the marketability of the Globalworth portfolio, we have continued to implement our renovation and maintenance programme at selected standing properties. Over the course of the year, improvement works were carried out at six standing properties, with works on a further two scheduled to start in 2018. We are pleased to observe that the results of our efforts have been visible at properties such as Globalworth Plaza and City Offices, where occupancy improved materially in 2017 and where we are in active discussions with a number of tenants for the take-up of remaining available space.

We delivered our projects, including renovations and maintenance, to plan in 2017. We were able to respect scheduled delivery dates and budgets and we remain on track for projects still under construction.

Completing our real estate activities on time and within budget is a vital part of our business, and our ability to do so reflects on the capabilities of our internal project management team, in conjunction with those of our partners, and has been key to our successful track record to-date.

Optimising Capital Efficiency

Efficiently managing our combination of equity and debt financing is pivotal to achieving a balance that allows for the rapid growth of the Company, enhances medium-term shareholder returns, and controls the inherent risk associated with third-party debt.

Over the course of the year we completed two sizeable debt and equity transactions, raising in total c.EUR890 million. This allowed us to simplify our capital structure and de-risk our balance sheet, while providing us with funds to facilitate further investment in our development projects and new pipeline opportunities, and thus the growth of the Company.

Debt Transactions

In June 2017, Globalworth successfully completed a EUR550 million Eurobond raise with a fixed interest rate of 2.875%. Through this transaction, Globalworth refinanced all but one of its existing facilities at improved terms, reducing the weighted average interest rate on debt financing at group level from 5.25% at 31 December 2016 to 2.62% at 31 December 2017.

We were delighted by the very positive response that this transaction received from both national and international investors, resulting in the offering being more than two times oversubscribed and, considering that this was the first time we had issued such an instrument, representing a great achievement for the Company.

Following our investment in GPRE, our consolidated weighted average interest rate on debt financing has further reduced to 2.62%, with our consolidated gross LTV remaining at moderate level of 49.5% (Net LTV of 34.3%).

Additionally, in 2017 Globalworth set up a EUR30 million revolver facility secured against one of its properties, which to-date has not been used.

Equity Transactions

In December 2017, we completed a EUR340 million new equity capital raise at a share price of EUR8.75 per share, subscribed to by both existing and new investors.

The transaction follows on from the successful EUR200 million equity capital raise undertaken in December 2016, which resulted in Growthpoint Properties, South Africa's leading REIT, becoming the largest shareholder in the Company.

Active Asset Management to maintain a high occupancy rate and high quality long-term leases

The ability to achieve high occupancy rates remains one of the Company's key strengths. In 2017, we once again performed strongly in the Romanian market, successfully negotiating the take-up or extension of 57.4k sqm of commercial GLA, increasing our overall total since 2014 to c.295.5k sqm. This confirmed the Company's position as one of the most successful investors and developers in the Romanian real estate market and the wider CEE region.

New commercial leases signed in 2017 included some of Romania's best-known national and multinational corporates, such as Amazon, Stefanini, Wipro and Microsoft and were signed at a WALL of c.8.0 years, in line with the Company's strategy of agreeing long-term lease contracts.

We are pleased to see demand for office space increasing as the performance of existing tenants continues to improve and new corporates enter or expand in the market. This was reflected in last year's take-up, with the majority of our new leases being agreed with tenants taking space in our properties for the first time, demonstrating the quality of our portfolio and the capability of our leasing team. In addition, a number of new leases include expansion options, an indication of the positive market environment in Romania and of the intention of these corporates to grow their businesses.

Our expansion in Poland through GPRE has further enhanced our tenant base by adding new corporates to our list of partners. This list now includes corporates who are already tenants of ours in Romania, an important feature for the overall effective asset management of the portfolio.

At 31 December 2017, the average occupancy rate of the standing commercial portfolio was c.93.3% (95.4% including tenant options). Overall, at year end we had 747.9k sqm of commercial space let or pre-let at a WALL of c.5.7 years.

The portfolio is occupied by a diversified, high quality mix of tenants, comprising some 440 national and multinational corporates from more than 28 different countries.

Investment in environmentally friendly properties

Globalworth maintained its commitment to having a modern portfolio of high quality and environmentally friendly real estate properties, with the Company adding 3 green certified properties in Romania and 7 in Poland through its investment in GPRE in 2017. In Q1-2018 one additional property was green certified in Poland.

We our particularly proud that our landmark class "A" Globalworth Tower office in Bucharest was officially awarded the Green certification of LEED Platinum, becoming the first building in Romania and the broader SEE region to have received the highest available Green accreditation.

Currently, 18 standing properties have received green accreditations of BREEAM Very Good / LEED Gold or higher. Green certified properties accounted for 57.3% of our standing portfolio value and we are currently assessing the green certification potential of our larger, non-certified office and mixed-use properties, targeting certification levels similar to the ones already obtained. We have already begun the green certification or re-certification process for 8 of our properties and are confident that we will adding them to our green certified portfolio in the coming few months.

High quality team of professionals and improved infrastructure

Over a relatively short period of time, Globalworth has established a portfolio with current standing GLA of 791.0k sqm and has further developments in progress in Romania and Poland.

Having the right team of professionals to properly manage our existing properties, as well as to facilitate growth, is key to the success of our business. In 2017, we continued to invest for the future through selected hires in our core and support teams, as well as in technology which will allow us to operate more efficiently and effectively.

At year end 2017, the Globalworth team comprised 75 professionals, the majority being located in Bucharest. Our local presence in our core Romanian market has allowed us to build a broad network of relationships over the years with owners, occupiers, property specialists and community representatives, as well as domestic and international investors and capital providers.

Similar to Globalworth, GPRE has a team of 32 high quality professionals in Poland, which we will seek to help complement in the future as operations grow there.

We believe that forming strong relationships with our partners and having a thorough local knowledge of the market gives us an advantage in identifying and investing in opportunities as and when they become available, either publicly or off-market. In addition, it allows us to identify and respond quickly to our partners' needs and closely monitor any changes in trends or the overall market, which are key components for the future of our business.

Next Steps

Management will continue to work intensively to source new opportunities and facilitate further growth for the Company in both Romania and Poland, aiming to fulfil our strategic goal of becoming the reference office investor and landlord in the CEE region.

We also aim to streamline our operations in and between the two countries in which we operate in order to improve the way we do business.

We look forward to an exciting year in 2018.

Dimitris Raptis

Deputy Chief Executive Officer, Chief Investment Officer

7 March 2018

CASE STUDY

Globalworth Shareholders & Investor Engagement

As Globalworth continues building scale at both the portfolio and balance sheet level, the increasing international awareness of the Company's commercial activities and with a growing institutional investor base, investor relations and managing the Company's external perception have become an important focus. In this respect, Globalworth was pleased to strengthen its capability with the appointment of a Director of Marketing and Communications and a Head of Investor Relations & Corporate Development in 2017.

Globalworth is now actively enhancing its investor engagement program and will seek to be present at more capital markets industry conferences, engage in more investor outreach, both abroad and through welcoming investors to visit its properties in Romania and Poland. During Q4-2017 alone, in excess of 75 investor meetings were held. The Company believes that through these steps, market knowledge and awareness of the Globalworth proposition will continue to grow further, which in turn is beneficial for the Company's share price rating and market liquidity.

Our initiatives have been reflected in the strong share price appreciation in 2017 and the ongoing improvement in market liquidity.

Equity Fundraising

In December 2017, following the successful completion of its strategic investment in GPRE, which was funded from existing cash resources, Globalworth issued further equity via a non-pre-emptive placing of 38.9 million new ordinary shares at a price of EUR8.75 per share. The placement raised EUR340.0 million of gross proceeds, which was in excess of the Company's target and oversubscribed at this level.

The net proceeds of the Placing are to be used to fund further attractive investment opportunities in both Poland (through GPRE) and Romania, as well as for general corporate purposes, and will also assist Globalworth in managing its gearing strategy to a target loan to value ratio of 35.0%.

The placing attracted a wide range of new and existing institutional investors, which increased the Company's free float and is expected to broaden the liquidity of Globalworth shares ahead of the planned move to the Main Market of the London Stock Exchange in 2018.

INVESTMENT REVIEW

Expanding our footprint to deliver high quality space, to satisfy strong tenant demand in the region.

2017 was a milestone year for Globalworth, investing for the first time in two countries, Romania and Poland, the two largest markets in the CEE region. We realised a number of asset purchases, completed a corporate transaction and made further progress with our development and modernisation programmes. In total, Globalworth invested over EUR694.4 million in 2017, the largest deployment of capital since its inception.

New Investments

The majority of the new investments made in 2017 were in Poland, where the Company acquired 71.7% of the Warsaw-listed GPRE for EUR145.7 million, valuing the targeted company at EUR539.9 million (100% of firm value). At the time of the investment, GPRE held a portfolio of nine real estate investments (with 15 properties) valued at EUR509.2 million and following Globalworth's investment, acquired a portfolio of 3 high quality investments (with 5 properties) in Wroclaw, Gdansk and Katowice for a total of c.EUR160.0 million.

Globalworth, through GPRE, owns a portfolio of 12 investments in Poland, nine of which are offices and three are mixed-use, with total GLA of 242.6k sqm.

The Company invested a further EUR92.6 million in Romania, where it completed the acquisition of two standing properties, entered into a joint-venture with the Elgan Group for the development of Groupe Renault's new headquarters in Bucharest, currently under construction, and acquired 30 hectares of light-industrial / logistics land in Timisoara (TAP II).

New standing properties included:

-- Building "C" of the award winning Green Court class "A" office complex developed by Skanska in Bucharest.

-- The modern warehouse ("Dacia Warehouse") facility in Pitesti, 100% long-term leased to Dacia, Romania's largest corporate.

New Deliveries

-- TAP - Valeo: in March 2017, we delivered a new built-to-suit light-industrial facility leased to Valeo Lighting. This new 14.0k sqm facility increases Valeo's presence in Timisoara Airport Park ("TAP") to 41.5k sqm and marks the second time the tenant has expanded in the park since its arrival in 2011, a testament to the quality of the project and the service offered by Globalworth.

-- TAP - Litens: in October 2017, we delivered the second facility under development in our TAP complex. This 8.1k sqm facility, 100% leased to Litens Automotive, is the fifth and newest facility in the park which now offers total GLA of 103.4k sqm.

-- Globalworth Campus Tower I: in September 2017, we were particularly pleased to have delivered the first of three new office buildings at our Globalworth Campus project. Tower I, was completed in 24 months following the commencement of works, offers total GLA of 29.0k sqm and 273 parking spaces.

Under Development

Over the course of the year, Globalworth made further progress with the development/construction of four other buildings in Bucharest.

At Globalworth Campus project, construction of Tower II is at an advanced stage and is expected to be completed in Q1-2018. Similar to Tower I, on completion the property will extend over 12 floors above ground and two underground levels, offering GLA of 28.2k sqm and 180 parking spaces. The delivery of Tower II will mark the completion of Phase A of the project, which comprises Towers I and II with total GLA of 57.2k sqm and 453 parking spaces. In addition, further progress has been made with the development of Phase II of the Globalworth Campus project, with works expected to start in H1-2018.

At the end of 2017, the Company's Renault Bucharest Connected ("RBC") project was under construction. On completion, RBC will house Groupe Renault's new Headquarters in Romania as well as a dedicated design centre for the development of future models of cars, with 42.3k sqm of GLA and 1,000 parking spaces. The project is progressing in line with its envisaged timeline, with all preparatory activities completed and construction having reached the third floor. RBC is expected to be delivered in Q1-2019.

In Poland, Globalworth, through GPRE, has one investment in Wroclaw under a forward purchase agreement and two others in Warsaw under right of first offer in which it owns a minority stake (25%). These investments are currently under different phases of construction, with the investment in Wroclaw currently 97.7% pre-let (100.0% including Master Lease) and expected to be completed in Q2-2018, while the ones in Warsaw are expected to be delivered between Q3-2018 and Q4-2019.

 
New Investments     Developments - Delivered  Developments - Under Construction  Portfolio Improvements 
GPRE (71.7%)        TAP - Valeo               GW Campus Tower II & III           Globalworth Plaza 
EPP (through GPRE)  TAP - Litens              RBC                                City Offices 
Green Court "C"     GW Campus Tower I                                            Other maintenance 
Dacia Warehouse 
RBC(1) 
TAP II(1) 
------------------  ------------------------  ---------------------------------  ---------------------- 
EUR642.6m           EUR20.3m                  EUR23.6m                           EUR7.9m 
------------------  ------------------------  ---------------------------------  ---------------------- 
 
   (1)       Land for future development 

Renovation and Maintenance Programme of Standing Properties

The Company's ongoing efforts to offer best-in-class real estate space to its business partners continued in 2017, with further implementation of its renovation and maintenance programme at selected standing properties in the portfolio. Over the course of the year, Globalworth carried out improvement works on 6 standing properties. Works on a further 2 are scheduled to start in 2018.

In total, EUR7.9 million was invested in renovation and maintenance, principally at Globalworth Plaza (office), City Offices (office), and the cluster of properties formed by BOB (office), BOC (office) and Upground Towers (residential), all situated in the same block. Works involved primarily the upgrade of both indoor and outdoor common areas.

The benefits of our renovation and maintenance programme, combined with our ongoing leasing efforts, were evidenced at two properties in particular, Globalworth Plaza and City Offices, where occupancy improved significantly in 2017 over the previous year.

-- Globalworth Plaza works performed in 2017 included the renovation and modernisation of the lobby and upgrade of the building's façade, with future works to include the installation of external video walls and other general upgrades.

-- City Offices works included various repairs and upgrades to the common areas of both the commercial building and the multi-level parking. Additional works planned for 2018, which include the implementation of a new ticketing system in the multi-level car park, are expected to further improve the property's marketability and revenue streams.

Our renovation and maintenance programme will continue in 2018 as the Company works to maintain the high-standards set for its real estate portfolio.

2018 Investments

In 2018 Globalworth, successfully completed the acquisition of the two land plots located in the Gara Herastrau/Barbu Vacarescu corridor of Bucharest's new CBD, that it had previously announced for a total consideration of EUR15.5 million. The first land plot is located between the Globalworth Plaza and Green Court "B" office properties owned by the Company, and is the last remaining street facing land plot on Gara Herastrau street. The second land plot adjacent to Globalworth's Green Court complex. The combined lands are anticipated to allow for the development of c.40.0k sqm of commercial (predominantly office) space.

LEASING REVIEW

Driving sustainable income growth through leasing

Effective asset management of our portfolio is core to Globalworth's strategy, ensuring the sustainability of our cash flows and performance of our properties. Over the past four years, Globalworth has secured c.295.5k sqm of new leases and extensions.

Globalworth's strong leasing performance continued through 2017, with the Company successfully negotiating contracts with more than 41 different national and multinational corporates, resulting in a total take-up or extension of 57.4k sqm of commercial space within its Romanian portfolio.

The success of last year's leasing performance, combined with the addition of five new commercial properties through acquisition/delivery which were in varying phases of lease-up, resulted in an overall occupancy rate for our Romanian standing commercial portfolio of 90.8% as of 31 December 2017.

Occupancy rate on a like-for-like basis improved by 10.2% to 91.6% at the end of 2017, enhanced through new leases signed with tenants including Wipro, Microsoft and Global Compass. The most notable change in occupancy rate was at Globalworth Plaza, where occupancy at year-end reached 81.5% (29.7% on 31 December 16), representing an increase of more than two and a half times compared to the previous year. Other notable improvements in occupancy were achieved in our flagship Globalworth Tower and City Offices properties, which as of year-end 2017 were at 98.9% (up from 83.2% as at 31 December 2016) and 49.4% (up from 21.8% as of 31 December 2016) respectively.

The delivery of our developments is key to growing our portfolio and rental income. Having completed Tower I at our Globalworth Campus project in Bucharest, we are delighted to have been able to partner with Amazon, who will become the largest tenant in the property, as well as to continue our long-standing relationship with Honeywell. Having further expanded its operations in Bucharest, Honeywell will be the second largest multinational tenant in this property (agreement signed in 2018).

Occupancy in Tower I stood at 46.8% (73.6% including tenant options) on 31 December 2017 and has increased to 54.5% (88.9% including tenant options) in 2018. The Company is also pleased to announce the first pre-lettings of nearly 7.9k sqm to Stefanini and PC4Cards in Tower II (expected delivery Q1-2018) at Globalworth Campus, which is now 28.0% pre-let.

Partnership with such large corporates is a testament both to the quality of this project and to Globalworth's standing and reputation as the leading office investor and developer in the local market.

New contracts signed in Romania in 2017 included well-known national and multinational corporates such as Amazon (Globalworth Campus) for 13.5k sqm, Stefanini (Globalworth Campus) for 6.6k sqm, Wipro (Globalworth Tower) for 3.9k sqm, Microsoft (Globalworth Plaza) for 3.6k sqm, Global Compass (City Offices) for 3.3k sqm, RCS-RDS (City Offices) for 2.6k sqm and Coface (Globalworth Plaza) for 2.4k sqm, as well as Amoma, Zara/Inditex Group, Printec, PC4Cards, Cegedim, ACNielsen and others. Since the beginning of 2014, the Company has successfully negotiated the take-up of approximately 295.5k (311.4k including tenant options) sqm of commercial GLA within its buildings.

The Company following its expansion in Poland through GPRE, has enhanced its tenant base by adding new corporates to its list of partners, as well as corporates who already have presence in its Romanian portfolio, which is considered important for the overall effective asset management of the portfolio. Overall, in Romania and Poland the portfolio is leased to approximately 440 national and multinational corporates from 28 countries and 37 different sectors / industries, with a remaining WALL on the commercial-leased space of approximately 5.7 years as 31 December 2017.

Globalworth's occupancy rate for its commercial standing portfolio at the end of 2017 was 93.3% (95.4% including options).

FINANCIAL REVIEW

Impressive growth in results and NAV

2017 was another very successful year for Globalworth in terms of growth in revenues and profitability.

Highlights

-- Continued the growth in revenues and NOI by 14.1%, and 17.3%, respectively, resulting mainly from new lease agreements signed, the addition of five leased properties to the standing commercial portfolio in Romania during 2017, as well the positive results of our Polish operations since the acquisition of a 71.7% shareholding in GPRE;

   --         Further growth in normalised EBITDA by 13.5%, compared to 2016; 

-- EPRA Earnings for 2017 increased by EUR8.2 million compared to 2016, and IFRS Earnings per share for 2017 amounted to 26.40 cents, as compared to 17.57 cents in 2016;

-- Dividends declared and paid for the first time in 2017 of 22 cents per share (44 cents per share annualised);

   --         Overall increase in the OMV of the assets portfolio by EUR837.9 million; 

-- EPRA NAV as at 31 December 2017 increased by 49.5% from 31 December 2016 (3.2% increase in EPRA NAV per share); and

-- Significant level of cash and cash equivalents of EUR273.3 million at 31 December 2017, EUR52 million higher than at 31 December 2016.

Revenues and Profitability

-- Total revenue reached EUR77.9 million in 2017 (14.1% or EUR9.6 million higher than in 2016);

-- NOI also increased in 2017, following closely the increase in total revenues and reaching a total of EUR51.1 million (2016: EUR43.6 million), representing an increase of 17.3% or EUR7.5 million compared to 2016;

-- EBITDA(1) amounted to EUR31.5 million (2016: EUR43.8 million), however, the decrease compared to 2016 is due to the higher level of acquisition costs and non-recurring expense items in 2017;

-- Normalised EBITDA(2) amounted to EUR41.2 million (2016: EUR36.3 million) and followed the growth trend in revenues and NOI in 2017 with an increase of 13.5% over 2016;

-- EPRA earnings amounted to EUR16.8 million in 2017 (2016: EUR8.6 million), representing an increase of EUR8.2 million or 95.6% over 2016;

-- Increased finance costs during 2017 by 19.4% resulted from the full amortisation of unamortised debt issue costs of c.EUR16.1 million, following the successful refinancing of the Company's debt with the issuance of the EUR550 million Eurobond in June 2017 at a coupon of 2.875%; and

-- Earnings before tax of EUR26.2 million increased by 115% as compared to 2016 (EUR12.2 million), despite the significant costs associated with the increased investment and refinancing activities during 2017, mainly as a result of the increase in operational results (NOI) and the contribution of the c.EUR25.7 million (unrealised) gain recorded on the acquisition of the 71.7% shareholding in the GPRE Group, Poland.

1 Earnings attributable to equity holders of the Company before finance cost, tax, depreciation, amortisation of other non-current assets and purchase gain on acquisition of subsidiaries.

2 EBITDA less: fair value gain on investment property (2017: EUR6.7 million; 2016: EUR6.7 million), non-recurring income (2017: nil; 2016: EUR3.4 million); plus: acquisition costs (2017: EUR10.0 million; 2016: EUR0.1 million); plus: non-recurring administration and other expense items (2017: EUR6.4 million; 2016: EUR2.5 million).

Portfolio Valuation, Shareholders Equity, Total Assets and NAV

-- The outstanding level of investment activity during 2017 (c.EUR328.8 million invested on new acquisitions and advances made for further acquisitions, including the 71.7% shareholding in GPRE, and c.EUR69.4 million on properties under development) led to an 82.7% increase in the value of our investment property portfolio at 31 December 2017, which reached EUR1.8 billion (31 December 2016: 0.98 billion);

-- Total assets at 31 December 2017 exceeded EUR2.1 billion and increased by 75.4% from 31 December 2016; and

-- EPRA NAV at 31 December 2017 (EUR1.17 billion) increased by 49.5% from 31 December 2016 (EUR783.8 million), while EPRA NAV per share increased by 3.2% to EUR8.84 per share (31 December 2016: EUR8.57 per share) and 6.5% over H2-2017 following completion of the GPRE transaction (30 June 2017: EUR8.30 per share).

Cash Flows

-- Cash generated from successful equity and debt financing during 2017 of EUR897.8 million in total, while EUR430.2 million was used on the repayment of more expensive senior and corporate level debt facilities;

-- Cash used in investments made during 2017 of EUR388.0 million in total, including the acquisition of two standing properties and the completion or further advancing of the construction of properties under development in Romania, the acquisition of the 71.7% shareholding in GPRE in Poland, and the acquisition by GPRE of three additional standing properties towards the end of December 2017;

-- Dividends paid during 2017 in respect of the six-month period ended 30 June 2017 of EUR19.9 million; and

-- Cash and cash equivalents at 31 December 2017 (EUR273.3 million) increased by EUR52 million compared to 31 December 2016 (EUR221.3 million).

CASE STUDY

EUR550 million Eurobond pricing

In June 2017, Globalworth successfully completed a EUR550.0 million Eurobond raise with a fixed interest rate of 2.875%.

This was the Company's inaugural issue of such an instrument and we were delighted by the very positive response it received from national and international investors.

As part of the marketing effort, management met with many fixed income investors in eight European countries, which included Romania, France, Germany and the UK, to establish a strong and diverse investor base for this milestone transaction.

The issue was more than two times oversubscribed, resulting in the Company increasing the size of the transaction by EUR50 million and a tightening of the interest rate on the coupon.

The Eurobond carried a rating of BB+/Stable by Standard & Poor's and Ba2/Stable by Moody's in recognition of the outlook for growth, diversity and capital raising potential (targets materialised in Q4-2017).

The instrument has a term of five years, expiring in June 2022, and is traded on both the Irish and Bucharest stock exchanges.

FINANCING AND LIQUIDITY REVIEW

Robust liquidity and capital base

Financing Achievements During 2017

2017 has been a cornerstone in the Group's financing activity, marked by the successful issuance in June 2017 of a EUR550 million Eurobond at a coupon of 2.875% and its listing on the Irish and Bucharest Stock Exchanges, as well as the successful EUR340 million equity raise in December 2017.

The most significant achievements in this area during 2017 were as follows:

Debt Financing/Refinancing:

The total debt portfolio of the Group at 31 December 2017 incorporates the senior debt of GPRE Group and ranges between short and medium to long-term debt, denominated mostly in EUR, with insignificant facilities denominated in Romanian Leu ('RON') and Polish Zloty ('PLN').

-- In June 2017, the Group issued a EUR550 million Eurobond. The five-year euro-denominated Bond matures on 20 June 2022 and carries a fixed interest rate of 2.875 per cent. A significant proportion of the net proceeds of the Eurobond were utilised in the repayment of existing secured lending, contributing to the very significant decrease in the weighted average interest rate on debt financing to 2.62% at 31 December 2017 from 5.25% at the end of 2016; and

-- In November 2017 the Group signed a EUR30 million revolving, long-term facility with Erste Group Bank AG, secured on the TAP property. The full amount of this facility was undrawn at 31 December 2017.

The majority of the Group's debt (EUR550 million Eurobond) is unsecured, while the remaining of the Group's debt is secured with real estate mortgages, pledges on shares, receivables and loan subordination agreements in favour of the financing parties.

Equity Raising and Payment of Dividends:

In December 2017 we successfully raised EUR340 million, diversifying further our equity investor base.

In July 2017 the Group had its first interim dividend payment of 22 cents per share (c.EUR19.9 million) in respect of the six-month period ended 30 June 2017, while another interim dividend of 22 cents per share (c.EUR29.1 million) was paid in January 2018 in respect of the six-month period ended 31 December 2017.

Servicing of Debt During 2017

In 2017 we have repaid in total c.EUR24 million loan capital (excluding the refinancing of existing facilities using the proceeds of the Eurobond), and c.EUR13.4 million of accrued interest on the Group's drawn debt facilities.

Liquidity

The Group seeks to maintain, at all times, sufficient liquidity to enable it to finance its ongoing, planned property investments and completion of properties under development, while maintaining flexibility to capture quickly attractive new investment opportunities.

As outlined above, in December 2017 EUR340 million additional equity was raised, contributing to the significant increase in available cash resources at year end to EUR273.3 million, while additional available liquidity from undrawn loan facilities at 31 December 2017 amounted to EUR32.7 million.

Debt Structure as at 31 December 2017

Loans and borrowings maturity and short-term / long-term debt structure mix

The Group has credit facilities and Eurobond with different maturities, out of which 98% are due in the long term, while only a very small portion of 2% mature in the short term, as presented in the graph below (compared to 93% and 7%, respectively, at 31 December 2016).

At 31 December 2017, the weighted average remaining duration of the Group's debt is 5.4 years (2016: 4.2 years).

Debt Covenants and Securities

The Group's financial indebtedness is arranged with standard terms and financial covenants, the most notable being:

-- the debt service cover ratio ('DSCR') / interest cover ratio ('ICR'), with values ranging from 100% to 300% (be it either historic or projected);

-- the Gross LTV ratio, with contractual values ranging from 60% to 83% (versus the significantly lower overall Gross LTV ratio of the Group at 31 December 2017 of 49.5%; Net LTV at 31 December 2017 of 34.3%);

   --         the loan to cost ratio ('LTC') with a maximum value of 75%; and 
   --         the secured leveraged ratio of 30%; 

with no breaches of the aforementioned values occurring for the year ended 31 December 2017.

The Group's credit facilities concluded with local banks in Romania and Poland are secured with real estate mortgages, pledges on shares, receivables and loan subordination agreements in favour of the financing banks.

Further details on the Group's debt financing facilities are provided in note 15 of the consolidated financial statements.

Debt Denomination Currency and Interest Rate Risk

Our long-term loan facilities are almost entirely Euro-denominated, the Group's loans are denominated in Euro, with insignificant portions denominated in RON and PLN, and either bear interest based on three-months Euribor plus a margin, or bear a fixed interest rate. This ensures a natural hedging linked to the Euro, original currency denomination of the most significant part of our liquid assets (cash and cash equivalents and rental receivables) and reporting currency for the fair market value of our investment property. This is depicted by the low level of overall net foreign exchange loss reported each year.

The weighted average interest rate on debt financing as at 31 December 2017 amounted to 2.62% versus 5.25% at 31 December 2016. As outlined above, the significant decrease is mainly due to the refinancing of all but one of the Group's secured facilities using the proceeds of the Eurobond.

In addition, as a result of the fixed coupon Eurobond, the most significant portion of the Group's indebtedness has a fixed interest rate or it is hedged against interest rates fluctuations, which minimises any interest rate risks for the Group.

CORPORATE SOCIAL RESPONSIBILITY

Respecting our social and environmental objectives

At Globalworth we believe that it is our duty to manage responsibly the social, environmental and economic impact of the way we do business and to contribute to the community in which we live and work.

Our objectives

-- Create value for shareholders by acting consistently in an ethical and socially responsible manner.

   --         Positively impact and improve the future prospects of our local community. 
   --         Create an environment in which people want to work and be associated with. 
 
 FOCUS AREA      2017 INITIATIVES                                                   BENEFICIARIES 
--------------  -----------------------------------------------------------------  ------------------------------------------------------------ 
 SOCIAL 
                   *    Supported our selected charitable causes,                    *    Hospice Casa Speran ei (Hospice of Hope), Save the 
                        contributing in excess of EUR500k over the year.                  Children, and United Way were the main causes 
                                                                                          supported by Globalworth in 2017. 
 
                   *    Continued encouraging our staff to divert part of 
                        their social contributions to charitable causes.             *    More than 10 other foundations and NGO's received our 
                                                                                          support. 
 
                   *    Staff actively contributed personal time to 
                        charitable initiatives.                                      *    Globalworth day camp grew bigger, with 450 children 
                                                                                          hosted at Aduna ii Cop ceni (Hospice of Hope). 
 
                   *    Enhanced the range of 'good cause' events which 
                        Globalworth hosted or participated in.                       *    Christmas Charity Days at Globalworth hosted more 
                                                                                          than 1,200 children over a four day period during the 
                                                                                          festive season. 
                   *    Over 100 scholarships awarded to children. 
 ENVIRONMENTAL 
                       *    Maintained our commitment to owning an                   *    Local communities benefiting from reduced carbon 
                            environmentally friendly real estate portfolio,               emissions. 
                            adding 11 green certified properties in Romania and 
                            Poland. 
                                                                                     *    Tenants benefiting from lower energy costs, 
                                                                                          positively impacting their profitability. 
                       *    Properties added to our environmentally friendly 
                            portfolio included: 
                                                                                     *    People working or visiting our buildings benefiting 
                                                                                          from improved "living" conditions. 
                       *    BREEAM: Very Good or Excellent: 7 properties. 
 
                                                                                     *    Our partners benefiting by assisting us in developing 
                       *    LEED Gold or Platinum: 4 properties.                          and maintaining our green buildings. 
 
 
                       *    Invested in the development of platform that will        *    Our investors benefiting through the creation of long 
                            allow us to better measure and monitor the                    term sustainable value in our portfolio. 
                            performance of our properties. 
 
 
                       *    Focused on energy efficient and sustainable solutions 
                            for our development projects which we seek to 
                            formally green certify following their completion. 
--------------  -----------------------------------------------------------------  ------------------------------------------------------------ 
 

PORTFOLIO REVIEW

Best-in-class real estate portfolio

A high quality portfolio with properties positioned in prime locations within their respective sub-markets in Romania and Poland, with a total consolidated appraised value of EUR1.8 billion.

Globalworth's real estate portfolio continued to grow in 2017, with the Company maintaining its strong momentum in Romania while investing for the first time outside its primary operating market and into Poland.

As at 31 December 2017, the Company's combined portfolio comprised 29 investments with a total of 47 properties in Romania and Poland, two of the largest real estate markets in the CEE region respectively, with an appraised value of EUR1.8 billion, an increase of 85.7% compared to 2016.

Asset Focus

Globalworth's primary focus is to invest in standing or development office properties, which are subsequently actively managed by the Company. Such properties accounted for c.70.7% of our combined portfolio value as of year-end 2017.

In addition, through its investment in GPRE, the Company now controls three high-street mixed-use properties in Poland, which account for c.17.0% of our combined portfolio value. These multi-functional, high quality properties are centrally located within their respective submarkets and combine high street retail and class "A" office space.

Over the course of the year, Globalworth further increased its exposure to Romania's light-industrial / logistics sector, encouraged by the strong demand for high quality space in the sector and the opportunity of providing a holistic real estate solution for our corporate partners. The success of our TAP light-industrial park in Timisoara, which was further developed in 2017 following the completion of two new facilities, and the addition of the Dacia Warehouse resulted in the Company's light-industrial / logistics portfolio rising to an appraised value of EUR103.4m as of 31 December 2017. In addition, recognising the overall demand for high quality light-industrial / logistics space in Timisoara and the attractiveness of TAP's location, we have acquired 30 hectares of land (valued at EUR7.4m) close to the park which we aim to develop in the short / medium term.

The remainder of our portfolio is located in Bucharest / Romania and includes 346 residential units which form part of the Upground complex, other auxiliary premises and two land plots held for future development, accounting for 6.2% of our combined portfolio value.

Geographic Focus

Our real estate portfolio in Romania grew during the year, mainly through the addition of 5 standing properties, further progress in our development projects and the acquisition of 30 hectares of industrial land for future development. As a result, our Romanian combined portfolio reached EUR1,135.3 million as at 31 December 2017, accounting for 62.5% of Globalworth's total portfolio.

In December 2017, the Company acquired a controlling stake in GPRE, following which its exposure to the Polish market consisted primarily of a portfolio of 20 standing properties with an appraised value of EUR680.1 million (as of 31 December 2017).

Real estate investments in Poland, as at 31 December 2017, accounted for c.37.5% of our total combined portfolio value. Given that the properties are located in six different cities, exposure to a single city / market does not exceed c.10.0% of the total consolidated portfolio value of the Company. Wroclaw (two investments) and Warsaw (five investments) account for 10.0% and 9.4% of combined portfolio value, offering total GLA of 106.3k sqm.

The greatest concentration of our portfolio remains in the new Central Business District (CBD) of Bucharest (Romania) where we have 10 standing properties and a development project, accounting for 69.6% of the combined value of our Romanian portfolio and representing 259.7k sqm of standing commercial GLA and 346 residential units as of 31 December 2017.

The new CBD is in the northern part of Bucharest, clustered around the Dimitrie Pompeiu, Calea Floreasca and Barbu Vacarescu Boulevards, and has seen the highest level of office investment in recent years as a result of its excellent accessibility and infrastructure (metro, tram, bus, road), its proximity to the Henri Coanda International Airport, and the availability of sizeable land plots.

Key investments in the new CBD include the Class "A" flagship office Globalworth Tower (54.7k sqm), the Green Court complex (54.3k sqm), the Class "A" BOC office property (57.0k sqm) and, finally, our Globalworth Campus project from which Tower I (29.0k sqm) was delivered in 2017.

The remainder of our Romanian portfolio is spread across the capital and in two of the country's prime logistics hubs, Timisoara and Pitesti, which account for 20.6%, 5.5% and 4.2%, respectively, of our combined portfolio value.

Standing Properties

Globalworth's portfolio of standing properties almost tripled in number in 2017, with the addition of 22 properties through acquisition and 3 properties which were under construction at the beginning of the year and were subsequently delivered to the market. As of year-end there were 39 standing properties in Romania 19 and Poland 20.

Our standing portfolio, as of 31 December 2017, comprised 25 Class "A" offices and three mixed-use investments (with 7 properties in total) in central locations in Bucharest (Romania) and 6 major office markets/cities of Poland. In addition, we own a light industrial park with 5 facilities in Timisoara (Romania), a modern warehouse in Pitesti (Romania), and part of a residential complex in Bucharest (Romania).

Globalworth's total standing GLA at the end of 2017 had almost doubled to c.791.0k sqm, of which c.748.1k sqm was commercial space, while the appraised value of our standing properties rose to c.EUR1.7 billion (as at 31 December 2017), representing a c.1.9x increase on the previous year.

Most notable additions to our portfolio this year include Tower I of our Globalworth Campus development project in Bucharest, Hala Koszyki in Warsaw and the A4 Business Park in Katowice.

The Globalworth Campus project is a large-scale development situated in the new CBD of Bucharest, which on completion will offer three Class "A" office towers, retail spaces and other supporting amenities including a conference centre. Tower I (left tower), part of Phase A, was delivered in September 2017, offering 29.0k sqm over 12 floors and two underground levels. The property, which is currently in its lease-up phase, as of end-of January 2018 was already 54.5% leased (88.9% incl. options) to high quality tenants such as Amazon and Honeywell. Occupancy for the property as of 31 December 2017 was 46.8% (73.6% incl. options)

Hala Koszyki, is a multi-tenanted mixed-use revitalisation / development project in Warsaw, completed in 2016, combining commercial and entertainment features with three modern class "A" office properties (and a smaller secondary office). The project's centrepiece is the former 'Koszyki' market hall, commonly known as the 'People's bazaar' built between 1906 and 1908, which has been renovated and complements the three recently completed modern office buildings, offering 22.2k sqm of high quality commercial space. The property is pre-certified with BREEAM 'Very Good' green certification and is 100% leased to tenants such as Mindspace. In Q1-2018 the retail component of Hala Koszyki received BREEAM 'Very Good' certification, and we are currently in the process of certifying the office component.

The A4 Business Park is a modern, multi-tenanted class "A" office park in the southern part of Katowice (Poland). The park comprises three properties, delivered between 2014 and 2016, offering total GLA of 30.6k sqm. A4 is 100% leased to tenants including the well-known international corporates IBM, Rockwell Automation and PKP Cargo.

All our properties are modern and have been completed or refurbished since 2011, with c.66.7% of our GLA and c.66.5% of our standing combined portfolio value having been delivered within the past 7 years. It is worth noting 37 of our properties have been delivered or significantly refurbished in the past 5 years, and following the delivery of our development projects (Globalworth Campus - Towers II and III, Renault Bucharest Connected) and other future completions, the proportion of modern office stock in our portfolio will further increase in the next two years.

The number of 'green' properties owned by the Company has also increased since the beginning of 2017, with the most notable addition being our landmark class "A" Globalworth Tower office in Bucharest, which was officially awarded the Green certification of LEED Platinum, becoming the first building in Romania and the broader SEE region to have received the highest available Green accreditation. In addition, Globalworth Plaza in Bucharest received BREEAM Excellent certification in 2017, while 8 of the properties added in our portfolio through acquisition are green certified with BREEAM Very Good or higher and LEED Gold accreditations, including Green Court "C" (Bucharest), Green Horizon (Lodz), Westgate (Wroclaw), Tryton (Gdansk) and the A4 Business Park (Katowice).

Our portfolio now includes 18 green accredited properties, accounting for 57.3% of the standing consolidated portfolio value. We have commenced the process for certifying or re-certifying 8 of our properties and in addition we are assessing the green certification potential of our larger, non-certified office and mixed-use properties, targeting green accreditations of BREEAM Very Good / LEED Gold or higher, thus aiming to further increase the number of green certified properties in our portfolio over the next 12 months.

Occupancy of our standing commercial portfolio as of 31 December 2017 had significantly improved to 93.3%, representing a 12.2% increase compared to the same period last year (83.1% as of 31 December 2016) or a 10.2% increase on a like-for-like basis. In total we have c.697.8k sqm of commercial GLA leased to c.440 tenants, the majority of which is tenanted to national and multinational corporates which are well-known within their respective markets. This high level of occupancy is underpinned by the fact that 32 (of 38) of our commercial properties had an occupancy rate in excess of 95%, and we are in active discussions with a number of tenants for the remaining vacant space in our portfolio.

In addition to our commercial portfolio, Globalworth owns 346 apartments in Upground Towers, a modern two-tower residential complex centrally situated in the new CBD of Bucharest, with a total of 571 apartments. The property benefits from fine views of the nearby Tei lake and adjacent to our BOB, BOC and Globalworth Campus investments and in close proximity to 6 other offices in our portfolio, thus allowing us to leverage its use and provide a complete package to our many international tenants looking for turnkey solutions when relocating their operations to the area.

Globalworth's exposure to the residential sector further decreased in 2017 and accounted for c.4.3% of our combined portfolio value at year end (from 9.5% in 2016), mainly as a result of the new additions in our portfolio and the sale of 75 residential units during the year. At 31 December 2017, 195 apartments in Upground Towers were leased, generating c.EUR1.5 million of annual rental income.

 
Commercial Standing Properties   31 Dec. 16  31 Dec. 17 
-------------------------------  ----------  ---------- 
Number of Investments                    11          24 
Number of Properties                     13          38 
GLA (sqm)                           370,033     748,143 
"As Is" Valuation (EURm)              788.6     1,632.6 
Occupancy                             83.1%       93.3% 
Contracted Rent (EURm)                 46.9       107.6 
WALL (years)                            6.4         5.3 
-------------------------------  ----------  ---------- 
 
 
Total Standing Properties   31 Dec. 16  31 Dec. 17 
--------------------------  ----------  ---------- 
Number of Investments               12          25 
Number of Properties                14          39 
GLA (sqm)                      419,986     790,967 
"As Is" Valuation (EURm)         881.5     1,710.3 
Contracted Rent (EURm)            48.5       109.1 
--------------------------  ----------  ---------- 
 

Developments

Globalworth continued with its active development programme in Romania in 2017, delivering to market Tower I of the class "A" Globalworth Campus development and two light-industrial facilities in TAP, with total of 51.0k sqm of commercial GLA. As at the end of the year, we had 2 other properties in Bucharest under construction which, upon completion, will further increase our footprint of high quality office standing GLA by 70.5k sqm.

Tower II (right tower) of the Globalworth Campus development project is in progress, with structural works and the façade almost completed. The majority of the remaining works involves the interior areas of the building. On completion, Tower II will offer GLA of 28.2k sqm and 180 parking spaces, with 12 floors above ground and two underground levels. The building is expected to be completed at the end of Q1-2018 and its delivery will mark the completion of Phase I of the project, comprising Towers I and II.

In addition, construction of Phase II of the Globalworth Campus development is expected to commence in H1 2018 and will include a class "A" office building, conference facilities and other auxiliary areas. During 2017, the Company improved the design of Phase II and we are currently undertaking the tender process for the appointment of the general contractor responsible for its development. Phase II is expected to be completed within 22 months from commencement and, on completion, will contribute additional GLA of approximately 34.8k sqm and 506 parking spaces.

At the end of 2017, Globalworth's development project known as Renault Bucharest Connected ('RBC') was under construction. RBC, which is jointly owned by the Company and the Elgan Group, will house Groupe Renault's new headquarters in Romania as well a dedicated design centre for the development of future models of cars. On completion, RBC will offer 42.3k of GLA and 1,000 parking spaces. The project is progressing in line with its envisaged timeline, with all preparatory activities completed and construction having reached the third floor. The development is expected to be delivered in Q1-2019.

Globalworth according with the terms of its agreement with the Elgan Group will be funding 100% of the development cost and upon completion of construction will have a right of first offer for the acquisition of its non-controlling stake in the project.

The Company has adopted several environmentally friendly principles for its development projects and, as such, anticipates these projects to be awarded Green certification following their completion.

Elsewhere, following the delivery of two new light-industrial facilities at TAP in 2017, the size of the park has reached 103.4k sqm of GLA, with the potential for further development which would increase GLA to 131.9k sqm if the extension options currently available to its existing tenants are taken up.

The "As Is" value of the Development Projects as of 31 December 2017 was approximately EUR79.4 million. On completion, the projects are expected to deliver approximately 133.8k sqm of new office and light-industrial space, with an appraised value of c.EUR202.1 million

Land for Future Development

Globalworth owns land plots in two prime locations in Bucharest (Herastrau Lake and the historical CBD), covering a total surface of 9.8k sqm, in which office or mixed-use properties can be developed. We have prioritised the land in the historical CBD for future development, and we anticipate constructing a mix-use property of c.27.0k sqm space, subject to relevant approvals.

In 2017 the Company acquired 30 hectares of land near the TAP light-industrial park in Timisoara. This land can be developed in phases delivering c.139.8k sqm of new high-quality light-industrial / logistics space in the area.

We are currently performing planning and/or permitting activities for Globalworth's land bank in order to be able to develop it in the future. The total appraised value of our land for future development as of 31 December 2017 was c.EUR25.7 million.

Overview of Selected Current and Future Developments

 
                                     Globalworth                                              Land 
Development                             Campus                   Renault          TAP           in 
                            ------------------------------ 
                                                               Bucharest    Extension    Bucharest       TAP II 
                                      Tower          Tower 
Asset                                    II            III     Connected    Timisoara          CBD    Timisoara 
--------------------------  ---------------  -------------  ------------  -----------  -----------  ----------- 
                                      Under         Future         Under       Future       Future       Future 
Status                         construction    development  construction  development  development  development 
--------------------------  ---------------  -------------  ------------  -----------  -----------  ----------- 
Expected Delivery                  Q1-2018E          2020E      Q1-2019E                     2020E   2018-2020E 
                                                                                                           134k 
                                                                                                         sqm in 
                                       28.2                                                   27.0 
GLA (sqm)                                 k         34.8 k        42.3 k       28.5 k            k       phases 
Capex to 31 Dec 
 17 (EURm)                             16.9            6.6          18.4          0.8          7.0          4.7 
As Is Value (EURm)                     37.6           16.7          24.4          0.7         12.6          7.4 
Estimated Capex 
 (EURm)                                15.8           45.0          39.8          7.4         35.0         56.4 
Completion Value 
 (EURm)                                51.2           66.6          74.0         10.3         12.6            - 
Est. Yield on Development 
 Cost                                              12.2%            9.5%        11.5%        13.8%        10.0% 
--------------------------  ------------------------------  ------------  -----------  -----------  ----------- 
 
   *               Renault Bucharest Connected (reflected with 100% ownership). 
   *               Estimated capex based on contracted and company estimates. 

Forward Purchase and Right of First Offer Portfolio

Globalworth, through GPRE, has a portfolio of three investments in Poland which are at different phases of construction and which it has either prefunded or in which it owns a minority stake (25%), with the right to acquire the remaining interest once certain conditions have been satisfied.

Forward Purchase

-- West Link is a class "A" office project located in west part of Wroclaw next to the West Gate office building owned by the Company. The property, which is expected to be completed in Q2-2018, will offer on completion c.14.4k sqm of GLA over six floors above ground and 266 parking spaces. West Link, on acquisition, will be fully occupied, and is currently 97.7% pre-let mainly to Nokia, with a 5-year master lease on available spaces.

Right of First Offer (25% current ownership)

-- Beethovena Business Park is a class "A" office project located in Warsaw comprising two, five-floor offices, which on completion will offer total GLA of 34.2k sqm. Beethovena I and II are of similar size and are expected to be delivered in Q3-2019 and Q4-2019 respectively

-- Browary J is a class "A" office project located in Warsaw comprising a stepped shaped "main" building extending over 11 floors and the lower 7th floor wing. The project is expected to be delivered in Q4-2018 and, on completion, will offer 15.0k sqm of GLA, of which c.45% has been pre-leased to a blue-chip tenant. Browary J will be part of Browary Warszawskie (Warsaw Brewery) a mixed-use (office, residential and retail) development in the Wola district which has become one of the most dynamic commercial and residential areas of Warsaw

 
                                                                 Remaining 
                                                                    Amount               Value 
                                                                     (EUR)                  on 
                                                                             As Is 
                                      Estimated                      to be   Value  Completion 
                                                                  invested     (31         (31 
                                     Completion          Amount        for     Dec         Dec 
                                                   GLA Invested 
                          Location         Date           (EUR)       100%   2017)       2017) 
-----------------------  ---------  -----------  --------------  ---------  ------  ---------- 
Beethovena I                Warsaw      Q3-2019  17,845     2.9       16.5     6.9        42.1 
Beethovena II               Warsaw      Q4-2019  16,380     2.8       14.4     3.9        36.9 
Browary J                   Warsaw      Q4-2018  14,979     4.2       19.4    14.0        54.3 
-----------------------  ---------  -----------  ------  ------  ---------  ------  ---------- 
Total ROFO 
-----------------------  ---------  -----------  ------  ------  ---------  ------  ---------- 
West Link                  Wroclaw      Q2-2018  14,362    18.0          -    36.4        36.4 
-----------------------  ---------  -----------  ------  ------  ---------  ------  ---------- 
Total ROFO and Forward 
 purchase                                        63,566    27.9       50.3    61.2       169.7 
-----------------------------------------------  ------  ------  ---------  ------  ---------- 
 
   *               For the ROFO properties 50% LTV is assumed. 

   *               West Link "As Is" value, represents the estimated completion value of the property. 

GOVERNANCE

INTRODUCTION TO GOVERNANCE

Letter from the Chairman

Our growing momentum in the CEE office sector is very evident following the significant progress in 2017 in enlarging our geographic footprint, portfolio size and our capital base. Alongside this, our commitment towards strong governance and corporate sustainability and responsibility remains an overriding priority.

Highlights

-- Strong supportive relationships with shareholders and bond holders of the Company, evidenced by our success in capital markets

   --         5 new Non-Executive Directors joined the Board which now comprises 13 members 

-- Active involvement by the Board in overseeing governance with 19 meetings held during the year

-- Continuous focus on high environmental standards with 11 new green certified offices added to our portfolio

   --         Outstanding health and safety record 

Dear shareholders

I am pleased to introduce this Corporate Governance report, in which we demonstrate our high standards of corporate governance as we strive to voluntarily meet the higher standards of the UK Corporate Governance Code. 2017 has been a significant year for Globalworth on a variety of fronts, and one which we are confident we can further capitalise on in the years ahead. The Board is grateful to all the Company's stakeholders for their ongoing commitment and support.

I am delighted with the ongoing progress that the Company continues to make, further extending the impressive track record since IPO in 2013 and in-line with our strategy and business model. While 2017 will be marked by the Company's expansion into Poland which starts an exciting new chapter, the ongoing underlying progress in Romania was also pleasing, with growth in occupancy alongside the delivery of new developments and acquisitions. The Company successfully marked its debut in the debt capital markets with a EUR550m Eurobond in June which was more than 2x oversubscribed, and demonstrated the Company's ability to tap into the attractive lending conditions available to it. As evidence to our scale, this represented the largest corporate bond issue in the history of the Bucharest stock exchange. Following this progress, it was satisfying to see the Company completed in December a EUR340 million new equity capital raise, above target and oversubscribed at a price of EUR8.75 per share, receiving good support from our existing shareholders and, importantly, from new shareholders to Globalworth.

It is with great satisfaction that we have seen the considerable progress achieved in 2017 reflected in the strong total return to shareholders through a combination of share price performance and dividend. An owner of our shares throughout 2017 will have enjoyed a total return of 37%. The Company's improved traction in the capital markets has also been seen by improved trading volumes of our shares on the London Stock Exchange in recent months, with average daily volume exceeding EUR400k/day in Q4 2017, compared to c.EUR75k/day in Q4 2016. Responding to feedback from our investors, the Company has expanded its investor relations and engagement program, reflecting our commitment to build our brand and market awareness in international capital markets further. This places us in a good position, as announced during the year, to progress our intention to obtain a Premium Listing on the London Stock Exchange's Main Market during the coming year.

Sustainability/Social Responsibility

All at Globalworth are committed to following strict business ethics and in corporate social responsibility. We are proud to place significant importance on this, but firmly believe that this sustains long-term value for the Company, our shareholders, the community and environment.

Reflecting the importance not only for the environment, but also as a key priority for many prospective tenants, we continue to target buildings offering strong green credentials, or scope where environmental performance can be improved. Today, we have a portfolio of 25 office properties in Romania and Poland, of which 17 have received green accreditation of BREEAM Very Good / LEED Gold or higher. This was also recognised in the award of the Best Leading Green Build Development & Developer for Globalworth Tower at the CIJ Awards Romania. In addition, in Q1-2018 the retail component of our Hala Koszyki investment in Poland was green certified.

Giving back to the Community is a key principle in our operations, both as a Company and through our employees in a personal capacity. Over the years, Globalworth has supported numerous local communities, charities and hospitals both indirectly and directly. Examples have included our efforts with children and those in need of palliative care, but also in education.

Health & Safety

Health and safety is of paramount importance to us, with tens of thousands of people working at or visiting our properties each day and across our development sites. With c.791.0k sqm of standing GLA in our property portfolio and an additional 70.5k sqm under construction at the end of 2017, and we work hard together with our partners to maintain an outstanding record in this area. Across our portfolio, we conduct health and safety training for our tenants and undertake regular scenario exercises in order to secure the safety of employees and visitors in the event of an emergency. On our construction sites we monitor our contractors closely to ensure that proper safety measures are being applied to the workforce and, in the case of visitors, that the proper health and safety training is being performed.

The Board

The close relationship and open communication between the Non-Executive and Executive Directors is integral to our governance process, allowing the smooth operation of the Board, and ensuring ongoing guidance for the Company. This is evident through the 19 times the Board convened in 2017, and I would like to thank all members of the Board for their ongoing support. We were pleased to welcome five new additions to our Board of Directors over the course of the year, which now comprises 13 members. Norbert Sasse, George Muchanya, Peter Fechter, Richard van Vliet joined in February 2017 following the enhancements to governance announced at the end of 2016, and in December 2017 we were pleased to be joined by Bruce Buck. Together these additional members continue to enhance the expertise and depth of knowledge from which the Company benefits.

Geoff Miller

Chairman

7 March 2018

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEARED 31 DECEMBER 2017

 
                                                    2017      2016 
                                          Note   EUR'000   EUR'000 
----------------------------------------  ----  --------  -------- 
Revenue                                      7    77,866    68,231 
Operating expenses                           8  (26,772)  (24,678) 
Net operating income                              51,094    43,553 
----------------------------------------  ----  --------  -------- 
Administrative expenses                      9  (10,231)   (7,707) 
Acquisition costs                           26  (10,809)     (105) 
Fair value movement                          3     6,727     6,710 
Bargain purchase gain on acquisition of 
 subsidiaries                               26    28,897         - 
Gain on sale of subsidiary                             -       272 
Share-based payment expense                 24     (143)      (14) 
Depreciation on other long-term assets             (150)     (183) 
Other expenses                              31   (4,091)   (1,857) 
Other income                                           5     3,111 
Foreign exchange loss                              (317)     (119) 
----------------------------------------  ----  --------  -------- 
                                                   9,888       108 
----------------------------------------  ----  --------  -------- 
Profit before net financing cost                  60,982    43,661 
----------------------------------------  ----  --------  -------- 
Net financing cost 
- Finance cost                              10  (38,465)  (32,222) 
- Finance income                                   1,447       749 
----------------------------------------  ----  --------  -------- 
                                                (37,018)  (31,473) 
----------------------------------------  ----  --------  -------- 
Share of profit of joint venture            28     2,188         - 
----------------------------------------  ----  --------  -------- 
Profit before tax                                 26,152    12,188 
----------------------------------------  ----  --------  -------- 
Income tax expense                          11   (2,405)     (873) 
----------------------------------------  ----  --------  -------- 
Profit for the year                               23,747    11,315 
----------------------------------------  ----  --------  -------- 
Other comprehensive income                             -         - 
----------------------------------------  ----  --------  -------- 
Profit attributable to:                           23,747    11,315 
----------------------------------------  ----  --------  -------- 
- Equity holders of the Company                   24,426    11,315 
----------------------------------------  ----  --------  -------- 
- Non-controlling interest                         (679)         - 
----------------------------------------  ----  --------  -------- 
 
 
                              Cents  Cents 
------------------------      -----  ----- 
Earnings per share 
- Basic                   12  26.40  17.57 
- Diluted                 12  26.04  17.56 
EPRA earnings per share 
- Basic                   12  18.17  13.34 
- Diluted                 12  17.92  13.33 
------------------------      -----  ----- 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2017

 
                                                      2017       2016 
                                           Note    EUR'000    EUR'000 
-----------------------------------------  ----  ---------  --------- 
ASSETS 
Non-current assets 
Investment property                           3  1,792,414    980,892 
Goodwill                                     27     12,349     12,349 
Advances for investment property              5      3,355      2,454 
Investments in joint-ventures                28     21,939          - 
Other long-term assets                                 689        722 
Other receivables                            19        416      1,183 
Prepayments                                          1,578      1,022 
Available for sale financial assets          17      5,897          - 
Long-term restricted cash                    20      2,958          - 
-----------------------------------------  ----  ---------  --------- 
                                                 1,841,595    998,622 
-----------------------------------------  ----  ---------  --------- 
Current assets 
Debentures                                   18     18,389          - 
Available for sale financial assets          17      4,346          - 
Trade and other receivables                  19     22,419     10,807 
Guarantees retained by tenants                         304        277 
Income tax receivable                                  295        411 
Prepayments                                            325        348 
Cash and cash equivalents                    20    273,272    221,337 
-----------------------------------------  ----  ---------  --------- 
                                                   319,350    233,180 
-----------------------------------------  ----  ---------  --------- 
Total assets                                     2,160,945  1,231,802 
-----------------------------------------  ----  ---------  --------- 
EQUITY AND LIABILITIES 
Total equity 
Issued share capital                         22    894,509    538,114 
Treasury shares                              24      (270)          - 
Unissued share capital                       23          -      8,584 
Share-based payment reserve                  24      2,240      2,139 
Retained earnings                                  172,405    166,557 
-----------------------------------------  ----  ---------  --------- 
Equity attributable to equity holders of 
 the Company                                     1,068,884    715,394 
Non-controlling interest                            67,572          - 
-----------------------------------------  ----  ---------  --------- 
Total equity                                     1,136,456    715,394 
-----------------------------------------  ----  ---------  --------- 
Non-current liabilities 
Interest-bearing loans and borrowings        15    834,044    375,570 
Deferred tax liability                       11     99,574     70,575 
Guarantees retained from contractors                 2,616         33 
Deposits from tenants                                8,931      2,261 
Trade and other payables                     16      1,509      2,188 
-----------------------------------------  ----  ---------  --------- 
                                                   946,674    450,627 
-----------------------------------------  ----  ---------  --------- 
Current liabilities 
Interest-bearing loans and borrowings        15     36,360     38,665 
Guarantees retained from contractors                 1,057      2,394 
Trade and other payables                     16     35,635     20,726 
Other current financial liabilities          21      2,638      3,574 
Finance lease liabilities                                -          4 
Deposits from tenants                                1,256        374 
Income tax payable                                     869         44 
-----------------------------------------  ----  ---------  --------- 
                                                    77,815     65,781 
-----------------------------------------  ----  ---------  --------- 
Total equity and liabilities                     2,160,945  1,231,802 
-----------------------------------------  ----  ---------  --------- 
                                                     Cents      Cents 
NAV per share                                13        809        791 
Diluted NAV per share                        13        807        782 
EPRA NAV per share                           13        884        857 
-----------------------------------------  ----  ---------  --------- 
 

The financial statements were approved by the Board of Directors on 7 March 2018 and were signed on its behalf by:

Richard van Vliet

Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEARED 31 DECEMBER 2017

 
                                               Equity attributable to equity 
                                                   holders of the Company 
                              --------------------------------------------------------------- 
                                Issued            Unissued  Share-based                                Non- 
                                 share  Treasury     share      payment   Retained              controlling      Total 
                               capital    shares   capital      reserve   earnings      Total     interests     equity 
                        Note   EUR'000   EUR'000   EUR'000      EUR'000    EUR'000    EUR'000       EUR'000    EUR'000 
----------------------  ----  --------  --------  --------  -----------  ---------  ---------  ------------  --------- 
As at 31 December 
 2015                          341,784         -         -        2,655    155,242    499,681             -    499,681 
----------------------  ----  --------  --------  --------  -----------  ---------  ---------  ------------  --------- 
Shares issued for 
 cash                          200,000         -         -            -          -    200,000             -    200,000 
Transaction costs 
 on issue of shares           (22,191)         -         -            -          -   (22,191)             -   (22,191) 
Transaction costs 
 on issue of shares 
 settled in shares               8,584         -         -            -          -      8,584             -      8,584 
Transaction costs 
 on issue of shares 
 to be settled in 
 shares                              -         -     8,584            -          -      8,584             -      8,584 
Fair value of option 
 warrants issued 
 for executive share 
 scheme                              -         -         -           14          -         14             -         14 
Shares granted 
 to Executive 
 Directors 
 and other senior 
 management employees                -         -         -        3,407          -      3,407             -      3,407 
Shares issued to 
 the Executive 
 Directors 
 and other senior 
 management employees            3,937         -         -      (3,937)          -          -             -          - 
Shares issued for 
 settlement of 
 interest-bearing 
 liability                       6,000         -         -            -          -      6,000             -      6,000 
Profit for the 
 year                                -         -         -            -     11,315     11,315             -     11,315 
----------------------  ----  --------  --------  --------  -----------  ---------  ---------  ------------  --------- 
As at 31 December 
 2016                          538,114         -     8,584        2,139    166,557    715,394             -    715,394 
----------------------  ----  --------  --------  --------  -----------  ---------  ---------  ------------  --------- 
Shares issued for 
 cash                     22   340,000         -         -            -          -    340,000             -    340,000 
Transaction costs 
 on issue of shares       22   (2,271)         -         -            -          -    (2,271)             -    (2,271) 
Transaction costs 
 on issue of shares 
 settled in shares        22     8,584         -   (8,584)            -          -          -             -          - 
Fair value of option 
 warrants issued 
 for executive share 
 scheme                   24         -         -         -           17          -         17             -         17 
Shares issued under 
 Executive share 
 option plan            24.1     8,950         -         -        (175)          -      8,775             -      8,775 
Shares issued to 
 the Executive 
 Directors 
 and other senior 
 management employees   24.2     1,132         -         -      (1,132)          -          -             -          - 
Interim dividend 
 payment during 
 the year               22.2         -         -         -            -   (19,933)   (19,933)             -   (19,933) 
Acquisition of 
 own shares             24.3         -     (428)         -            -          -      (428)             -      (428) 
Shares granted 
 under the 
 subsidiaries' 
 employees share 
 award plan             24.3         -         -         -          126          -        126             -        126 
Shares granted 
 to Executive 
 Directors 
 and other senior 
 management employees   24.2         -         -         -        1,423          -      1,423             -      1,423 
Shares vested under 
 the subsidiaries' 
 employees share 
 award plan             24.3         -       158         -        (158)          -          -             -          - 
Acquired through 
 business acquisition     26         -         -         -            -          -          -        77,306     77,306 
Acquisition of 
 minority interest        29         -         -         -            -      1,355      1,355       (9,055)    (7,700) 
Profit for the 
 year                                -         -         -            -     24,426     24,426         (679)     23,747 

----------------------  ----  --------  --------  --------  -----------  ---------  ---------  ------------  --------- 
As at 31 December 
 2017                          894,509     (270)         -        2,240    172,405  1,068,884        67,572  1,136,456 
----------------------  ----  --------  --------  --------  -----------  ---------  ---------  ------------  --------- 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2017

 
                                                             2017       2016 
                                                  Note    EUR'000    EUR'000 
------------------------------------------------  ----  ---------  --------- 
Profit before tax                                          26,152     12,188 
Adjustments to reconcile profit before 
 tax to net cash flows 
Fair value movement on investment property           3    (6,727)    (6,710) 
Bargain purchase gain on acquisition 
 of subsidiaries                                    26   (28,897)          - 
Loss on sale of investment property                         3,807      1,421 
Gain on sale of subsidiaries                                    -      (272) 
Share-based payment expense                         24        143         14 
Depreciation on other long-term assets                        150        183 
Net movement in provision for doubtful 
 debts                                                        129       (98) 
Foreign exchange loss                                         317        119 
Share of profit of joint ventures                   28    (2,188)          - 
Net financing costs                                        37,018     31,473 
------------------------------------------------  ----  ---------  --------- 
Operating profit before changes in working 
 capital                                                   29,904     38,318 
(Increase)/decrease in trade and other 
 receivables                                              (3,027)      4,174 
Increase/(decrease) in trade and other 
 payables                                                 (3,010)      1,364 
Interest paid                                            (13,352)   (23,171) 
Interest received                                             170         22 
Income tax paid                                             (614)      (795) 
------------------------------------------------  ----  ---------  --------- 
Cash flows from operating activities                       10,071     19,912 
------------------------------------------------  ----  ---------  --------- 
Investing activities 
Expenditure on investment property under 
 development                                             (50,076)   (51,688) 
Payment for acquisition of subsidiaries 
 less cash acquired                                 26  (317,653)    (1,894) 
Proceeds from sale of subsidiary less 
 cash disposed                                                  -     11,000 
Payments for the acquisition of non-controlling 
 interests                                          29    (7,700)          - 
Proceeds from sale of investment property                  10,392      3,327 
Investment in available for sale financial 
 assets                                             17    (3,464)          - 
Investment in and loans to joint ventures           18   (19,360)          - 
Acquisition of other long-term assets                       (117)      (244) 
------------------------------------------------  ----  ---------  --------- 
Cash flows used in investing activities                 (387,978)   (39,499) 
------------------------------------------------  ----  ---------  --------- 
Financing activities 
Proceeds from share issuance                        22    348,775    200,000 
Payment of transaction costs on issue 
 of shares                                                (3,896)    (1,099) 
Purchase of own shares                            24.3      (428)          - 
Proceeds from interest-bearing loans 
 and borrowings(1)                                        548,989    222,703 
Repayment of interest-bearing loans 
 and borrowings                                         (430,213)  (203,017) 
Payment of interim dividend                       22.2   (19,933)          - 
Payment of loan arrangement fees and 
 other financing costs                                   (15,702)   (11,670) 
Change in restricted cash reserve                           2,971          - 
------------------------------------------------  ----  ---------  --------- 
Cash flows from financing activities                      430,563    206,917 
------------------------------------------------  ----  ---------  --------- 
Net increase in cash and cash equivalents                  52,656    187,330 
------------------------------------------------  ----  ---------  --------- 
Cash and cash equivalents at the beginning 
 of the year                                        20    218,366     31,036 
------------------------------------------------  ----  ---------  --------- 
Cash and cash equivalents at the end 
 of the year(1)                                     20    271,022    218,366 
------------------------------------------------  ----  ---------  --------- 
 
   1               Net of the EUR2.3 million (2016: EUR2.9 million) cash reserve, see note 20. 

The aforementioned references to the Financial Statements above are in relation to the notes that are contained in Section I: Basis of Preparation within the 2017 Annual Report, which can be found at http://www.globalworth.com/investor-relations/financial-reports-and-presentation from page 116. In addition, the Annual Report provides further information about the activities of Globalworth and also a glossary of terms.

[1] Combined real estate portfolio is defined as the aggregation of all assets in the Company's portfolio, including consolidation of 100% of GPRE and 100% of the investment referred to as Renault Bucharest Connected.

[2] Normalised EBITDA is defined as 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.

This information is provided by RNS

The company news service from the London Stock Exchange

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March 08, 2018 02:01 ET (07:01 GMT)