Ladies and gentlemen, thank you very much for joining today's call related to Q1 2025 financial results of the GTC Group. Today I can welcome you as newly appointed President of the Management Board of the Group. I'm together with Balázs Gosztonyi and Zsolt Farkas, we will take you through the first quarter, solid first quarter results presentation. We can confirm that the portfolio is continuing to deliver, and we see the momentum for the letting on, in all sectors of our operations. Let me start the presentation, and we can take it from there. In CEE, we have continued improvement in the financial results. Our revenues, combined revenues for the CEE and German residential portfolio improved by around 9%.
We see the results of the German acquisition on the gross margin. That's an impact which makes the gross margin stable. We expected this to be exactly this way when we were acquiring the portfolio. The portfolio required some work, and we already put significant work into the portfolio, improving the occupancy by 2 percentage points in the first quarter only. The FFO I, Balázs will tell a little bit more during his speech, but it declined to around EUR 12 million. That's the result of increased interest cost, mostly on the new funding that we acquired during the end of 2024 and the beginning of 2025. If you look at the LTV, LTV improved to 52.1%. That's the result of mostly improvement of the cash position.
As you see, the cash position improved significantly. We conducted a number of different disposals over the first quarter of this year, and those disposals significantly added to our cash position. As I said, we had significant disposals which not only proved the value of our assets, but also allowed us to build the cash position. On the top of the disposal of Matrix C, which we concluded in Q4 of last year, however, EUR 10 million came to our accounts in the first days of this first quarter. We also disposed GTC X at the book value, and we disposed Wilanów land with a significant premium to the book value.
All together we consolidated around EUR 88 million from the disposals in the first quarter of this year only. That proves that the asset base is really high quality and the disposal plan that we are implementing is well accepted by the market. There is a number of buyers for each of our assets designated for disposal. Talking about the strength of the portfolio, our assets are today well diversified. They are diversified over three sectors, three main sectors, which is the Commercial, being Office and Retail and Residential. If we look at the income producing portfolio, around 51% are Offices, then Retail is around 30% and Residential is around 19%.
That makes the portfolio very well diversified, but also diversified not only sector-wise, but also geographically. Around 32% of the portfolio is in Poland, then another 26% of the portfolio is in Hungary, and around 19% of the portfolio is in Germany. When we look into the credit ratings, around 51% of our property portfolio is located in A-rated countries, which works in our benefit whenever we are talking to the creditors. The weighted average lease terms remains unchanged. That's a proof of very active and very dynamic trends on the letting side. Let me take you through the segments of the portfolio.
Office portfolio, as you see, that is moving well. I mean, first of all, occupancy remained the same, and I can say that that's probably second quarter in a row when we do have proper occupancy improvement vis-à-vis the previous quarter. That shows that the working from home alternative is a little bit in decline, I would say. We see more and more companies supporting their employees in coming back to the offices. Pretty recently, it was MOL that asked their employees to come back to the offices. We have those examples across the markets.
What is very important to say that also the Polish market, which seems to be the softest, and that's not because Poland is the softest, but because the Polish portfolio is spread across the regional cities. We see improvements vis-à-vis the previous quarter and vis-à-vis the third quarter of 2024. We do have very high quality assets. If you look at the pictures below the graph, you will see that each of our asset is attracting very big tenants, very big international blue-chip tenants, and we are very proud of the portfolio that we hold. If we move to the Retail portfolio, definitely that's a very strong component of our total portfolio. The occupancy is very strong.
The leasing activity is also very strong. Again, the retail portfolio shows significant improvement in the tenants' turnovers, but also in the footfall of the shopping malls. They are quite busy. Whenever you go there, each of the shopping malls seems to be an attraction for not only for the local community, but also regionally, like, for example, Galeria Jurajska, which is a regional shopping mall. Talking about the third part of the portfolio. As I said, Residential portfolio is around 19% of our total portfolio. Here, what is important to say is that we are improving the occupancy.
W ith around 100 units being let in the first three months of us owning the portfolio at an improved rate compared to what we have in the overall portfolio. We are quite optimistic that this portfolio will contribute to the further growth of GTC. With that, let me give the floor to Balázs Gosztonyi, who will take you through the financial results. Again, let me just stress that we have very high quality assets that been validated by the disposals that we conducted. Our strategy in terms of the journey seems to be on the right track, and we will deliver on the strategy in the following quarters. Balázs, the floors is yours.
Thank you very much, Małgosia. As usually we have a walk-through on the profit and loss statement, cash flow and the balance sheet of the company. Finally, we will conclude on the credit metrics. Our Q1 results on the profits and loss side showed stability. Our revenue has grown by 9%, as Małgorzata mentioned earlier. Our gross margin stayed very stable. Stability is underlined also by our EBITDA. EBITDA has been EUR 27 million in Q1. Where on the EBITDA, we have two slightly negative effects. One is loss from revaluation of assets. That's due to capitalized expenditures on uncompleted properties. However, these are improving these properties, so we'll see the return on these revaluations up on Q2.
The finance cost has been increased from last year, same quarter. That is due to the additional senior facilities taken in Bulgaria as well as the acquisition financings and senior facilities taken over with the acquisition in Germany. The increased financing costs or the interest cost has been expected, also due to the increased weighted average interest rate across GTC facilities. We do consider these to be temporary as we are executing our strategy through disposals and de-leveraging the company, to manage these risks in the short as well as in the long term. Moving on to the cash flow. As mentioned earlier, these the cash flow of the company, the position of the company has improved. The operational, cash is stable.
It was mainly affected by the tax effect of the disposals that we basically connect to the execution of the strategy. Our investment in real estate and related has been EUR 38 million. That's underlining the improvement of the value of the portfolio, as well as underlining the long-term stability of cash generation. The disposals we mentioned earlier showed EUR 88 million cash inflow from sale of assets, and that's underlined actually the value of those disposals, underlining that the quality of our operations and the assets are very good. We set aside. Okay, maybe can you go still to the cash flow? Sorry, Malgosia. One more.
We did set aside EUR 45 million from the proceeds from disposals to decide prudently at a later stage on various opportunities to deleverage the company. In this way, we are intent to manage the rising interest costs that we mentioned earlier. We can move on. Okay. On the balance sheet, our assets base is steady, but due to the transactions, more cash generative. We have, beyond the announced disposals, we have a good pipeline. But through internal regulation, GTC is only showing assets held for sale with a stricter sort of internal regulation compared to IFRS standards. We do classify assets held for sale upon signed PSPAs.
As of today, the decrease of this amount or this line from last December to the first quarter, because at that point we had less signed PSPAs. However, the strategy is focusing on certain asset disposals, and therefore upon we reach this level of disposal process, we'll include additional assets in the assets held for sale line. The cash and cash equivalents were also affected by the proceeds from disposals, and we were in general successful to maintain the portfolio value along with executing on the book value or above the book value transactions. When it comes to the liability side of our balance sheet, we did reclassify certain long-term facilities into short-term.
Specifically, three loans have been reclassified, we are already in the process to prolong or renew or refinance these facilities due to the strong bank relations that we utilized in the past as well. Trade and other payables have been slightly decreased due to settlement of certain outstanding invoices and on liabilities referred to asset held for sale. On that line, you see the effects of the disposals on the liability side where we down paid EUR 25 million loan that was related to GTC X and also derecognize certain right of use elements related to the assets. This shows that through the transactions we further strengthened our balance sheet for 2025 Q1. That leads us to the debt metrics of GTC.
Our credit metrics are good and we continue to improve them. Net debt was down reflecting on the disposals mentioned earlier. That resulted on an overall net LTV improvement of 0.6% over the course of the quarter. We managed to refinance senior debts across several markets. That's also underlining our good bank relations, and we intend to build on these relations in the further upcoming maturities. As you see, we have EUR 140 million short-term facilities that we are addressing as we speak, and we feel strongly about refinancing these facilities in 2025 as well as with the facilities in scheduled for 2026 renewal. We are aware of the increasement of the weighted average interest rates. It currently stands at 3.63%.
As mentioned earlier, GTC management has a plan to further strengthen the credit metrics of GTC, thanks to GTC being a very good financial platform, showing the results in the past quarters and years as well. Management is very well aware of the big upcoming maturity of the bond, and we are actively working on addressing the bond ahead of its maturity. I believe that that concludes that building our continued success on the financial and financing markets. We as GTC management are focusing on de-leveraging the company through disposals and refinancing upcoming maturities, that we already been able to present partial success steps in Q1. That concludes the presentation itself.
Ladies and gentlemen, at this point, we will be happy to take any questions you may have.
Everyone, this is Jakub from Wood & Company. If there are no questions yet, maybe I can kick off. Congratulations, Malgosia. Best of luck in the new role. Could you guys please talk a little bit more, I think Balázs mentioned it, but I didn't really understand the short-term blocked deposits. What are they attributable to, and what exactly drove the increase in the first quarter?
The increase was due to. Well, previously we didn't have blocked deposits, but due to our execution of strategy, we intend to dedicate funds for de-leveraging the company. As a first step, we dedicated EUR 45 million for that de-leveraging. We'll see how and in what form and in what facilities we would be able to utilize them.
I see. Essentially, it was like a voluntary pledge that you will use this money to maybe repay certain bank loans, and now you cannot use the money for anything else.
It was a voluntary dedication. We will see which facility to be used it or applied for the best.
Does it mean that this money could potentially also used for the bond or not?
Potentially, it could be used for the bond. Potentially, it could be used for senior facilities. We have not concluded on this. As we see the increasement of the financing cost, we intend to get GTC prepared and also targeting to manage the credit metrics further. This sort of dedication will help us in execution.
Gotcha. Thanks. I also saw there was, this EUR 38 million of CapEx spent on investment property in the first quarter. Again, you touched on it. You said it's improvement of portfolio. Can you be a little bit more specific what this money went on? What were the sources? How much of this was financed through bank loans? Help us understand what is the CapEx run rate for the following quarters.
The spending was, as we show that as developments. The combination of developments, fit-out spending and CapEx spending to maintain the buildings. The amount we showed is a combination of these. We have spent approximately little bit below EUR 20 million on developments. That's including some renovations as well as we classify them as developments. The remaining was related to fit-outs due to new prolongations and new tenants moving in, as well as improvements of the buildings in various locations. Majority of it, I believe, was financed through cash, and minority was financed through some facilities dedicated through finance entities committed before.
Should we expect this rate of spend to continue in the coming quarters of the year?
No, actually, that rate of spending is definitely, we believe will be lower due to several factors. One is that GTC is focusing on development projects in terms of meeting criteria of not being speculative. These criteria are available financing, proper level of pre-lease, and basically technical parameters being ready, meaning having the right permitting. This is the point where we intend to further use funds for developments. That also limits GTC's exposure to equity portions to be put in various projects. On the other hand, we did review the status of the buildings. Maintenance CapEx has been reevaluated. I believe the maintenance CapEx spending will be also decreasing over the course of the quarters.
The third element is fit-outs. Fit-outs are developing along the success of the leasing teams. Technically speaking, I'm hopeful that we will have fit-out spending coming up in the coming quarters that will show the successful execution of leasing or prolongation in the portfolio.
Got it. Thanks. Uh, if I may continue, uh, if there are no, uh, other questions yet. Um, outside of the CapEx for developments, uh, could you, uh, help us understand what are the other, if any, uh, major cash outflows that we should, uh, expect in the coming quarters leading up until June next year?
You mean what is the portion of committed CapEx for 2025, second, let's say, part of the year up to 2026?
I mean, if you can share that would be helpful. I was also thinking if there are some other commitments that GTC may have, maybe also in relation to the German portfolio, which would translate into cash out.
Look, as I mentioned to our more and more prudent investment strategy, we intend to make sure that developments will be financed through senior facilities or development facilities. Therefore, we are working on to decrease the equity need for such spending as much as it's possible. We don't have excessive amount of or excessive level of committed CapEx as of today. We are reviewing it on a quarterly basis to make sure that the strategic focus of the management of deleveraging the company can be maintained. As of now, I don't have an exact figure for the next seven quarters. No, five quarters until end of Q2.
Gotcha. Thanks.
I think that on the top we have to that there is interest cost, of course, which you already seen in the first quarter, which seemed to be significantly higher than it was. We will spend around EUR 42 million on the option to buy 10% of the German portfolio from the minority investor. That what was announced. That has been executed, and we are structuring the payment for that option as well. Those are the only cash outflows, significant cash outflows that we'll see. We hope to have them financed from, at least from external sources, the call options.
Got it. Got it. Thanks very much. If I may continue, I wanted to ask on the FFO impact of the German portfolio, where on one hand we have seen the rental income, on the other hand we have seen the increase in interest costs, which seems even slightly greater. There were also, I think around EUR 4 million booked in other finance costs that I wanted to ask about. What is this? Where is this coming from? Also we have seen some increase in admin expenses. Again, I was wondering to what extent this is attributable to Germany and maybe what other factors were included here.
We do not present separate accounts for Germany or other entities or other countries as of now. The effect on actually both on admin and survey charge costs are all shared between the various countries. I wouldn't say it's 100% one or the other. When it comes to the German portfolio performance, I believe that we took over with the mentioned 83% of occupancy and that showed the expected lower contribution to the gross margin at the beginning that was expected. As we have been working heavily on improving the occupancy and improving the operational effectiveness in Germany.
We already starting to see the fruits of it with improving occupancy and improving what is it? Sorry. Rental rates. Technically speaking, Germany is performing as expected, but we have a lot of work to invest and to reach the levels that were strategically planned. For that, we need to entertain further improvement in the rental rates, further improvement in the occupancy, and I believe as was shown as strategic direction, we intend to execute certain disposals as well as CapEx, Finance CapEx spending, that will all draw GTC's Germany portfolio into the more and more cash generative assets of ours.
If I may only add, of course, a significant part of the increase on admin cost is coming from the Germany. We have additional employees, starting from the beginning of the year. That's definitely a part of it which relates to it. Also, the other finance expense, I would also say that significant portion of it comes from the German market.
Thank you. Sorry, on the last point, the other finance expense, is this recurring or is this one-off?
Other finance expense, I believe. Let me just. I believe other finance expense was one-off. Yeah. Give me one second. Yeah, I believe that was one-off items.
I see. Okay. Thank you. If I may, still continue, you commented on several post balance sheet date events or transactions related to the German portfolio. As this all looks quite complex, could you please help us understand what's the gist of these?
Sure. During the signing of the initial contract in, let's say, end of 2024, beginning of 2025, there was a 10%, 10.1% stake on which we have an option. On the 31st of March, we decided to exercise the option. That was the deadline to exercise the option. The deadline for payment for that option was expiring on 15 of April. We decided to extend it until the end of April, then further extend it until end of May.
I see. Now, essentially you will actually do it probably.
We are still working on structuring, especially on the tax side, so it may happen, and I cannot really say it with the full kind of assurance that we may work on further extension, but that is still not decided.
Got it. Thanks very much. Could you also share, what kind of net inflow roughly could we expect from the Artico sale that you announced?
We'd rather not disclose the selling price at this point. The negotiations are still going on, so I wouldn't like to disclose it at this point.
Mm-hmm. Understood. Then while I have the mic, two more, and then I'll shut up. These are broader. I mean, in the context of the changes at the Hungarian Central Bank although and now with the change of leadership of GTC, if you feel you could share with us maybe about the mandate that you feel that you have from the controlling shareholder, mainly in the context of the 2026 June maturity. I mean, what are the key goals now for the team?
I think that it's fair to say that 2026 maturity is a key goal for the company. We definitely want to address it earlier than that. We are looking at the capital markets. We cannot share any exact information, but we are assessing our options, and we are finalizing our transaction plan. Capital market condition seems to considerably improve, we believe that our relationships with the banks remain supportive, and we are confident that we will be able to address the maturity significantly earlier than initially initial maturity. That's the main and the most important element of the mandate. The second important element of the mandate is realization of the GTC strategy on the German residential market.
That's also a very important part of our existing plan. Of course, proper management and improving significantly the CEE portfolio and the result of the portfolio is the third element that we are focusing on.
That's clear and helpful. Thanks very much. Last one then from me, and thanks very much for taking the time with all of these. If you feel that there is anything that you could share with us, which is understandably difficult, but just trying my luck here. Regarding the liquidity situation of your controlling shareholder, both in the context of the potential shortage alluded to by the audit report, but also related to this potential capacity and/or willingness to support GTC in case either the transaction market and/or capital markets remain more difficult than currently expected.
I don't think I can comment on their financial position and their liquidity position. That's not related to GTC. We don't discuss it with the majority shareholder. I mean, I would say that's something which, if at all, you should discuss with Optima rather than with GTC at this stage.
That's super fair enough. Thanks very much.
Thank you. Ladies and gentlemen, do you have any additional question to the management at this stage?
Hi, you've got Adam here from Bank of America. If I could jump in.
Hi
if that's all right.
Sure.
Morning. Thanks for taking my question. Just to start with a quick follow-up on what was previously asked. On the call option, just to make sure I get it right, did you say it was EUR 48 million that the exercise option would cost?
No, it was EUR 46 million, out of which EUR 4 million was already paid. That information is describing the financial statement.
Okay, great. That's helpful. Also on the Artico sale that was already touched on. I understand you can't disclose any current negotiations, just can you give us a pointer as to what the book value of that asset is currently?
That's not a significant asset. You have to keep in mind it's around 7,000 square meters. The book value is around EUR 20 million.
Okay, great. That's helpful. My next question would just be on the cash balance. In your presentation where you report EUR 150 million cash, plus additional escrow balance versus EUR 63 million in the balance sheet. I mean, you already mentioned the EUR 45 million of short-term deposits that you've voluntarily put aside. How should we bridge the EUR 150 million to the EUR 63 million, and how much of that is really available versus how much is sort of restricted for future CapEx?
You can bridge it with the EUR 63 million plus the EUR 45 million plus the escrow on EUR 20 million for developments. In between what we have between the EUR 150 million and the combination of the three before mentioned is basically tenant deposits. That bridges the cash position to EUR 150 million.
Tenant deposits are of course restricted cash.
They are restricted.
To the tenants. They are securing the leases.
Yes.
Okay. EUR 63 million cash plus EUR 45 million of voluntary short-term deposits, so to say, that's available to use, and then the rest would be blocked, deposits for tenants.
As of today, yes.
Okay. That's helpful. Probably my last one. Could you please comment on whether you've had any new discussions with specifically the German banks around the upcoming maturities that you're showing in the next 12 months? Just looking at the chart that you're showing in the presentation, it looks like the first bar has sort of gone down from just over EUR 200 million to EUR 160 million. Have you been able to address any immediate maturities? How do you plan to tackle the maturities, specifically the 30th of June one in Germany?
Yes. Negotiations are ongoing. We are actively engaged with the banks where the maturity is coming up in June. I'm extremely positive that we see good opportunity to extend. What we have on the short term is actually in Germany, one facility on which we are focusing as of today. The other elements that the three loans I mentioned that has been reclassified as short-term, they are ahead of us in Q1 2026. Technically speaking, we need to focus on one as of today. We are in continuous conversation with the current providers as well as active banks on the German market to get the best terms for GTC.
Okay. Just to follow up there, you mentioned you're confident to extend that June. Is that you're confident in to find a long-term solution, or are you potentially exploring another short-term extension, conscious that facility was moved previously from March to June?
Understood. Actually, we are sort of facilitating the approach within GTC to have as many options on the table as possible to make sure that we can pick the right solution. When it comes to Germany, we have a strategic direction which requires us to be considerate of the disposals as well. I'm not, as of today, I'm not closing off any of the short or long-term solution because of the fact that we need to make sure that any sort of extension or prolongation or refinancing will not limit our ability to dispose at a later stage. At a later stage.
Altogether, I believe, both of them are on the table, and we'll make a decision in the coming weeks which one is the best for GTC.
Understood. Thank you. I think that's it from my side.
Thank you.
I don't see any additional question. Thank you very much for your time. It was a pleasure to speak to you and to thank you very much for joining us for this call. The call is recorded and will be posted on the website, you can access it from the website. Have a very nice day, speak to you soon.
Thank you very much. Have a great day.