Hello.
Recording in progress.
Hi, good morning, everyone.
Hello, good morning.
Good morning.
Thank you very much for joining our 2023 annual results call. It is my pleasure to introduce you or to kind of show you who the speakers of today's call gonna be. It's gonna be Gyula Nagy, who is the CEO of GTC S.A. It's gonna be Zsolt Farkas, who is the COO of GTC S.A. We also have Barbara Sikora with us today, who will present the financial statements and the financial results for 2023. As usual, the call is being recorded, and it will be posted on GTC's website later today. Let me give the floor to Gyula, who will make a short introduction, followed by Barbara. Following the official presentation, we will open a Q&A session. Thank you very much.
Thank you very much, Małgorzata. Good morning, everyone, and thank you for the opportunity to have this presentation about the 2023 figures of GTC. I would like to start that, despite the fact that the economic situation was not favorable for the real estate market, market sentiment on real estate sector was down at the level it was 8-10 years ago in a high inflation rate and in a high-interest environment. On a challenging leasing market, GTC managed to achieve quite a good financial performance and KPIs.
The revenue in 2023, rental income, the revenue for rental activity, went up by 10% to EUR 183 million, which is mainly due to disposals of assets, offset by completions in 2022 and 2023 as well, resulting in a like-for-like rental revenue growth of around 10%, which is mainly due to the indexation of the rental fees, the rental rates. Gross margin rose by 8% to EUR 128 million in 2023. Our FFO reached EUR 71 million, which is adjusted for one-off items, which will be in detail presented by Barbara. Our EPRA NAV amounted to EUR 1,232 million as of 31st December, which is a slight increase due to the devaluation of our portfolio, mainly due to the yearly appraisal procedure, which takes twice a year, in terms of financials.
Our net loan-to-value resulted in 49.3%, adjusted if we adjust the loan-to-value with a cash on an escrow account, it's the adjusted net loan-to-value leveled down to 47%, more than 47%. We managed to reach an average occupancy level for our portfolio of 87% as of December 31st. We have still quite high and robust cash amount on our balance sheet, EUR 60 million, plus an escrow account buildup for the acquisition of our eurobond amounting to EUR 29.5 million. So altogether, the like-for-like cash balance amounts to EUR 108 million. Małgorzata, can you please turn to the next slide? In terms of our office portfolio, we managed to maintain the occupancy of 2022 on in 2023 as well at the level of 84%, with a vault of 3.5 years.
We achieved quite a good leasing activity in terms of office portfolio for 106,000 sq m . The disposal of Forest Offices in Debrecen took place in January 2023. This generated a cash flow of EUR 49 million. We reinvested in real estate. There were two completions, Rose Hill Business Campus and Matrix C, which has an added area for our portfolio of more than 50,000 sq m . So as I mentioned, Rose Hill Business Campus was the first completion in 2023 with two refurbished A-class office buildings of 46,000 sq m . The occupancy reached 100% for that at an average rental rate of EUR 18 per square meter.
In Zagreb, in Croatia, we completed Matrix C, a new A-class office building of more than 10,000 sq m with an occupancy rate of 95% at an average rental rate of EUR 14.5 per square meter. In terms of our retail portfolio, we're still performing good. The occupancy level we managed to maintain at 96% with a WALT of 3.5 years as well. We have reached a quite good leasing activity of 38,000 sq m 2023. Małgorzata, could you please go to the next slide? Our portfolio did not change compared to the Q3 as presented for the Q3 figures. 88% of the total portfolio on gross asset value basis is qualified as recording income portfolio.
Out of the income-generating portfolio, 65% is the office portfolio, and the remaining 35% qualifies as retail portfolio. 3% of our portfolio is under development, and the land reserves amount to 8% of that. We still managed to maintain our presence in EU countries at the level of 92%, out of our whole portfolio. And we are still concentrating on our commitment to green certification and ESG compliance, by having a portfolio, the majority of our assets, 92% is green certified and 6% is under certification. If we move forward to our development, we are still continuing the development activity as committed ourselves to turn GTC to a development company.
Our current development activity upon completion, we'll have an added value to our portfolio of more than 51,000 sq m with a gross asset value of more than EUR 68 million, realizing an ERV of more than EUR 13 million there. One of the Hungarian developments is Andrássy Street with a 3,600 square meter office space. Now, the Shell and Core status has been completed, and we are seeking for the tenants in terms of hospitality and office. And the next one is the refurbishment as we presented last quarter. Centerpoint 1 and 2—this was the former headquarters of Exxon, which moved to Pillar, our Pillar office building. This building, Centerpoint 1 and 2, consists of more than 40,000 sq m , and the refurbishment contains the full renovation of the ground floor areas, lifts, and the lobbies.
We still committed ourselves to continue the redevelopment of Rose Hill Business Campus, the remaining buildings. We managed to sign with a private hospital a 10-year leasing agreement with EUR 18 per sq m with a future possible extension. And still, there are leads in the pipeline for four or three tenants, just like a pro private schools and for offices as well. The fourth one is Centerpoint 3, our Centerpoint 3 development consisting of 36,000 sq m new office space. At that time, we are in terms of this asset, there is a big tenant, a key blue chip tenant, in an advanced negotiation status for 12,000 sq m at EUR 18 per sq m. And there are two or three tenders in the pipeline for 2,000-8,000 sq m each.
So in terms of the financials, I would like to give the word to Barbara to continue and present the 2023 KPIs and financials to you. Thank you very much.
Thank you, Gyula. Good morning, ladies and gentlemen. I'd like to start from a comment that it has been a very decent financial year, of stable increases on the operating side, and the Q4 has been a very strong quarter. On the revenue from rental activity side, there was an increase of 10%, as Gyula mentioned, which resulted in gross margin from operations growing by 8% as compared to 2022. And profit for the 2023, in the amount of EUR 12 million. The result for the year, of course, was strongly influenced by loss from revaluation of last of assets. And again, referring to Q4, it was a good quarter as we promised. The Q2 down devaluation of the assets was definite, meaning at the end, and it was a big decrease.
But as we promised, it should have represented the entire devaluation. And in fact, in Q4, there was no further devaluation, with minor adjustments, on the asset, by asset, level. But the net result from revaluation of asset was +EUR 1 million. On the EBITDA side, you can see that the results obtained for 2023 as compared to 2024 was at the similar level. This is, of course, due to the fact that there were one-offs, which were not planned. As for the other line items, you can see more or less stable increase in line with the inflation. The one-offs that Gyula mentioned and need to be repeated also from the previous quarters, these were severance payments, related to our board members leaving as well as a number of employees leaving the company. This totaled approximately EUR 4 million.
On top, there was a significant write-off of the cost related to Optima transaction, which we decided not to continue. Just, I think we should move forward with the next slide, Małgorzata. On the cash flow side, what is quite important is to look at the bottom line and the cash decreasing significantly. This line should be read in connection with another line that you will see in the balance sheet where we moved there, meaning the receivables and receivables and prepayments. Just before the year-end, the company transferred significant money to escrow accounts. One of them is escrow account dedicated to Aurora Bonds buyback. And another one is, this was amounting to EUR 30 million, and another EUR 19 million was transferred to construction accounts.
This is the specifics of Hungary, in connection with the significant construction on CP3 side, and other construction sites in Hungary. You just forward the money to a dedicated escrow account. And out of that, the bank pays for the construction cost. Regrettably, this year, this happened in December, and, as said, it was a significant amount, EUR 19 million overall, which brought our cash significantly downwards at the year-end. Going through the cash flow itself, as you can see, the cash flow from operating activities increased by approximately 8% in line with what we have seen on the gross margin side. Moving to the investment activities because there you see a lot of movement. In 2023, the company invested heavily, as well as acquired two new properties in Hungary.
This is Vörösmarty Property and Lánchíd. On the development side, Gyula already mentioned a couple of times Centerpoint 3, Andrássy, Matrix C, in total approximately EUR 60 million expended on that, as well as a significant money was used to our FitOut and CapEx activities. More than EUR 15 million went to this purpose. Another, the next line, marked two, is the money transferred to the escrow accounts, as I mentioned, dedicated to the bonds buyback. And finally, sale of investments, the EUR 50 million, this is well-known, Forest Offices Debrecen sale. And finally, going to financing activity, in 2023, the company acquired three loans, secured on Matrix C, GTC X, as well as Advance Business Centre. Let's move to the next slide. Some selected debt metrics.
Our total net debt increased, due to the fact that the net increase in the loans and bonds amounted to EUR 36 million. Cash, as mentioned, was decreased due to the money transfers, maybe mainly. The net LTV resulting from these movements or changes amounts to 49.3%. This is a significant increase from 44.5%. But we have to remember again that this is before the adjustment to reflect the escrow accounts. The weighted average debt to maturity, this is regrettably decreasing due to the fact that the repayment of bonds and significant repayment of loans coming in 2026 is approaching. Of course, the company is taking care of all these significant movements or events that will come in 2026. However, in the meantime, there is 2024 and 2025 loan maturities to be addressed.
We have to say that 2024 is nearly already fully managed, and partially 2025 has been managed. This is the same bank. We are in the very advanced stage of closing these either prolongations or refinancing activities. For 2025, what remains is Galeria Jurajska refinancing or prolongation. We are also in discussions with the financing bank. Currently, it looks very promising, meaning we will do everything we will act in cooperation with the bank to prolong this financing. The remaining metrics remained more or less on similar levels with adjustments reflecting the new loans acquired. On the balance sheet side, there is not a huge increase in the investment properties, due to the fact that the before-mentioned revaluation of assets took place.
Even if the company expended EUR 85 million on investments, FitOuts and CapEx, and purchased the new land bank, the revaluation of assets decreased the value of the investment properties and assets held for sale, reflecting the sale of Forest Offices Debrecen. As I mentioned before, cash and cash equivalents should be read in connection with the prepayments and other receivables line, where approximately EUR 48 million represents money transferred to the escrow accounts. On the short- and long-term financial debt, as I mentioned, there is an increase of EUR 36 million. This has been explained. Partial increase of this item should be also read in connection with the next line, meaning the derivatives line, because there is FX hedges closed for the Hungarian bonds, and they are reflected in line five. And I think that's it from my side.
Unless you have questions, of course, please feel invited to ask any questions needed.
Gerald, that concludes the formal presentation. I can open the floor to the Q&A. So if you have a question, just unmute yourself and ask the questions.
Hi, everybody. Good morning. Thanks for the presentation. This is Jakub from WOOD. Maybe if I can go first, I would have a couple of questions. I would prefer to ask them one by one. First, could you please talk about the project you have acquired in Ireland and sort of what are the options there now?
Yes, please. In terms of our Kildare project, in 2023 and 2024, we achieved two major milestones in terms of the development and execution of the project. Last year, Kildare Council granted us the 10-year planning permission to expand the whole campus itself. This year, in 2024, the project managed to sign the lease agreement with a well-known high scaler who agreed to take the entire 179 MW data center capacity for 20 years, which is now quite a good milestone in terms of the valuation and in terms of the successful execution of the project. The GTC's strategy for that is that exit is still an exit in a 6-12-month period with an upside and already initiated negotiations to achieve that.
As Gyula mentioned, this major improvement in terms of the lease signing should result in an uplift of the value of the project in the next quarters. We are currently in the process of a new evaluation that will reflect the new leasing conditions achieved.
Thank you for this color. Given that you have signed April lease, I understand that some sort of project has been prepared. Could you share with us some ballpark numbers as to what kind of construction CapEx will the eventual buyer be looking at in order to sort of bring this project live and what sort of development yields do these types of projects generate?
Barbara, can you please?
Yes, yes, I can. I can only say that because this lease is confidential, regrettably, we cannot share any details of what has been signed. But what needs to be underlined is that we do not really plan to engage into the construction. And the idea would be to exit, as Gyula said, within the next 6-12 months. So I believe this is the only thing that we can say at this stage.
Thanks. That's clear. If you fail to find a buyer for this project, can you walk us through the plans for tackling the 2026 maturity?
Actually, so there are scenarios that enable us and which ensure the feasibility to pay back the bonds and the debt consolidation by 2026. Of course, the cash proceeds for this sale, we count on that and budget that in order to pay it back. But there are alternative scenarios we are seeking for and facing with and budgeting if there is a failure. But the management does not think that it is not marketable. So we hardly believe that we can exit from this project with a significant upside in the next forthcoming 6-12 months.
Or maybe, Gyula, what you've said was, I would say, quite decent. There is an interest in the market. This is really a hot, hot type of asset that is searched for rather than, you know, you go around and seek for a buyer, for an investor. This is exactly the place to be. So when to exit is also a decision on our side, how much to advance the project. Because, of course, with every advance in the project, the upside to be executed will be even higher. So most probably, if we decided to exit today, it would be a nice upside. But if we wait a little bit longer and execute maybe another stage of the development, there will be even higher upside on our side. So this is now more or less when to exit rather than if we can exit.
Could you talk us through, at least broadly, through the scenarios where the exit for any reason, maybe higher rates for longer, no transactions in this type of projects in Europe, when it doesn't take place? I mean, would you have capacity to refinance it with secured debt, or would it breach the covenants on the bonds because the unsecured portion of the portfolio would fall too much?
So even if we disregarded the value of our assets, which we can always exit - and this is one of the scenarios, of course, that is being considered - just taking into account the assets that are currently unsecured with a very, very, I would say, conservative approach, we could acquire new financing in the value of EUR 300 million-EUR 350 million. So this is one of the plans, the biggest being our shopping mall in Warsaw, Galeria Północna, in the value of nearly EUR 300 million. This is a significant chunk of unsecured assets. Of course, we cannot start the refinancing now, or we can, but it wouldn't be possible to draw down this loan without breaching the covenants on bonds. So this needs to be prepared. But this step should be executed just before the repayment of bonds.
This is one of the scenarios that can be mentioned.
Got it. Thanks. Thanks, Barbara. Could I also ask what will be the management's recommendation with regards to dividend from the 2023-year profit?
Yes. Just as we discussed, the management is developing, and it's quite a good advanced status of developing and interpreting and executing a budget for that, mainly for the approaching maturity of our Eurobond 2026. The management recommendation would be to execute cash reserve and not to pay dividend on 2023 for the financial year 2023 in 2024 as at the level of management recommendation to the board and the general meeting.
Thanks for this. I think that's a reasonable decision. Could you also please talk about the acquisitions, the Lánchíd office, and I think it's the Vörösmarty maybe hotel? Who were the sellers? What is the value of these acquisitions? What kind of yield are we looking at? And how do these tie to the broader strategy of GTC?
Barbara, do you take it, or?
Yes. Although in terms of the strategy, it was like the decision was taken already some time ago. This was a part of the bigger portfolio that has been acquired or pre-acquired, at least in 2022, Małgosia, right, as far as I remember, with partially the transaction executed in 2022 and the rest in 2023. What are the yields? What we can say, I think that we already signed a PSPA related to the Lánchíd property with a very nice return of approximately, I remember, as far as I remember, Gyula, like 30% or so. So it is what I can say with the Vörösmarty. Currently, this is a land bank. And what will be done, I think this is the management.
Yeah. The concept and the business plan for Vörösmarty Square is hospitality and still under development. So at this stage, we cannot say anything about the expected yields because the whole concept is under development for that.
I see. Thanks. And sorry, on Lánchíd, have I understood correctly that the total return should be around 30%?
Yes, around 30.
This is the yield? So this is the rental income divided by the value, or?
No, it's not the rental income. As Barbara mentioned, we already signed an PSPA for this asset to a market player. This is the sale price less the cost.
I see. Got it. Thank you.
This is, sorry if maybe this sounded wrong, but this is currently also a land bank. This is a hotel, but it is not operational. Yeah, this was just a profit.
I see. I see. Thanks. Last question from me. Thanks for all the answers. The occupancy at some of the offices has been quite weak for quite some time now. How much renovation CapEx do you expect that GTC may need to be spending annually for the next two to three years into the portfolio to make sure that all of the buildings are sort of modern and meeting the expectations of the tenants?
The plan and the capital expenditure budget is still ongoing in terms of considering all the factors and all the market situation of the leasing market as it is. We are trying our best to determine the exact and adequate level of capital expenditures and fit-out granted to the clients and, of course, for repositioning, the CapEx required for repositioning as well. And where we are able to determine and conclude that it's not worth pouring capital expenditure on the asset, which will not be returned, then we are seeking for and we are considering to dispose of those assets. So right now, we are not able to grant you exact figures, especially for the forthcoming year for capital expenditure. But this is the concept and the strategy for that.
Got it. Thank you very much, all for the answers.
Thank you, Jakub.
Are there any more questions to the management at this stage?
Yes. I just have a couple of questions. My first question is regarding liquidity. So your unrestricted cash balance at the end of the year was EUR 60.4 million. And I think EUR 15.5 million of that is restricted due to customer tenant deposits. And my question is, do you still have EUR 94 million of undrawn facilities that are still available to the company?
So maybe starting from where our deposits are or what is the value of the deposits, it's approximately EUR 15 million, the tenants' deposits. So it's not that much figure. There is more money related to DSRA accounts related to our bank loans. Still, I agree there is some significant chunk of restricted money. So in March 2024, we have acquired another bank loan amounting to EUR 55 million secured on our Bulgarian asset, Ada Mall and Ada Center. And so sorry.
Sorry, Barbara.
Sorry, Sofia.
Please.
of Sofia. Sorry. Yes?
Sorry, Barbara. It's ABC and Mall of Sofia, so.
No, ABC was signed in 2023. But yes, Mall of Sofia in 2024. Yes, sorry. It was a slip of the tongue. Yes, of course, Sofia Mall. So EUR 55 million flew to the company in Q1 2024. You will see it, of course, in the financial statements. As I mentioned, there is a very high potential, further potential to acquire new financing. We are discussing currently our Romanian assets. But still, also in Poland and in other countries, there is still further financing acquisition potential.
I guess regarding the EUR 55 million of new loans that you received in March, was that part of the EUR 94 million of undrawn facilities that you had at the end of third quarter? Or are these new facilities beyond the EUR 94 million of undrawn facilities?
No, 94, what do you mean? I said that undrawn?
RCF. I think the Peter.
No, no, no. RCF has been closed already in 2023, this was in October, right, Małgosia? I think in October 2023. So no, this is not undrawn facility. This is a completely new project financing that has been acquired.
Understood. And then just regarding your discussions with the banks about extending the bank loans, what amount is currently being negotiated in FY 2025?
Okay. Negotiated currently, we are discussing loans related to Polish portfolio. But this is more, let's say, refinancing and rolling forward of the assets sorry, of the loans that you have seen in the debt metrics, meaning in total for 2024, it's EUR 46 million that needs to be refinanced. And as I said, in 2025, EUR 123 million. And also the EUR 123 million, including Galeria Jurajska, is being discussed with the financing bank. In terms of the new loans, as I said, the potential to acquire new loans amounts to approximately EUR 300 million-EUR 350 million, including Galeria Północna being the biggest asset among them.
Understood. Thank you.
And still, we also have to remember that there are new assets being completed in Hungary shortly, which also will bring new financing potential to the group. They are currently all equity-financed. But of course, liquidity management is one of the key topics. And the group has to carefully watch the situation and work on it. That's clear. If we are to invest further because there are big plans, we want to grow, we want to develop. So of course, we have to work also on the liabilities side.
Are there any additional questions? Ladies and gentlemen, as I see no further questions, please let me conclude this call. I will be available to answer any questions you may have in more one-on-one sessions. Please let me know if you need additional explanation or additional time of the company. Thank you very much for your participation and for your interest. Have a lovely day.
Małgorzata, I think somebody wanted to speak.
Oh, hi. Can you hear me?
Yes.
Oh, thank you so much for the presentation. Sorry for interrupting. Just a quick question on 2026 maturity. Do you consider it all to coming to international capital markets and perhaps issuing a new bond?
We closely watch this market, but it's too early to say. We might, of course, consider going to this market if this is open as it was in the past.
Thank you. Thank you for the presentation.
Thank you.
Can I try to close again? Thank you very much, everybody. Have a lovely day and speak to you in a month on our Q1 results. Thank you very much. Bye-bye.
Thank you.
Thank you. Bye.
Bye.
Thank you. Bye. Bye.