Ladies and gentlemen, good after every, good afternoon, everyone. It's my pleasure to welcome you at Q1 2024 results of GTC. Today with me is the management board representatives, and they will introduce themselves in a minute. Just for formality, the call is being recorded and will be posted on our website. There will be a formal presentation run by the management board, which will be followed by a Q&A session. So let me pass the floor over to Gyula for the introduction. Thank you.
László, hello.
Hello, everyone. Good afternoon, everybody. Hereby, I would like to start with grabbing the opportunity to introduce Mr. Balázs Gosztonyi, who is a kind of newly appointed member of the management board of GTC. He was appointed one month ago, just after our recent supervisory board member. So I will give the word to him to speak about himself shortly in order to introduce himself.
Good afternoon. My name is Balázs Gosztonyi. Just a couple of sentences on myself. I started my career as management consultant, then worked in several industries, financial management, as well as debt management. And I'm working with GTC since last September. I'm being responsible for the reporting and controlling of the group, as well as taking the role of Hungarian CFO at the moment. Looking forward to serve as management board member of GTC in the future.
Thank you, Balázs, for the short introduction. Małgosia, can you please put the presentation on the screen? Thank you very much. So in terms of 2024 Q1, GTC managed to close a very successful, very solid, good quarter in terms of financials. Revenues from rental activity went up by 7% to EUR 46 million, compared to EUR 43 million last year, the same quarter. This is mainly due to the increase in revenues from rental activity due to newly completed assets in 2022 and 2023, and the indexation, which was executed for 2024.
The gross margin from rental activity went up by more than 9% to EUR 32 million, compared to EUR 30 million last quarter. The FFO rose to EUR 19 million in the first quarter compared to the EUR 16 million in the same quarter last year. Our FFO is mainly... The increase of the FFO is mainly due to the increase in gross margin and the optimization of our selling and G&A and selling expenses. Our EPRA net asset value increased slightly to EUR 1,247 million, compared to last year's figures. This is mainly due to smaller capitalization value, offset by smaller devaluation.
Our loan-to-value decreased to 48.1%, compared to 49.3%, as of the year end last year. If you take into account the escrow accounts held at March thirty-first, the loan-to-value would be 47%, which is quite high and a good achievement in terms of this KPI. Our occupancy rate dropped slightly to 86%. This is the average occupancy in terms of office and retail portfolio, compared to 87% at the end of last year. We still have a robust and strong cash balance of EUR 122 million. Beyond that, the cash balance on escrow account amounted to EUR 27 million.
A good achievement, GTC managed to achieve last week and in recent weeks due to the work performed in recent weeks, that Fitch affirmed the BB+ rating as it is now with a stable outlook. So what we can conclude is that GTC managed to keep the rating as it is now for the forthcoming period. If we go further to the office portfolio. The average occupancy in terms of the office portfolio dropped to 83%, compared to 84% last year. The average weighted lease term dropped to 3.4 years. Our leasing activity in the first quarter dropped, let's say significantly, but we still see the signs of improvement in terms of the office portfolio.
We managed to sign prolongations and new tenants in regional Polish cities and in Budapest as well. And last to mention, the Croatian new asset, Matrix C, we managed to achieve an occupancy of more than 96%. If we move forward to the retail portfolio, we still managed to maintain the occupancy at 96%, the same level as it was at the year end of last year.
The average weighted lease term dropped to 3.2 years, but still, the leasing activity in the first quarter, compared to last quarter and last year, we more than doubled the leasing activity, and we can see that our hyper tenants stayed and prolonged all over our retail assets, just as in the Serbian Ada Mall and the Warsaw and the Polish retail asset of GTC. Now, I would give the word to Ariel Ferstman , our CFO, to continue with the numbers and the financials of the first quarter of 2024.
Thank you, Gyula. Moving into the financial and looking a bit on the figures, so we are happy to present a very good result, as Gyula mentioned, for our Q1. So our rental revenue increased from EUR 43 million to EUR 46 million, and as Gyula mentioned, the two main drivers here would be the completions that we managed to do, and these are GTC X, Matrix C, and Rose Hill. And on top of it, we have the like-for-like increase that is coming mainly from indexation, and we managed to index 77% of our portfolio, with average indexation of 3.5%. Looking into the administration expenses, we don't see any change here into the presentation.
If you will look later on the financial statement, you would see a slight increase due to the severance payments that we had due to the changes in the organization happened at the end of last year and beginning of this year. While the company is expecting a decrease in the G&A and the administration cost by the end of the year. Moving to the next item here, we see the loss from revaluation. This is EUR 6 million this year, and this is comprised by the fit- out and CapEx that were done this year. Approximately EUR 4 million of fit- out due to our leasing activity, and EUR 1.5 million for the CapEx. Seeing an Adjusted EBITDA of EUR 27 million, a strong EBITDA compared to last year, where it was EUR 24 million. We can move to our next slide, our consolidated cash flow.
Okay, good. Thanks, Małgosia. So here we see, looking for a second on the bottom line, as already mentioned by Gyula, we see a strong cash flow movement and a strong cash position of EUR 122 million at the year-end, coming from the increase in the FFO, the new financing that was acquired, and the money that was received back from the designated account.
Looking a bit more into the numbers, so our cash flow from operating activity ended with EUR 19.7 million, coming again from the strong results we presented earlier, offset a bit by the interest paid that increased compared to last year, and this is mainly due to the new financing that was acquired during last year and this year for ABC, GTC X, Matrix C, and the last one in Mall of Sofia. Moving to the investing activities, we see EUR 19.4 million that was invested this year, and the two main drivers items here would be the development of Center Point III, and with the, sorry, with EUR 12.2 million, and the rest is fit- out and CapEx, as was shown earlier in the P&L.
The last item to be mentioned here into the cash flow statement would be in the financing activity. These are the proceeds from long-term borrowings. And here we have Mall of Sofia, new financing, acquired this year, this year with the EUR 55 million. Okay. Małgosia, we can move to the next slide. Thank you. So looking at our debt metrics, we have our net debt is EUR 1.17 billion euro, while our total debt is approximately EUR 1.3 billion, being split more or less equally between unsecured and secured debt of EUR 653 million of unsecured and EUR 671 million euro secured. Other item to be mentioned here is that the EUR 500 million euro green bonds that we have would be mature in June 2026.
This is where you can see the graph on March 27 that actually show the yearly, let's say, mature debt. Then we move to our adjusted LTV. As Gyula mentioned also earlier, it was decreased from 49.3 to 48.1. Here, the main drivers would be the change in net debt of approximately EUR 19 billion. That is coming from the increase in cash, as we showed earlier, in the cash flow, and the increase in the loans, offset by the buyback of the bonds that we had, the regular amortizations and some repayments that we've done. Also, another factor of the decrease in the LTV would be the increase that we have in the gross asset value coming from the development.
The last item to mention here would be the unencumbered asset ratio that was decreased due to our new financing. We can move to our last slide here, the financial position, the balance sheet. Here, the main items to be mentioned would be the investment property increase by EUR 39 million, and here the two main drivers would be the EUR 14 million that is coming from development, and this is mainly Center Point III. Together with increase in perpetual usufruct booked with IFRS 16 adjustment, and the same adjustment we will see also in the lease liability later on in number five, with zero or minor effect in the PNL.
The cash position was already mentioned, a strong cash position, EUR 122 million, compared to EUR 60 million last year. Prepayment and other receivable, we see a significant decrease. This is coming from the decrease in the designated account. I didn't mention earlier because I think this issue was shared with you already earlier, but we had some designated account that was for the purchase of for the buyback of the bonds. We actually managed to buyback successfully buyback EUR 4.4 million euro of bonds. Additional twelve million euro was returned to the company, and we have some approximately twelve, thirteen million euro that is still for this purpose.
Then we move to our short and long-term financial debt, and here the change that we can see is mainly due to the acquiring of the new financing for Mall of Sofia. What you cannot see in the presentation, and you will see in the financial statement, is some finance, some loans that are moving into short term. We already initiate discussions with with all the lenders. We see positive feedback, and we will keep you posted into the next quarter with our progress. And that's all from my side for the finance part.
Ladies and gentlemen, I think that that concludes our formal presentation, so we will be happy to answer your questions. Please unmute yourself and ask the question.
Hi, good afternoon. So maybe one question from my side, Cezary Bernatek. I suppose you can hear me, right?
Yes. Yes, yes, we can hear you.
Thank you. So apparently, two questions. The first one concerning the refinancing of the shopping malls. You are facing the refinancing of Galeria Jurajska, as I can see, in 1Q25. Am I right? So the question is: How do you feel about it? Whether you expect it to be like a tough negotiation on or... You know, I'm just asking in the light of, like, Blue City refinancing failure recently. But at the same time, like, for example, EPP and Echo Investment, were quite successful with mall refinancing recently as well. So the question is: how do you feel about it? And also, other retail assets in the region, because you got a few of them.
That's the first question, and maybe I will proceed with the second one. So basically, what is the current trend when it comes to office rentals development in your standing assets? And the second issue here is, where do you expect it to go in the quarters ahead? And maybe the low supply environment could help here somehow to put some upward pressure in 2024, 2025. Could you please give some more light on this?
Gyula, maybe I will start with Galeria Jurajska financing.
Sure, sure.
Yes. So with regards to Galeria Jurajska financing, so first, we already initiated the first discussion with the bank, and we see a positive, let's say, feedback from them regarding it. We have addition, another meeting with them in few weeks. I mean, when we will present more our strategy, and we expect a positive, let's say, results over there. I don't know if Blue City is comparable. It's different type of asset, so I wouldn't try to compare it. But if we speak about our financing, we actually just mentioned in the cash flow, our successful financing for Mall of Sofia retail asset, and we strongly believe that we'll be able to finance Jurajska, I mean, with the terms that we expect to see, let's say.
Okay, thank you.
In terms of office leasing, I would highlight that, yes, there is still a kind of challenging market in terms of office, especially in the regional cities in Poland and, of course, in Budapest, it's like in the same situation. What GTC did last year is that we fully reorganized and enhanced and improved our leasing team in Poland and this year in Budapest as well. What we see is that there are good signs of improvement in terms of office leasing market. Our tenants are willing to prolong, and there are new tenants and new leases as well. In terms of the term, we don't see any bad signs on that.
You know, there are some demand to reduce the area, reduce these spaces, but we have what we can do is to maintain close relationship with our tenants and move pre term in terms of negotiations with them just before the lease term just before the end of the lease term. And of course, for prolongations, we are seeing signs of the tenants' expectations for allowances. So I think we are in a good track for remedy. We are in a good track to serve our tenants, but still this year, especially in the second and the third quarter, we will have some challenges on that.
We are doing our best to remedy and to improve our leasing activity in the relevant cities and the relevant office buildings of us.
Okay, got it. And what about the trends in terms of the, of the rentals? Are they, are they like, still flattening out, or, or how, how do you see it now in, in, in the recent, renegotiations or, or, or prolongations?
What we see in terms of our own tenants, in terms of prolongations, the headline rents remained quite flat. So there was no sign of significant decrease on that. So we managed to keep our level of rental rates, and we see signs for the possibility to be improved in a short period of time, even this year.
Okay, great. Thank you.
This is Márton Kasnyik from Bloomberg News, Budapest. What I'm mainly interested in is, according to Hungarian press reports, there were about EUR 107 million worth of property purchases, mainly by GTC origin, in Hungary over the past few years. Mainly concentrated from one circle of sellers. What I'm interested in is that, like, were investors briefed on this, and how do these these properties fit into the strategy of the group, including the ones in central Budapest? Thank you.
Yes, I would answer it. Okay, guys. So these assets are... These assets were part of the so-called growth portfolio, which was an acquisition project of GTC to be acquired from the major shareholder, Optima. So these assets had been acquired before GTC was acquired by the foundation, Pallas Athéné Foundations and Optima. And when Optima acquired GTC, its strategy was to, you know, eliminate any competition in the real estate market, especially in Budapest, with GTC, and to concentrate Optima's portfolio in GTC in terms of the effective use of the structure and the know-how with a company with a good track record.
As a selective basis, there were offices, cash generating offices, and there were development plots or real estate, which is a development, which means development potentials in terms of office as well, and retail and residential and hospitality as well. So we are in the phase that for development sites and development real estate, we are designing and thinking over what to do with them. One asset has been sold as it was presented last year. This is the Forest Offices Debrecen. So this was that the essence and the concept and the strategy behind that growth portfolio acquisition.
Thank you.
Ladies and gentlemen, are there additional questions to the management?
Maybe, maybe one more, more from my side, if I may. Concerning the indexation of rental rates in the shopping mall segment. For last year, as far as I remember, you showed kinda, kinda material indexation on average, I think it was like 10%. What are your expectations concerning this year in this, in this aspect?
Ariel, can you please-
Yes.
Answer the question?
So as I mentioned, we indexed at the moment 75 or 77% of our portfolio, including shopping malls. Actually, the shopping malls were already fully indexed or almost fully indexed, and the average indexation within the whole group is 3.5%. And we see lower indexation, obviously, compared to last year. And if you speak about the following periods, then we expect, like, similar lower indexation, I mean, within the following years, let's say, if I understood correctly your question. But most of the assets were already indexed, with the majority of the shopping malls' tenants that are already indexed.
The shopping malls on average were also indexed by, like, 3.5%, if I'm correct.
I would say yes, yes. The average represents, I mean, I mean, both. Yes.
Okay, great. Thank you so much. Bye.
Hello, this is Jonas from SEB Asset Management. I had two questions, one of which is, could you share an update on the data center project in Ireland? As I understand, there has been some agreement from the local government to proceed with the project. Could you share what the progress has been made there, and whether any exit is planned?
In terms of Kildare project, the data center project, there is no improvement compared to the one month ago investor call. So the status is that, yes, the project has the planning permit valid. And what we already said during our last call, that there is a hyperscaler. There is a signed rental agreement for 20-year with a hyperscaler for the whole almost 180 MW capacity of the project. And still, the strategy and the concept of GTC in terms of this investment is to exit from the investment this year with a solid upside on it.
I see. Thank you. And, my second question would be, could you touch on the dividend for 2023? I see that-
Yep.
...supervisory board, they recommended EUR 0.22 per share. Does this comply with, I guess, the long-term loan to value targets of the company? Is 40% still the medium-term target for you?
Yeah. As per the announcement of the management board of GTC during our last investor call, was that we understand our stakeholders, investors, financing banks' expectation to consolidate cash to execute our strategy. Based on that, at that time and not yesterday, before the publication, the management board expressed its recommendation not to pay dividend in this year for 2023 financial results.
But there was an indication from the major shareholder that they expect a kind of yield, a kind, in terms of, in the form of dividend payment as well, for the amount we paid last year, which is, which amounts to EUR 30 million as well, which is a kind of, which is a yield of 4.2% compared to the capitalization of the company as of now. So that's why yesterday, the supervisory board recommended the annual general meeting to vote on the dividend payment in late June.
Okay, thank you.
If I may have one more question. Has the attempted acquisition of Ultima Capital been abandoned?
Yes.
Yeah.
It was announced. It was fully announced last November. And the management of GTC has not changed its mind, so we are not doing Ultima any longer, especially in the structure as it was.
But then in a different structure, there might be,
No, it's not contempt-
Okay. Thank you.
at all.
I just have a question. Was there a valuation uplift in the technology center in Ireland in Q1?
Um-
Ariel, can you please answer? Thank you.
Yes, yes. So the company didn't recognize any valuation profit from the, from Kildare project. And we did receive a new valuation of our, notes over there, showing a increase in the range. And currently, as a conservative, approach, as we are still, the book value is still within the, the, lower range. Currently, it's actually on the lowest range, so we didn't increase the value. But we do, have some internal, internal discussions about the increased strategy when we go towards the sell. And currently, the range of the asset, of the external valuation that we have is between EUR 120 million and EUR 140 million, and in our books, it's EUR 119.1 million.
Got it. Thank you.
Ladies and gentlemen. Yeah, yeah. Ladies and gentlemen, I understand there are no more questions. Thank you very much for your participation and for your interest in GTC. If you have any more questions, please give me a call or send me an email, and I will be happy to answer any questions you may have. Have a very nice rest of the day. Goodbye.
Thank you.
Goodbye to everyone. Thank you.
Thank you. Bye-bye.