Managed by over 230 professionals in Cyprus, Guernsey, Poland and Romania, 95.1% of the GWI portfolio consists of income-producing assets, predominately in the office sector, that are leased to a diverse array of more than 650 national and multinational corporates. In Poland, GWI has a presence in Warsaw, Wroclaw, Lodz, Krakow, Gdansk and Katowice, while in Romania it has assets in Bucharest, Timisoara, Constanta and Pitesti.

Shareholding and executive changes

In December 2020, the founder and co-CEO of GWI, Ioannis Papalekas, stepped down from his role, leaving Dimitris Raptis as the sole CEO.

After becoming the biggest shareholder in GWI in February 2020, CPI Property Group joined with Aroundtown to form a consortium that now holds 60.6% of the share capital, via Zakiono Enterprises Limited. This followed the completion of a cash acquisition of GWI shares at EUR7.00 per share, which was initiated by way of a formal offer announced in May 2021.

Growthpoint received an offer from Aroundtown S.A. and CPI Property Group S.A. for its shares in GWI in April 2021. However, the Independent Committee of the Board of GWI, which was appointed to consider the formal offer, concluded that it significantly undervalued the company, its assets and its prospects. The Board of Growthpoint agreed with this view and consequently did not accept the offer, which means that we continue to hold a 29.3% stake in GWI.

Performance

For its six-month financial period ended 31 December 2020, Growthpoint received dividends of EUR 0.15 per share from GWI, totalling R186.8m. It also received dividends in respect of the six-month financial period ended 30 June 2021 of EUR0.15 per ordinary share, amounting to R183.5m.

Revaluation losses mainly caused by Covid-19 were counterbalanced by the acquisition of two high-quality logistics and light industrial properties in Romania and the net positive impact from developments completed, in progress or under refurbishment, meaning that GWI's overall gross asset value increased by 2.0% to EUR3.07bn at 30 June 2021 compared to 30 June 2020. The portfolio now consists of 66 standing properties with a gross lettable area (GLA) of 1.3m square metres.

In the six months to end-June 2021, the like-for-like appraised value of GWI's standing commercial properties was stable and remained effectively unchanged – moving only 0.1% lower in the half-year – to EUR2.7bn.

As a result of the negative impact of revaluations, GWI reported an IFRS earnings per share of EUR-21 cents for its financial year ending 31 December 2020 (2019: EUR93 cents). It reported IFRS earnings per share of EUR6 cents in the six months ending 30 June 2021, which was a significant improvement on the same six months for 2020, where earnings per share were EUR-22 cents as a result of negative revaluations.

GWI's preliminary EPRA net reinstatement value (NRV) as at 30 June 2021 of EUR1 903m, or EUR8.61 per share, represented a marginal decrease compared to EUR8.68 at 31 December 2020. This was mainly due to the payment of an interim dividend and the negative impact of the IFRS valuation losses.

GWI maintained its investment-grade rating by all three major rating agencies post the 31 December 2020 year-end review of the company. Its loan-to-value ratio (LTV) of 39.2% at 30 June 2021 is consistent with its long-term strategy of keeping its LTV at below 40%. Its liquidity position remained extremely high, with EUR459.9m of cash available as of 30 June 2021, and an additional undrawn EUR215m revolving credit facility.

Further improvement in its debt maturity profile was achieved through the repurchase of approximately 41% of notes maturing in 2022 at a 2.0% premium to their par value. This effectively extended their maturity through the July 2020 issuance of its inaugural "green" bond, which raised EUR400m with a six-year term and was more than two-times oversubscribed. This further formalised GWI's commitment to green financing initiatives.

GWI's weighted average interest rate at 30 June 2021 was 2.7%.

Leasing transactions for 194 400m² – comprising new lets, renegotiations and extensions – were concluded in the six months from January to June 2021. Leasing activity in these six months equates to nearly two-thirds of the total achieved in FY20, and increased 68.2% for the comparable period in 2020 to deliver GWI's best six months. The overall leasing activity – comprising new lets, renegotiations and extensions – for the July 2020 to June 2021 period covered more than 380 000m².

However, the like-for-like vacancy rate increased to 10.3%, due to the challenging market and the addition of three new properties to the portfolio during a period with slower take-up than usual because of Covid-19. GWI's weighed average lease length at end-June 21 was 4.7 years.

GWI's total annualised contracted rent is EUR185.2m. The rate of collections for rents invoiced and due remains high at just below 99%.

In 2020, GWI maintained its operational profitability growth trend despite the global impact of Covid-19 and the resulting higher uncertainty in the market. However, in the 12 months from 1 July 2020 to 30 June 2021, net operating income declined by 9.4% with administrative expenses increasing by 5.7% compared to the previous 12 months.

The company continued to internalise property management, with more than 90% of its portfolio now being internally managed. This drives an enhanced customer focus. In an effort to improve efficiency and achieve significant savings, GWI also conducted an extensive review of its cost base and reduced administrative expenses by about 7% during 2020. This will have ongoing benefits, especially for tenants, who will experience lower occupational costs in GWI's properties.

Portfolio highlights

GWI acquired two high-quality logistics and light-industrial facilities with a total area of 27 000m² in the western part of Romania for EUR17.9m. These facilities – IPW Arad (Industrial Park West Arad) and IPW Oradea (Industrial Park West Oradea) – are 100% let to two multinational tenants with 15-year lease agreements. The acquisitions expanded GWI's footprint into two more cities in western Romania, where it already owns the Timisoara Industrial Park. It has now invested in six cities in the country. These acquisitions plus the two new facilities constructed in Romania during the year, also grew the GWI Industrial portfolio to more than 260 400m².

GWI prioritised the development of new high-quality logistics/light-industrial facilities and between 1 July 2020 and 30 June 2021, it also delivered two such facilities in Poland, where it is also refurbishing and repositioning two mixed-use properties, Renoma and Supersam.

The aim of the latter two projects is to add value by responding to the market changes brought about by Covid-19. Selected retail and commercial spaces are being converted to increase the amount of class "A" office space available in these buildings, while other commercial spaces are being reconfigured along the lines of GWI's successful Hala Koszyki redevelopment in Warsaw.

GWI, as at 30 June 2021, has a future pipeline of mainly office and industrial projects in Bucharest and other principal regional cities in Romania and Poland, with a potential blended yield on investment cost of 10.4%. These development projects will be pursued depending on market conditions and tenant demand. Currently, the company has prioritised the development of 99 700m² in four projects in Romania, and the refurbishment and repositioning of two more mixed-use properties in Poland.

ESG

GWI received two EPRA Sustainability Best Practices Recommendations (SBPR) awards, which are given to companies that help to raise the standard and consistency of sustainability reporting in the listed real estate sector.

In June 2021, GWI issued its sustainable development report and The Globalworth Foundation issued its first annual report, titled "Better Together". Then, in July, GWI published its inaugural Green Bond report.

Of the 66 properties in the GWI portfolio, 55 are green certified and valued at a total of EUR2.6bn. In addition, the Renoma and Supersam mixed-use properties in Poland, which are currently being refurbished and repositioned, have maintained their BREEAM Excellent accreditations, which will bring the total number of GWI's green certified properties to 57, with a total value to EUR2.7bn.

GWI has also maintained its low-risk rating by Sustainalytics and BBB rating by MSCI, and sustained a strong focus on giving back to its communities, with the company and the Globalworth Foundation contributing approximately EUR445 000 to more than 10 initiatives in Romania and Poland during the first six months of 2021. This followed contributions of around EUR2m in FY20 to 27 initiatives that were primarily aimed at fighting Covid-19 and its impact in the two countries.

Covid-19

During the 12 months under review, GWI continued to actively manage its portfolio of high-quality standing and development properties in Poland and Romania, while respecting restrictions in response to the pandemic. It successfully safeguarded its business, protected its assets, and minimised its exposure to the impact of Covid-19 during this period of uncertainty. At the same time, its robust liquidity and ample financial resources allowed it to act quickly in taking advantage of attractive new opportunities.

GWI invests in prime locations in key cities, selecting modern assets with excellent environmental credentials. As a result, it has a significant base of established, blue chip, and mostly international tenants with primarily long-term, Euro-denominated, triple-net and inflation-linked leases. This helped to cushion it against the impacts of Covid-19, and it was also protected by management’s keen focus on safeguarding the business, protecting its assets, and minimising its exposure to the effects of the pandemic. Furthermore, no pandemic prevention measures adopted in Poland and Romania resulted in any forced closure of offi ces, industrial premises or essential retail businesses – spaces that represent more than 95% of GWI’s contracted rent.

As the leading office investor in the CEE region, GWI has actively promoted the return of tenants to their office spaces. By prioritising the health, safety and wellbeing of the people working in and visiting its properties, and regularly communicating with tenants, it is providing the necessary assurance for them to actively start implementing their return to the office.

Prospects

GWI continues to focus on the active management of its portfolio of high-quality properties, and on being ready to respond to attractive market opportunities. Although the office of the future may need to be reconfigured to potentially offer greater flexibility or alterative space planning arrangements, GWI believes that its importance will not diminish. Corporates and occupiers believe that the office environment increases productivity and promotes creativity, innovation and consistency, while also fostering relationships and corporate culture, all of which are essential for the long-term sustainability and growth of their businesses.

In addition, Poland and Romania are poised to emerge as winners from the pandemic crisis as corporates continue to focus on containing costs. This will result in them nearshoring additional operations in GWI's two home markets.

GWI is very well-placed to continue to successfully address ongoing challenges and achieve new levels of success.