Hello, everybody, and welcome to the GTC H1 2025 results call. My name is Charlie, and I'll be coordinator today. If you'd like to ask a question at the end of the presentation, please press the raise hand icon on your screen if you're joined via Zoom. If you're joined via the telephone lines, please dial star followed by one on your telephone keypad. I'll now like to turn the call over to Małgorzata Czaplicka, CEO of GTC, to begin. Małgorzata, please go ahead.
Thank you very much, Charlie. Good afternoon, ladies and gentlemen. It's my pleasure to welcome you today on the GTC call related to the first half of 2025 results. Today I'm joined by Balázs Gosztonyi, who is the CFO of GTC, but it's also my pleasure to introduce our new IR person who will remain your contact person for the future. It's Michał Kuzawiński.
Thank you, Małgorzata, and good afternoon, everybody. I'm very pleased to join GTC as the new head of investor relations and corporate governance, and I look forward to working with all of you and keep the open and transparent dialogue with the market, as well as support the management team in executing the strategic goals. Thank you.
Thanks, Michał. I think we can now move to the presentation, so I will put the presentation on the screen. Of course, the presentation is available on the website, but let me start with a short summary of what happened during the first half of 2025. So the rental revenues went up by around 9%. We crossed EUR 101 million in the first half of 2025. This is mostly due to the addition of the German residential portfolio to the overall portfolio. The gross margin from rental activity was at EUR 66.1 million. This is a little bit above what we achieved in the first half of 2024. Our FFO was at the level of EUR 22.6 million. This is mostly due to higher financial costs, and Balázs will tell you a little bit more in detail how the financial cost increased and what were the reasons for that increase.
If you look at the EPRA NTA, we are more or less flat compared to the year-end. The EPRA NTA per share stands at EUR 2.23 or PLN 9.63. If you look at the net LTV, we went down to 51.8%. Occupancy, we are very proud to say that the occupancy of the commercial portfolio stays unchanged from the year-end. We do believe that the bottom in terms of the occupancy is behind us. We do believe it was in the first half of 2024. I will tell you a little bit more on the occupancy of different sectors in a minute. If you look at our cash position at the end of the second quarter, it was around EUR 80 million unrestricted cash. We had around EUR 22 million on the escrow accounts, and we had deposits of around EUR 45 million.
This is all before the new senior loan for Galeria Jurajska was fully drawn in July 2025. This is the loan of around EUR 84 million. This is before the exercise of the option to acquire non-controlling stake in the German residential portfolio, which we exercised in mid-July, and we paid the remaining purchase price of around EUR 42 million. Moving forward, talking a little bit about the portfolio, I think that the portfolio structure has not changed significantly. We are still holding around EUR 2.9 million of total investment portfolio, out of which the income or the real estate portfolio is EUR 2.7 million, and the income-generating portfolio is around EUR 2.4 million. For me, the most important for the time being would be the income-generating portfolio. As you see, we again are having around 51% in offices, around 30% in retail, and around 19% in residentials.
Around 88% of the portfolio is income-generating from the total investment portfolio. We have active developments of around 6%. That is roughly a few projects that we have up and running, three projects in Budapest, one project in Zagreb. We have around 95% of our portfolio in EU countries, out of which 51% is in A-rated countries. In terms of the green certification for the portfolio, 93% of our commercial income-generating portfolio is green certified. Another 5% is under the certification, and of course, we are working very hard to uplift the energy efficiency of the German residential portfolio. This is our main task, and that's what we are focusing on. You saw the communication of the cooperation with PAUL Tech earlier this year, released earlier this year. This is the route that we are taking with this portfolio.
Talking a little bit more into details about the office portfolio, the occupancy is stabilized. The occupancy is at the level of 82%. The average rate at lease term is around 3.6 years. We had robust activity, leasing activity. We leased during the first half of this year around 40,000 sq m. We had some big leases. We did some big leases across all the markets, as you see in the icons below. It's from Warsaw to Zagreb. All the leases are bigger ones and visible. We are pretty satisfied. We do still see some weakness or some softness in the Polish regional cities. That's where our occupancy is the lowest. That's mostly two cities. It's the city of Łódź and the city of Katowice, where our portfolio is characterized by the lowest occupancy in the portfolio. If we switch to the retail portfolio here, I mean, not significant changes.
We are still almost fully occupied at the 96% of occupancy. You see that some of the assets are almost at its full capacity. The average rate at lease term is of around 3.5 years. We do have some leasing activity released around 16,000 square meters, and again, that's throughout the whole portfolio. We don't have any assets that would show any weaknesses in that portfolio. None of the cities, none of the markets, none of the assets. To kind of confirm that, you will see on the slides the footfall and the tenants turnover. We are comparing it Q2– Q2 2025, but also on a semi-annual basis, so you see that all the properties are having footfall at a very stable and increasing trends, and of course, the tenants turnovers are extremely on an extremely positive trend across the market.
Even if you see that there is a small footfall decline like in Croatia, coming mostly from the fact that there is a Sunday trade ban introduced last year, you see that that actually translated into much better sales. Few words about the residential portfolio. We are working, as I said, on the energy efficiency of this portfolio. We are bringing the portfolio from the energy efficiency of D or E to energy efficiency of A and B. We are doing that together with a company called Paul Tech. It will be CapEx neutral. There will be no CapEx investment, as initially said at the acquisition announcement. We will invest CapEx only in the part of the portfolio that we plan to keep longer term. We did have some good progress with the occupancy. As you see, we acquired the portfolio. It was around 83% occupied.
At the end of Q2, it was already 86% occupied. We do see that the average rental rate is going up slowly, and we do see that the annualized in-place rent is also slowly going up. Our strategy towards this portfolio has not changed. As you probably realize with the recent announcements, we decided to enlarge and to strengthen the management board with an additional personnel. Sebastian joined GTC's management board as of today, and his main focus and his main responsibility will be the exercise of the strategy in the German residential market. With that, I will be happy to give the floor to Balázs to take you through the financial result.
Thank you, Małgorzata. In line with what Małgorzata said, let me present you the P&L of GTC First. So we do have an improvement on the revenue size compared to last year, which, giving you a little bit more detail on the like-for-like level, we managed to increase our rent of the core portfolio by EUR 0.6 million in the first half of the year. And as the residential occupancy improved, we managed to increase the annualized residential revenue expectation by approximately 5%. That's resulted in the EUR 101 million of revenue from rental activity. The cost of rental operation increased as well, which is partially due to, at a later stage of the year, scheduled reconciliation of the service charges, which altogether gave us a 1.5% increase in the gross margin from operations.
We recognized an increase in administration expenses that are partially due to the new operations in Germany and in Luxembourg, as well as inflation effect on the core operations. The profit, actually the loss that you can see on the revaluation of assets are standing at EUR 14 million at the end of H1 2025. That's mainly due to corrective values in the Hungarian portfolio, partially offset by improvements in Bulgaria, Germany, and Croatia. This leads to our major operations profit to slightly decrease to EUR 40 million from operation before finance income and tax. And as we are recognizing EUR 36 million of finance cost in the first half of the year, that's a significant increase compared to last year.
That is due to the acquisition we closed at the end of December in Germany and also the refinancing that we secured specifically in Jurajska at a little bit higher rate than the previous financing that was taken five years ago when the market conditions were much lower. We are focusing on managing these finance costs. We are aware of the increase of the weighted average interest rate as well, and the management intends to keep that at bay even after the refinancing of the upcoming maturities. Profit for the period is close to zero, EUR 50 million for the first half of the year, but we can show a stable EBITDA standing at EUR 54 million at the end of H1. Moving on to the cash flow, the previously mentioned effects are reflected in our cash flow as well. As Małgorzata mentioned, we have stable operating performance.
Currently, the cash flow from operating activities resulted in EUR 45 million of the first half of the year. On the investment activities, we had significant movements due to the investment that are ongoing, as well as the sale of assets in the portfolio that were closed in Q1 2025, and you see the combined effect. As you see, we slightly decreased or year-to-year comparison, the investment in real estate and related slightly decreased. That's due to the fact that the started developments are nearing completion, and due to the newly signed leases, we spent a larger portion of the investment on fit-outs that are basically matching the improvements in the occupancy of the portfolio.
The sale of investments of EUR 88 million, that's covering the three transactions that we announced, selling of the plot in Warsaw, the Matrix C building in Croatia, and the GTC X office building in Serbia.
Besides the investments, the financing cash flow is in line with what I mentioned before. The interest payments are increasing. That's in line with the previous expectations as the refinancing and the additional financing are taken on by the residential acquisition in Germany are increasing compared to H1 2024. We also managed to close a little bit higher repayment of long-term borrowings. There was one-off repayment in Hungary where we repaid EUR 6 million additional to the scheduled refinancing to improve GTC's position on the long-term borrowings. This gives us, on a year-end or sorry, the period-end, EUR 80 million of cash available for the company. Coming to the balance sheet, our investment properties slightly changed. That's due to the developments I mentioned earlier, constructions, as well as the CapEx and fit-out investments realized in the first half of 2025.
The previously mentioned disposals had an effect on the line assets out for sale. Basically, these are the three transactions I mentioned earlier. And obviously, these disposals offset by the investments had a positive effect on cash and cash equivalents in 2025 H1. All in all, the balance sheet is stable and shows that we are continuing the strategy management intends to implement. The same events show the effects in the liability side of the balance sheet. So basically, we managed to close a transaction that had a positive effect on the liabilities related to assets out for sale. And also we reclassified, along with certain financial facilities, we reclassified from long-term to short-term a significant amount of facilities. We have a detailed slide in the coming slide to explain how this has been changed.
Obviously, the short-term debt has increased due to the reclassification of the EUR 500 million outstanding bond of GTC. As certain loan financings are coming to maturity, reclassification had an effect on top of the bond and the EUR 500 million bond. If we jump to the, let's say, credit metrics of GTC, you see that because of the reclassification and actually the maturity dates are coming, our weighted average debt maturity decreased from year-end to 2.7 years in H1. This obviously underlines the focus of the management to refinance or extend the facilities that we have on hand. Before jumping into details of the outstanding debt, I would like to mention that overall, the Net LTV of the group decreased to 51.8%. The before-mentioned weighted average interest rate is on an increasing trend. In H1 2025, it was reaching 3.68%.
That's still, although negative trend, but it's still very nice compared to, let's say, market averages. And as I mentioned regarding the refinancing focus, the EUR 500 million bond is outstanding at the end of June 2026. GTC has selected JPMorgan to lead that refinancing, and the process has started as per our announcements. Beyond the Eurobond, we have several senior facilities project financings that are maturing in the next 12 months. Specifically, there's a bit more than EUR 100 million related to Hungarian assets. There's about EUR 100 million related to the German portfolio, and there's EUR 80 million related to the Polish portfolio. As all of these financing facilities are under scrutiny and we are in discussion with the banks and investors to refinance, all of these are being attended, and we are positive that the refinancings will be closed or extended ahead of their maturities.
Of course, these numbers, as mentioned earlier, are not including the facility that we secured on Galeria Północna. They will be reported in detail and will be part of the key metrics in the Q3 reportings. To be just kind of conclusive, besides the upcoming debt maturities, I believe that all of these facilities are being attended. The business performance has been strong. We managed to improve on the rental rate, and that shows the strength of the portfolio, and with the upcoming maturities being addressed, we are positive that the financial position of GTC will be improved, and from my end, thank you for your attention. You're muted, Małgorzata.
Charlie, we are ready for the Q&A session.
Perfect. Thank you. We'll now begin the Q&A session. If you'd like to ask a question, please press the raise hand icon on your screen if you've joined via Zoom. If you've dialed in via the telephone lines, please press star followed by one on your telephone keypads now. As a reminder, on Zoom, that's the raise hand feature, and if you've joined via the telephone lines, please dial star followed by one. We will pause briefly to allow for any questions to be registered. Our first question comes from Jakub Kaczmarek. Please state your company name and proceed with your question. Hello.
Thanks for the presentation. This is Jakub.
Oh, I cannot hear you.
Okay. We're trying to speak up, so I'm running between meetings.
I cannot hear you.
I'll write in my question. Sorry about that.
Apologies. Thank you. As a reminder, if you'd like to ask a question, please use the raise hand feature or press star followed by one on your telephone keypad if you've dialed in via the telephone. Our next question comes from Aleksander Radomski of UNIQA. Your line is open. Please go ahead.
Hi. Hello. I have two or three questions. First question is about the timeline for selling assets ahead of their coming bond refinancing. Is there some kind of timeline for that that you can share?
As you see, we already sold three assets this year. We have two more assets under the final, let's say, agreements. I can confirm that one of the assets was closed today. We have a number of assets that we are planning to dispose. At this stage, I would rather not comment on the disposal timeline.
Okay. Okay. And another question is about the EBIT margin on residential portfolio. If you can share that maybe or not. Balázs, this is a question for you.
We do not publish subsegment EBITDA margins to my so far. Therefore, I'm unfortunately not able to provide you EBITDA margin on the German portfolio, the separate, let's say, subsection of our portfolio. We do provide group-level EBITDA margins only.
Okay. Okay. I understand. So maybe can you elaborate about the renovations in the newly acquired apartments? Have they already begun? And what impact will they have or do they have on rental activity and revenue?
It's a little bit, I would say, differently. What we've done on the German portfolio so far, we split the portfolio into the assets that we are planning to keep, and we split this, and we selected those assets that we are planning to dispose. We are not planning to do any significant CapEx on the part that we are planning to dispose. We have a very strict plan for the assets that we are planning to keep.
We will start renovation at the end of this year. This year, you should see some small CapEx spend on those assets towards the end of the year. The majority of CapEx spend will be in 2026 and 2027. That's due to the fact that this will be financed by the subsidized financing. We are under consideration for the two different options. It's either the subsidized loans, which are called KfW, or the BAFA program, where the subsidy is on the money spent. There is no subsidized loan, but you are being reimbursed for one-fourth of the cost spent on the improvement of the property. That's how the German market works in this respect, and for that, we need to properly prepare all the documentation to be able to apply for any of those programs.
For the whole portfolio, what we are doing is we are doing certain improvements or change of some systems in a way to allow these properties to be energy efficient. We acquire them with the energy efficiency of around D or E, depends on the property, and with special technology that is invented by Paul Tech and is being provided by them, we will improve those assets to the energy efficiency of B or A. That will not have an impact on the revenue stream. Only the improvement in where the CapEx is spent can be translated into improvement in the rental rates based on the German regulations. So I would say that probably you should see some improvement in the rental rates coming from CapEx spent only in 2026, let's say, second part of 2026, beginning of 2027.
Okay. Thank you.
Thank you. As a final reminder, if you'd like to ask a question on today's call, please use the raise hand function. If you've joined via Zoom, if you've dialed in via the telephone lines, please dial star followed by one. We'll pause briefly to allow for any final questions to be registered, and we do have a follow-up from Jakub Kaczmar. Please unmute yourself locally and proceed with your question.
Hi, again. Is the line better now?
No, it's not.
Okay. Sorry. I'll write in with an email.
It might be a little bit better, Kuba, but it's not fully clear, so you can try with a video.
Okay. Let me try. I wanted to ask about maintenance CapEx outlook for the upcoming 12 months because we have seen a significant deceleration between Q1 and Q2.
But you are looking at the development cost, right? At the investment into real estate when you had a significant amount in the first half and much less in the second half? Sorry, significant amount in Q1 and much less in Q2?
Exactly. I was wanting to ask how do you see this CapEx item developing in the coming 6– 12 months?
Kuba, this is not really the maintenance CapEx. This is the development CapEx that we decided to cut back as one of the measures to improve our cash position. So as you know, we decided to we had few properties under construction. We decided to slow down certain developments and bring them up to speed with the leasing before we continue spending money on them. That's relevant for all three properties in the Hungarian market.
The only property that we are developing right now is Matrix D developing at a normal speed in Croatia. The maintenance CapEx on a regular annual basis for the commercial real estate portfolio is between EUR 10–EUR 15 million. And that's what we will be spending anyway on that part of the CapEx. We are not cutting back. I see. Thank you. This EUR 10–EUR 15 million includes the capitalized expenses for new leasing, or that would be coming on top? That would be coming on top. That will be from the fit-out line.
Understood. Thank you. My second question was on the talks with the creditors, both on the bond side and on the other liabilities coming due in the next 12 months. I mean, could you give us any color on how these talks are proceeding or if you think that you will be able to meet the timeline indicated in the last picture?
Sure. I will take over the bonds part and then let Balázs speak about the senior debt, so the bonds, as Balázs mentioned in his speech, we mandated JPMorgan to work with us on the capital markets transaction. We do believe that we can deliver the transaction in the timeline, which is in the fixed report. We remain in a close dialogue with the majority of our bondholders, and those negotiations are progressing, and they are moving forward. We do believe that at the end of the day, the capital market transaction will be of our focus and will be the final outcome of the exercise.
Regarding the upcoming maturities on the loan side, we have very strong relations with all around the portfolio. We have more than 20 banks with whom we are continuously working to acquire new loans or extend the current ones. These strong relations and the conversations we are continuously keeping tabs on gives us confidence that the roll forward or refinancing of the upcoming maturities will be handled. I believe the strength of the portfolio is also underlined by the fact that we were able to sort of onboard a new bank in our network. That's underlined by the J&T facility. We were able to secure a post-balance sheet date. I think that's so far, or maybe beyond that. So far, we were very successful in rolling forward. So we do have a high expectation to be successful on this regard in the coming quarters.
I see. I see. Thank you. And lastly, I understand that with the German minorities buyout completed, the office building in Bucharest has again become unencumbered. Could you give us a rough update on the current state of the standing unencumbered portfolio, please?
Kuba, this is correct. We never encumbered at the end of the day City Gate. It was always unencumbered. We repaid the loan before we managed to encumber the asset. As this is a longer exercise, we will be happy to share the list of the unencumbered assets, but you have to give us time. We don't have it handy. If you look at the presentation, around 40% of our assets, 39% are unencumbered. So that gives you more or less the pool of the unencumbered assets. But to be honest, I don't remember asset by asset out of the portfolio which are unencumbered and which are encumbered. Understood.
Thank you.
Thank you.
Thank you. Our next question comes from David Sharma of Trigon. David, your line is open. Please go ahead.
Hi, guys. Thank you for the presentation. Just a few questions from my side. Maybe the first one being, could you please clarify which of the assets are about to be sold in the second part of the year? I believe it's going to be the Artico building in Warsaw and the plot in Katowice. And how much of the proceeds are we expecting from those two transactions?
David, I can confirm that the plot in Katowice has been already sold. The plot in Warsaw has been already sold. I don't want to comment on the transactions which were not closed.
Right. Thank you. So maybe my second question would be the, okay, we now see the top-line expansion due to the consolidation of the Resi Germany. That being said, the biggest financial burden is, in a way, your FFO. So where do you expect the FFO pickup to happen over the next Q3 to Q4 ? And do you expect the FFO to pick up prior to the rollover of the bonds and loans?
The FFO will pick up upon the realization of the disposal strategy in the German residential market and repayment of certain debts related to that acquisition. Right. So I wouldn't say it's going to be this quarter or the next quarter. I would rather say that it should start in the second part of next year.
Right. And where can we expect those first couple of transactions to happen? So where do you expect this sub-portfolio of our resi assets to get sold?
We are preparing them for sale as we speak. We do believe that the first transaction, if all goes well, can be still, let's say, in the first quarter of next year, but most probably towards the second, fourth quarter of next year.
Right. Thank you. So the last question would be, anything about the Kildare campus? Anything about you sharing your sale in the JV?
Can you say again? I couldn't.
Yeah. Yeah. Sure. What about your participation in the Kildare Innovation Campus in Ireland? What about the equity in the project, and where can we expect this disposal to take place?
Again, let the management to analyze whether this disposal is the best possible outcome for GTC. There are certain changes in this project which are extremely positive, and we have to evaluate the project again and to decide whether we would like to keep the project or sell the project. We, at this stage, are at the analytical level of those assumptions. So you have to give us a little bit more time to come back to the market and tell you exactly what will be the plans of the company towards this project.
Right. Thank you. And maybe, well, last question, I promise, would be about the overhead expansion. We can see that the G&A cost rose over 50% this quarter. Do you expect this pace to continue over the next two quarters or over the next four quarters? Or that was only, I would say, one-off transaction related to your redevelopment of our resi assets in Germany?
Balázs, if you can answer that question.
Certainly. I believe this is a one-off. There is an element of the increase that will stay with us as we have additional operations now in Germany and in Luxembourg. However, this current reported figure already includes certain one-off items. So if operational efficiency and sort of the management of the new portfolio is taking on the GTC standards, we do not expect it to be growing significantly. Ideally, it will, worst case, stay on that level.
Fair enough. Thank you, guys.
Thank you very much. Thank you.
Thank you. Our next question comes from Aleksander Radomski of UNIQA. Alexander, your line is open. Please go ahead.
Thank you. I was actually about to ask a question about SG&A and margins. So David asked it for me. So no more questions from my side. Thank you.
Perfect. Thank you.
Thank you very much. At this time, we have no further questions registered on the call. So hand back over to the management team for any further or final remarks.
Thank you very much, ladies and gentlemen. It was a pleasure to speak to you. As we announced at the very beginning, Michał Kuzawiński is at your disposal. If you have any additional questions, we will be happy to answer them offline. Thank you very much for your time. Goodbye.
Thank you.
Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.