Globalworth Regulatory News (GWI)

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16 September 2020

Globalworth Real Estate Investments Limited

("Globalworth" or the "Company")

Interim Results for the six months ended 30 June 2020

Globalworth, the leading office investor in Central and Eastern Europe, announces the release of its Interim Report and Unaudited Consolidated Financial Results for the six-month period ended 30 June 2020.

Dimitris Raptis, Co-Chief Executive Officer and Chief Investment Officer of Globalworth, commented: "2020 has been a year of significant challenges, with a first quarter full of optimism and strong performance coming to an abrupt halt in March due to the Covid-19 pandemic. However, since the very early days of the pandemic we have taken measures in Poland and Romania, aimed at ensuring not only the maximum possible protection for all parties concerned, but also business continuity and long-term viability. I am proud to say that our proactive approach and, in certain cases, assertive measures, have been in the right direction and have placed us in the best possible position to emerge stronger in due course and a relative winner from the current turbulent times."

Operational Highlights

· Total combined portfolio value remained effectively unchanged at €3.0 billion mainly due to the positive impact from our developments (delivered or in progress) offsetting most of the revaluation decrease due to the Covid-19 pandemic.

· Standing portfolio footprint increased by 34.8k sqm mainly attributed to the addition of Globalworth Campus T3 in Bucharest, to 1,248.5k sqm of GLA.

· Green-certified portfolio increased to 48 standing properties at the end of June accounting for 83.8% of our standing commercial portfolio by value.

· Developments focused on projects with significant pre-lets or advance level of construction, with two class "A" office projects and two industrial facilities under construction in Romania (3 projects) and Poland at the end of June, which upon completion are expected to add 91.5k sqm of high quality GLA.

· Healthy leasing activity in H1-2020, with 115.5k sqm of commercial space taken-up or extended at an average WALL of 3.2 years.

· Leases renewed accounted for 74% of our leasing activity, resulting in our WALL remaining substantially the same over the period (4.5 years as at 30 June 2020 vs 4.6 years as at 31 December 2019).

· Average standing occupancy of our commercial portfolio of 93.3% (94.2% including tenant options), decreasing from 94.7% (95.0% including tenant options) at year end 2019. Like-for-like occupancy decreased by 0.8%.

· Majority of portfolio internally managed, with 83.6% of our standing commercial portfolio by value (87.6% of office and mixed-use standing properties) managed in-house by our team of over 200 professionals in Poland and Romania, with new properties being added in Q3-2020. 

· Most of our contracted rent is from office and industrial properties (89.9% of annualised contracted rent) which have remained largely unaffected by measures taken by the authorities against Covid-19.

· Claims received principally by occupiers of space who have been impacted by the Covid-19 pandemic, with claims accounting for 4.2% of annualised contracted rent received and settled with tenants, and further claims accounting for 0.8% of annualised contracted rent rejected or under negotiations.

· The modest economic impact of claims is expected to be substantially mitigated by the cost cutting initiatives already implemented by the Group and through the extensions of leases in place negotiated as part of the Covid-related agreements reached with our tenants.

· Rate of collections for rents invoiced and due remained high at 95.5% during the first half of 2020.

· CPI Property Group became the largest shareholder in Globalworth in February 2020.

· Over €650k donated in the fight against Covid-19 in Romania and Poland.

Financial Highlights

· Revenue and Net Operating Income rose by 9.9% to €114.0 million and by 17.1% to €79.6 million as compared to H1-19, respectively, mainly due to the acquisition of standing properties in Poland and completion of the development of properties in Romania after 1 January 2019.

· Adjusted Normalised EBITDA for the period increased by 16.1% to €71.5 million, following the increase in NOI.

· IFRS earnings were €48.6 million negative compared to €69.9 million positive in H1-19 mainly due to negative revaluations due to Covid-19. IFRS earnings excluding the effects of revaluations increased to €43.4 million for the first six-months of the year, 62% higher compared to H1-19.

· EPRA Earnings of €46.4 million, 24.4% higher compared to H1-19, with EPRA earnings per share decreasing by 8.7% to 21 cents per share, due to higher weighted average number of shares in issue following the successful equity capital raise in October 2019.

· Dividends declared in respect to the first six months of 2020 of 19 cents per share, representing 90% of EPRA Earnings for the period.

· Loan to Value of 36.9% at 30 June 2020, up from 34.7% at 31 December 2019, consistent with the Group's strategy to manage its long-term LTV target at below 40% while still pursuing strong growth.

· EPRA NAV per share decreased by 5.4% to €8.80 per share at 30 June 2020 (31 December 2019: €9.30), impacted by the negative effect of property valuations carried out at 30 June 2020.

· Issue of inaugural Green Bond in July, raising €400m with a 6-year term (coupon 2.95%), in a transaction which was 2x oversubscribed.

· Further improvement in debt maturity profile, through the repurchase of c.41% of the notes maturing in 2022 at a 2.0% premium to their par value.

Outlook

Globalworth will continue to actively manage its portfolio of high-quality properties (standing and developments) in Poland and Romania, while respecting the regulations and recommendations issued by the World Health Organisation as well as national, regional and local governments and adapt our operations accordingly. At the same time, should new attractive opportunities become available, the Company is prepared and has the financial resources to act quickly.

The Company also remains committed to ensuring the safety and wellbeing of all of its people, partners, communities, and other stakeholders, and will continue to safeguard its business, protect its assets and minimise its exposure to the impact of Covid-19, during this period of increased uncertainty.

For further information visit www.globalworth.com or contact:

Enquiries

Stamatis Sapkas Tel: +40 732 800 000

Deputy Chief Investment Officer

Jefferies (Joint Broker) Tel: +44 20 7029 8000

Stuart Klein

Panmure Gordon (Nominated Adviser and Joint Broker) Tel: +44 20 7886 2500

Alina Vaskina

About Globalworth / Note to Editors:

Globalworth is a listed real estate company active in Central and Eastern Europe, quoted on the AIM-segment of the London Stock Exchange. It has become the pre-eminent office investor in the CEE real estate market through its market-leading positions both in Poland and Romania. Globalworth acquires, develops and directly manages high-quality office and industrial real estate assets in prime locations, generating rental income from high quality tenants from around the globe. Managed by over 200 professionals across Cyprus, Guernsey, Poland and Romania, a combined value of its portfolio is €3.0 billion, as at 30 June 2020. Approximately 94.4% of the portfolio is in income-producing assets, predominately in the office sector, and leased to a diversified array of c.700 national and multinational corporates. In Poland Globalworth is present in Warsaw, Wroclaw, Lodz, Krakow, Gdansk and Katowice, while in Romania its assets span Bucharest, Timisoara, Constanta and Pitesti. For more information, please visit www.globalworth.com and follow us on Facebook, Instagram and LinkedIn.

IMPORTANT NOTICE: This announcement has been prepared for the purposes of complying with the applicable laws and regulations of the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom. This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "targets", "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward looking statements include all matters that are not historical facts and involve predictions. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business, results of operations, financial position, liquidity, prospects, growth or strategies and the industry in which it operates. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance. Save as required by law or regulation, the Company disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements in this announcement that may occur due to any change in its expectations or to reflect events or circumstances after the date of this announcement.

GLOBALWORTH REAL ESTATE INVESTMENTS LIMITED

INTERIM REPORT AND UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30 JUNE 2020

FINANCIAL HIGHLIGHTS: H1-20

CHIEF EXECUTIVE'S REVIEW

2020 has been a year of significant challenges, with a first quarter full of optimism and strong performance coming to an abrupt halt due to the Covid-19 pandemic in March which has carried on ever since. The rapid spread of the Covid-19 pandemic has created significant uncertainty regarding the future, and the way we live and operate. For us, the safety and wellbeing of our people, partners, communities, and other stakeholders, is and will continue to be our top priority, as we focus on safeguarding our business, protecting our assets and minimising our exposure to the impact of Covid-19.

I, and the entire Globalworth team, are committed to fight and overcome this crisis, following regulations and recommendations issued by the World Health Organisation as well as national, regional and local governments and adapting our operations accordingly.

To this end, since the very early days of the pandemic we took several measures in Poland and Romania, aiming at ensuring not only the maximum possible protection for all parties concerned, but also business continuity and long-term viability. I am pleased to report that our proactive approach, and in certain cases assertive measures, have been in the right direction.

Country update

There has been an increase in confirmed cases of Covid-19 during the pandemic, especially over the summer period, with more than 20.5 million and 3.1 million cases globally and in Europe respectively as at 27 August 2020. Poland and Romania rank 13th and 9th in Europe with 64.7k (2.0kdeaths) and 83.2k (3.5k deaths) in terms of confirmed cases, respectively.

Since March the authorities in both countries, in line with many other countries, declared a "state of emergency" for part of this period, and adopted several measures in order to address the pandemic, including restrictions on peoples' movement, travelling, opening hours of commercial spaces and so on. They also imposed emergency measures to protect affected businesses. Such measures included rent reductions and/or suspensions for non-essential retail businesses for as long as the state of emergency applies. In both countries, non-essential retail premises were ordered to close whereas certain types of restaurants were only allowed to operate a take-away or delivery service. There has been no government measure in either country forcing the closure of office, industrial premises or essential retail businesses (supermarkets, pharmacies, convenience stores etc.).

Although currently most of the above restrictions were lifted since June/early July, should the spike in confirmed cases over the summer period continue, we cannot preclude some of these restrictive measures being re-introduced.

Our Active Approach During the Pandemic

The Covid-19 pandemic has caused us to rethink our overall strategy, while looking to our long-term activities and investments.

During the period, in order to ensure the health and safety of the people who work at or visit our properties, and to maintain business continuity for our tenants and ourselves, we implemented several preventative measures such as performing frequent disinfections with specialised products in areas of high traffic, installed hand disinfection stations in common areas of the properties, maintained a continuous open communication with our tenants and suppliers on matters related to Covid-19 and established a detailed action plan in place should a Covid-19 case be detected in one of our buildings.

In addition, we reviewed all our suppliers and supplier contracts, resulting in the termination and/or suspension or renegotiation of several agreements, aiming at achieving significant savings which will benefit mainly our tenants. As most of our leases are triple net, the cost savings which form part of the service charges paid by tenants will be lower thus reducing their overall occupational cost in our properties. The approach we have taken as a result during this period is to reduce the service charge cost based on the projected amounts in the interim period, reducing the burden of our tenants, until we perform the final 2020 service charge reconciliation early next year.

In terms of investments, we have utilised a risk-adjusted approach aiming at preserving as much cash in the business without jeopardising safety and future growth of the Group. We substantially reduced our renovation & upgrade capex for our standing properties, focusing on the absolute essential requirements relating to health and safety, and maintenance. Furthermore, we continued focusing our investment capex on development projects with either significant pre-lets or for which construction was substantially completed or was very advanced at the time the pandemic started, while we suspended all other developments or new acquisitions. We continue to closely monitor the market and should an investment opportunity with particularly attractive potential returns arise in the future we have ample liquidity to pursue it.

Despite the challenging economic environment, we have remained committed in supporting our communities of which we are an integral part, and have directed a substantial amount of our ESG funds for this year in assisting hospitals and related staff in Romania and Poland by donating more than €650k in the fight against Covid-19.

Our Portfolio

During this period, our efforts have been exclusively focused in actively managing our portfolio of standing properties and development projects.

The quality of our portfolio and the ability to effectively and efficiently manage our properties has been reflected in our performance during this period of increased uncertainty.

Our overall portfolio value stood at €3.0billion as at 30 June 2020, remaining effectively unchanged during the first 6 months of the year, as the delivery of a new class A office in Bucharest at the beginning of 2020, and further progress made in our development projects, offset the revaluation decrease mainly attributed to the Covid-19 pandemic.

Furthermore, I am pleased that we have been able during the first six months of 2020, to have successfully negotiated the take-up (including expansions) or extension of 115.5k sqm of commercial spaces, with an average WALL of 3.2 years. More importantly, in the second quarter alone, where the pandemic crisis has been ongoing, we negotiated the take-up (including expansions) or extensions of 76.2k sqm of commercial spaces at with an average WALL of 2.1 years. The overall shorter duration of the leases signed reflects the prevailing market environment, where several companies are forced to re-assess their occupational plans (extensions, expansions, relocations, release of spaces etc.), as well as the duration of the leases signed and the fact that a significant part of the Covid-related tenant claims has been settled by offering rent concessions in exchange for extensions in lease duration.

Occupancy of our standing commercial portfolio remained high at 93.3% (94.2% including tenant options), albeit modestly decreasing from the 2019 year-end level (94.7% / 95.0% including tenant options), due to the lower occupancy than the average of the Globalworth Campus Tower 3 office in Bucharest which was added in the period and is in the lease-up phase, and the negative impact of the expiration of certain leases mainly in our Polish portfolio resulting in 0.8% decrease on like-for-like occupancy basis, (94.0% as at 30 June 2020), however considering our active discussions with potential new tenants, we remain confident that we will be able to lease a significant part of the available spaces in our portfolio in the near term.

The benefits of our strategy, since inception of the Company, to establish long-term partnerships with high-quality national and multinational tenants, thus ensuring sustainable cash-flow generation, could not be more evident than during a period of pandemic, where we have been able to maintain a high rate of collection with over 95.5% of the rents invoiced being received in line with their customary cycle, while the level of claims received by tenants accounted for only 5.0% of our contracted rents, with more than 80% settled with tenants and the remaining under negotiation. 

Our Results and Corporate Activity

The first half of 2020, marks the first such period since our initial investment in Poland, where we have 100% consolidated results of our Polish activities, following the acquisition and delisting of our Globalworth Poland subsidiary at the end of September 2019. The Group during this period reported a solid uplift in its first half earnings with an increase of 17.1% in our net operating income to €79.6 million, 16.1% in our adjusted normalised EBITDA to €71.5 million and 24.4% in our EPRA earnings to €46.4 million, as compared to the same period in 2019. Improvement in our performance is mainly attributed to our asset management initiatives and the impact of acquisitions and other property additions to our portfolio which were not fully reflected in 2019 (and 2020 year to date).

In February we paid a second interim dividend of 30 Euro cents per share in respect of the 2019 financial year resulting in 60 Euro cents in total. In addition, on 26 August 2020 we announced the first interim dividend of 2020 of 19 Euro cents per share, being 90% of the EPRA Earnings for the first six months of the year, as stipulated by our articles of incorporation.

Liquidity has always been key area of focus, and especially following the Covid-19 pandemic outbreak, we have taken several steps to ensure that we have sufficient cash in this period of uncertainty and capital markets volatility, to safeguard our business, maintain continuity and potentially take advantage of opportunities that may appear in the future. During this period we drew down on existing committed facilities, such as the €200 million RCF (subsequently repaid in August), and other new facilities, with most of the cash remaining essentially unutilised during this period. New draw downs in addition to funds from operations resulted in c.€570 million of liquidity and a Net LTV of 36.9% as at 30 June 2020.

The majority of our debt financing (€1.1 billion) in the first half of the year was in two Eurobond instruments expiring in 2022 and 2025 respectively. As part of our ongoing effort to effectively manage and further improve our debt maturity profile, at the end of July we successfully closed our inaugural green bond raising €400 million, with a 2.95% coupon, while at the same time repurchasing c.41% of our 2022 notes at a premium of 2.0% over par from the debt capital markets, essentially extending the maturity of a significant part of the notes maturing in June 2022 to July 2026. Furthermore, in August we repaid our €200 million RCF, but maintained the flexibility of re-drawing funds at the increased limit of €215 million in the future, with our overall liquidity as at 31 August 2020 being €524 million.

Overall, we are very pleased with the outcome of our efforts, as our inaugural green bond was more than 2x oversubscribed by existing and new bond investors, further confirming our strong performance, the quality of our portfolio and team, as well our overall approach to sustainable development and the creation of long term value for our stakeholders, in the period of increased uncertainty due to the Covid-19 pandemic.

In addition, all three major rating agencies, following their 2020 review of Globalworth, maintained their investment grade status for the Group, with Moody's changing their outlook from "Stable" to "Negative", while S&P and Fitch outlooks remained "neutral".

The high level of confidence received from the debt capital markets and the rating agencies, followed that of the CPI Property Group, one of the largest property companies in Western Europe and the CEE, which in February 2020 became the largest equity shareholder in Globalworth holding 29.4% of the share capital.

Our EPRA net asset value decreased by 5.4% to €1,957.5 million predominantly as a consequence of the revaluation of our like-for-like standing portfolio which was 1.1% lower compared to the year-end, and payment in February of €66.4 million of dividend relating to the second half of 2019, resulting in an EPRA NAV/Share of €8.80 (31 December 2019: €9.30).

Corporate Governance

Our Board of Directors was partially reshaped in 2020, because of corporate activity and the overall effort of reducing costs and creating a leaner board. As a result Mr Ioannis Papalekas, Mr Eli Alroy, Mr Peter Fechter, Mr George Muchanya and Mr Bruce Buck stepped down from their positions, with Mr Martin Bartyzal and Mr David Maimon being appointed new members on the board. I would like to personally thank parting members for their significant contributions to the Board, and wish the new members a successful tenor and look forward working closely with them and the rest of the board in steering Globalworth to the future. At the same time, I am pleased to share since March the honour and responsibility of the CEO role together with our Founder Ioannis Papalekas.

Outlook

We will continue to actively manage our portfolio of high-quality properties (standing and developments) in Poland and Romania, while respecting the regulations and recommendations issued by the World Health Organisation as well as national, regional and local governments and adapt our operations accordingly. At the same time, we are ready and have the financial resources to act quickly if new attractive opportunities become available in the future.

We are committed in ensuring the safety and wellbeing of our people, partners, communities, and other stakeholders, as we continue to safeguard our business, protect our assets and minimise our exposure to the impact of Covid-19, in this period of increased uncertainty. We firmly believe that we will emerge stronger and a relative winner from the current turbulent times.

Stay safe and healthy!

Dimitris Raptis

Co-Chief Executive Officer

& Chief Investment Officer

15 September 2020

MANAGEMENT REVIEW

REAL ESTATE INVESTMENT ACTIVITY

Developments

Globalworth, in the first half of 2020, amid of the Covid-19 pandemic, significantly scaled back on its active construction and development programme. Following further review of our projects we decided to focus only on projects which have significant pre-lets in place or construction was well underway or substantially completed. As a result, we reduced our original expected construction and development expenditure for 2020 by more than €36.0 million to €53.9 million by focusing on these selected projects, with €47.8 million remained to be invested to completion.

In the first six months of the year we delivered one office property and progressed with four other developments, three in Romania and one in Poland.

New Deliveries

In January 2020, we delivered Tower 3 (centre tower) of the Globalworth Campus development in the New CBD of Bucharest. The third tower, which represents the second and final phase of the project, offers 32.2k sqm of Class "A" office space (c.96% of total GLA) as well as other amenities such as a 750-seat conference centre (1.9k sqm) and c.500 parking spaces.

The main office building extends over 14 floors above ground and two underground levels, was 71.2% let as at 30 June, and had its first tenants arriving in January 2020. Fitouts for the interconnected conference centre remain in progress (delayed due to Covid-19) and expected to be completed in Q3-2020

The Globalworth Campus project, overall, offers 92.0k sqm of high-quality space balanced between three main towers offering Class "A" offices, commercial and other supporting facilities, and a 750-seat conference centre.

Review of Projects Under Development

Globalworth, as at the 30 June 2020, had two active developments in Bucharest, one in Krakow and one in Constanta, which together are expected to further increase our footprint by 91.5k sqm of GLA on completion.

Industrial Developments

Our active development of new high-quality industrial facilities continued in 2020, with two new facilities being at an advanced stage of completion at the end of June 2020. Both these facilities are developed within a joint venture partnership, in which we have a 50% interest, and are located in Bucharest and Constanta.

In Constanta, phase A of the mixed-use Constanta Business Park project is also under construction, involving the development of a 21.3 sqm logistics/light-industrial facility. The construction of our first development project in the Eastern part of Romania was delivered in Q3-2020, with the remaining to be developed in phases.

The Chitila Logistics Hub is in the greater Bucharest area and, on completion, is expected to offer a GLA of 23.1k sqm. The facility which is partially leased to Mega Image, part of the Delhaize Group, and Green Net (retailer), is the first industrial facility the Group is developing in the capital, and works are expected to be completed in Q3-2020.

Office Developments

Podium Park II is the first class "A" office the Group is developing in Poland. It is part of the office complex known as Podium Park which will be developed in phases and on completion will comprise three interconnected buildings in the east of Krakow. The first office of the complex was completed in 2018 (also owned by Globalworth), with the second currently under construction. As at end of June 2020, the structure of the building has been completed, with the façade currently been fitted, and mechanical and other installations in progress. Podium Park II on completion, estimated in Q4-2020, will offer high-quality GLA of 18.8k sqm and c.450 parking spaces over 11 floors above ground and two underground levels. This multi-tenant office, is currently 82.6% pre-let to tenants including Ailleron and FMC Technologies.

Globalworth Square is a class "A" office under construction in the New CBD of Bucharest. The property is located between our own Globalworth Plaza and Green Court B offices, and on completion, estimated in Q1-2021 will offer 28.4k sqm of high-quality GLA and c.450 parking spaces over 15 floors above ground and three underground levels. As at the end of June 2020, construction is in progress with the building structure been completed and the façade and other installations in progress.

Review of Other Future Developments

As part of the review of our development projects amid the Covid-19 pandemic, two offices in Bucharest (Globalworth West) and Krakow (Podium Park III) which were at an early stage of development at the time of the outbreak were postponed and reclassified as Projects for Future Development. These two class-A office developments, upon completion are expected to add in total 51.1k sqm to our portfolio and had an appraised value of €17.4 million at 30 June 2020 (€16.4 million as at 31 December 2019).

In addition, we own, directly or through JV partnerships, land plots in prime locations in Bucharest and other regional cities in Romania, covering a total land surface of 1.4 million sqm (comprising 2.1% of the Group's combined GAV), for future developments of office, industrial or mixed-use properties. We are currently progressing with select preparatory activities, including performing planning and/or permitting for this land bank, which when fully developed, has the potential to add in total a further 829.5k sqm (mainly office and logistics / light-industrial) of high quality GLA to our standing portfolio footprint.

Projects classified for "Future Development", are periodically reviewed by the Group, with the pace at which these projects are being developed being subject to tenant demand and general market conditions.

New Acquisitions

Following the Covid-19 pandemic outbreak in 2020 we suspended all new investments as part of our initiatives to safeguard our business and liquidity during this period of increased uncertainty.

As a result, the acquisition of two office developments in Warsaw (Chmielna 89) and Krakow (Tischnera Office) signed and announced in November 2019 was cancelled.

We continue to monitor the investment market for new investment opportunities, and we may decide at a later stage, and subject to market conditions, to pursue investments which will be considered to provide particularly attractive risk-adjusted returns for the Group.

ASSET MANAGEMENT REVIEW

Leasing Review

The strong leasing momentum of the previous years in our markets of focus in Poland and Romania, came to a sudden slowdown in the last three months of the period due to the Covid-19 pandemic, with several companies forced to re-assess their occupational plans (extensions, expansions, relocations, release of spaces etc), as well as the duration of the leases signed.

New Leases

In the first six months of 2020, the Group successfully negotiated the take-up (including expansions) or extension of 115.5k sqm of commercial spaces in Poland (40.3% of transacted GLA) and Romania (59.7% of transacted GLA), with an average WALL of 3.2 years.

More importantly, within the last three months that the pandemic crisis has been ongoing, the Group negotiated the take-up (including expansions) or extensions of 76.2k sqm of commercial spaces in Poland (33.9% of transacted GLA) and Romania (66.1% of transacted GLA), with an average WALL of 2.1 years.

 A significant part of our efforts over the period has been focused on lease extensions due to:

· the high occupancy of our portfolio;

· the expiration profile of our leases, with 80.0k sqm of GLA initially expiring in 2020 (5.0% of contracted rent), and a further 113.5k sqm (11.0% of contracted rent) in 2021; and

· the prevailing market environment, and in particular the fact that a significant part of the tenant claims has been settled by offering rent concessions in exchange for extensions in lease duration.

Lease renewals were signed with 92 of our tenants, for a total of 85.5k sqm of GLA, at a WALL of 2.2 years, with the most notable extensions involving Unicredit, DXC, InOffice, Patria Bank, Cegedim and Mazars. We are pleased that c.80% of the renewals by GLA signed in the first half of 2020 were for leases that were expiring in 2021 or onwards. The shorter WALL of these extensions is a reflection of the cautious approach taken by many corporates in this period of higher volatility in the global economy.

New leases for 17.1k sqm of GLA were signed at a WALL of 8.3 years, accounting for 56.9% of total new take-up, and included tenants such as BRD (part of Societe Generale Group), Green Net and Adecco as well as 21 other corporates. The remaining 12.9k sqm of space signed in the period related to expansions by 16 tenants, with an average WALL of 4.5 years.

Signing of new leases, typically for large multinational and national corporates, takes longer in the current environment as potential tenants are re-assessing their future occupational plans.

Overall occupancy of our combined standing commercial portfolio as at 30 June 2020 was 93.3% (94.2% including tenant options), representing a 1.4% decrease over the past six months (94.7% as at 31 December 2019 / 95.0% including tenant options). The addition (through delivery) of Globalworth Campus Tower 3 to the standing portfolio during the period, with occupancy lower than the Group average, and the negative net uptake of space despite the signing of new contracts, resulted in a lower average occupancy rate of our portfolio.

On a like-for-like basis, occupancy decreased by 0.8% to 94.0% over H1-20, negatively impacted by the expiration of certain leases mainly in our Polish portfolio, however considering our active discussions with potential new tenants, we remain confident that we will be able to lease the available spaces in our portfolio in the near term.

Across the portfolio, as at 30 June 2020, we had 1,157.0k sqm of commercial GLA (98.1% of the standing GLA) leased to approximately 690 tenants, at an average WALL of 4.5 years (4.4 years on standing GLA), the majority of which is let to national and multinational corporates that are well-known within their respective markets.

Rental Levels

Market rental levels, although they can vary significantly between type of spaces, buildings and submarkets, remained relatively stable in our portfolio in both Poland and Romania during the first half of the year, with new leases and leases prolonged signed at 15.8% higher rents compared to the previously prevailing averages.

Office leases were negotiated at an average rent of €15.2/sqm/month (€14.2/sqm/month for FY2019), above our office portfolio overall average of €14.2/sqm/month as at 30 June 2020, mainly due to signing renewals with tenants occupying spaces with higher rent (e.g. co-working and banking institutions). Our overall commercial GLA take-up during in the first six months of 2020 was agreed at an average rent of €14.8/sqm/month (€12.8/sqm/month for FY2019), with industrial and retail spaces leased at €4.8 and €14.3/sqm/month respectively.

Contracted Rents (on annualised basis)

Total annualised contracted rents in our standing commercial portfolio were €186.1 million at 30 June 2020, +1.5% compared to 31 December 2019, further increasing to €189.3 million when including pre-lets in place in our development projects. In addition, €0.9 million of annualised rental income is generated by renting 150 residential units and other auxiliary spaces in Upground, the residential complex in Bucharest which we partially own.

Like-for-like annualised contracted rents in our standing commercial portfolio decreased by 0.7% to €182.1 million at 30 June 2020 compared to year end 2019, as the increase in rents (1.0% on average) due to indexation was outweighed primarily by lower occupancy.

The Group's rent roll across its combined portfolio is well diversified, with the largest tenant accounting for 5.3% of contracted rents, while the top three tenants account for 10.7% and the top 10 account for 26.2%. We expect this diversity to grow further as the portfolio continues to expand.

Cost of Renting Spaces

Renting spaces typically involves certain costs which are incurred by the landlord. The base rent is the figure generally used as reference point in the real estate market, but in assessing the profitability of a rental agreement, the effective rent can be a more useful indicator.

The difference between the base rent and the effective rent is determined by the level of incentives awarded to tenants as part of the lease agreement, including rent-free periods, fit-out costs for the space leased, and brokerage fees. These incentives can vary significantly between leases, and range depending on type of lease (new take-up or lease extension), space leased (office, commercial, etc), duration of the contract and other factors considered.

For leases typically signed by Globalworth the difference between base and effective rents ranges from 10% to 30%, however due to the high-level of renewals with a shorter term duration than what we normally sign, the average for H1-2020 was c.20%.

Tenant Demands / Claims Review1

As previously reported, for a period of about 3 months since the pandemic broke-out in mid-March, authorities in Poland and Romania adopted very restrictive measures in terms of movement of people and travelling, as well as enforcing the closure of all but essential retail premises. They also imposed emergency measures to protect affected businesses, including rent reductions and / or deferrals for non-essential retail businesses for as long as the state of emergency applies. There has been no government measure in either country forcing the closure of office premises, logistics / light industrial assets or essential retail businesses (supermarkets, pharmacies, convenience stores etc.).

Our portfolio comprises mainly of office and industrial spaces, with our exposure to retail / commercial spaces limited to our three mixed-use properties in Poland and (typically) on the ground floors of our offices across our portfolio.

Of our €190.2million of total contracted rent, at the end of June 2020, office rent accounted for 85.1% (parking rent assimilated to office rent), with retail / commercial, industrial and other for 7.9%, 4.8% and 2.2% respectively.

As a result of the restrictive and protective measures imposed in both countries as well as the severe impact that the crisis has had on certain business and industries, between April and June we received a growing number of tenant demands and claims. We have been very proactive in managing this evolving situation by being in constant communication with all our tenants and adopting an open and collaborative approach, which on the one hand, targets to assist them to weather this crisis and on the other hand, protects the sustainability and longevity of our income.

Rather than applying a horizontal or vertical approach on dealing with tenant claims, we have considered each case separately. Some of the solutions implemented have been bringing forward to this year rent frees that were applicable in later years, and rent frees/reductions this year in exchange for lease extensions or delayed payment dates on rent invoices.

Overall, we have estimated the value of the claims received at c.€9.6 million2, reflecting c.5.0% of our contracted annual rent, of which most of them are attributed to office tenants (€5.7 million or 60.1%) and retail tenants (€3.3 million or 34.3%). We expect that the modest economic impact of these claims will be substantially mitigated by the cost cutting initiatives already implemented by the Group and through the extension of leases in place negotiated as part of the Covid-related agreements reached with our tenants.

Approximately 33.8% of the claims by value were settled without a cash impact on the rental income (of which ¾ were rejected), 49.5% of the claims by value were agreed with tenants (44.4% of the accepted claims resulted to a lease maturity extension) and the remainder are still under negotiation (16.7% of claims value).

On the retail side, as over the last three months of the period the operations of the majority of occupiers of such spaces in our portfolio were closed down by the authorities or have been materially impacted (e.g. like restaurants/canteens etc.), we have received notifications from most of them.

On the office side, notifications have been received both from tenants operating in industries who have seen an immediate impact in their businesses (e.g. co-working accounting for c.2.9% of our annual contracted rent as at 30 June 2020) as well as from a number of multinationals seeking to reduce costs.

1Data as of 31st of August 2020

2 The estimate results from the fact that a number of tenant claims received had no value attached to them or are still under negotiation. The estimated claims value also excludes certain ones related to lease agreements which were already under extension negotiations before the start of the crisis.

In the last few weeks of June, and in line with many other countries, most of the restrictive measures in Poland and Romania have been lifted. As a result, we have also witnessed a material decrease in the number of new tenant claims or demands. 

Collections Review1

The ability to collect - cash in - of contracted rents is a key determinant for the success of a real estate company.

Our strategy at Globalworth, since inception of the Group has been to establish long-term partnerships with high-quality national and multinational tenants to ensure sustainable cash-flow generation. As such, in the first half of 2020, we were able to minimise the impact on rent collections of the Covid-19 pandemic in our portfolio. The collection rate of rents invoiced and due during the period remained high at 95.5% (95.8% for H1-2019).

More specifically, considering the current market environment, rent to be collected in the period was classified as:

· Rent eligible for invoicing: Includes rents to be invoiced to tenants in accordance with the terms of their lease agreements. Such rents were either collected or subject to collection; and

· Rent impacted by measures imposed by the authorities: Such rent was to be collected based on the contractual agreements in place, however due to measures taken by the authorities in Poland and Romania, tenants were excluded from paying, and as such no invoices were issued by the Group.

From the €82.0 million of rent to be invoiced and due under normal conditions during the first half of the year, €1.4 million was not invoiced due to measures taken by the authorities.

1Data as of 31st of August 2020

Portfolio Valuation

Our entire portfolio in Poland and Romania was revalued, by independent appraisers, as at 30 June 2020. Valuations were performed in accordance with our policy of revaluing our properties twice a year, at the end of June and December respectively. CBRE and Knight Frank valued our properties in Poland, with Colliers and Cushman and Wakefield valuing our properties in Romania (more information is available under note 4 of the unaudited interim condensed consolidated financial statements as of and for the period ended 30 June 2020).

Our portfolio over the past periods has been growing in value, both on a like-for-like and absolute value basis, as a result of our asset management initiatives, and the performance of the real estate markets in Poland and Romania, resulting in healthy investor interest, tenant demand meeting or exceeding supply for quality real estate spaces, which led to contracting yields, stable or growing rental levels and lowering tenant incentives.

The Covid-19 pandemic, however has created uncertainty in the market which has also been reflected in the independent appraised valuation of our portfolio.

The total combined value of our real estate portfolio in Poland and Romania, as at 30 June 2020 remained effectively unchanged at €3.0 billion, compared to 31 December 2019, as the positive impact from our developments (delivered or in progress) was partially offset from the negative revaluation from our standing portfolio. Like-for-like appraised value of our standing commercial properties was €2.7 billion as at 30 June 2020, 2.8% lower compared to year-end 2019.

Appraisers have taken a more cautious approach when valuing our properties, typically applying wider yields and higher discount rates (when applicable) for our office and mixed-used properties. The level at which yields and discount rates have been considered, vary taking into account factors such as the commercial profile of the property, its location and the country in which it is situated. For the majority of our office and mixed-use properties yields and/or discount rates considered, were 10 - 50bps wider compared to December 2019. Our industrial properties, as well as the overall sector in Romania, continue to perform well, with valuations remaining constant compared to year end 2019. 

STANDING PORTFOLIO REVIEW

Standing Portfolio Evolution

Our portfolio of standing properties further grew in the first half of 2020, with the addition of Globalworth Campus Tower 3 in Bucharest, and as at 30 June 2020, there were 37 standing investments in our portfolio comprising a total of 62 standing properties in Poland and Romania.

Our standing portfolio comprised 30 Class "A" office investments (48 properties in total) and three mixed-use investments (with seven properties in total) in central locations in Bucharest (Romania), Warsaw (Poland) and five of the largest office markets/cities of Poland (Krakow, Wroclaw, Katowice, Gdansk and Lodz). In addition, we own two light industrial parks with five facilities in Timisoara (Romania), a modern warehouse in Pitesti (Romania), and part of a residential complex in Bucharest (Romania).

Globalworth Combined Portfolio: Key Metrics

The total gross leasable area of Globalworth's combined standing commercial portfolio increased by 35.4k or 3.0% over the six months to 30 June 2020 to reach 1,215.5k sqm, with the overall combined standing portfolio GLA increasing 2.9% to 1,248.5k sqm. The increase in the size of our portfolio was attributed to the addition of Tower 3 of Globalworth Campus and the re-measurement of certain of our properties (1.8k sqm), marginally offset by the sale of certain residential and retail units in our Upground residential complex.

The appraised value of our combined standing portfolio as at 30 June 2020 was €2.8bn. The inherent increase in total value from the addition of a new property to our combined standing portfolio, was offset by the revaluations of properties held throughout the period (like-for-like), mainly as a result of the increased uncertainty resulting from the Covid-19 pandemic. Value of like-for-like properties was 2.8% lower at the end of the first half of 2020 compared to 31 December 2019.

We consider our portfolio to be modern with 42 of our standing properties, accounting for 69.3% of our GLA and 71.9% of our standing combined portfolio value, having been delivered or significantly refurbished in or after 2014.

Standing Properties Operation, Renovation and Upgrade Programme

Offering best-in-class real estate space to our business partners is a key component of our strategy at Globalworth.

We continued to implement this strategy in the first half of 2020, focusing on a more hands-on approach to the management and operation of our properties. Internalising the property management of our portfolio is a prime area of focus for the Group, and we are pleased to have been able to increase the number or properties we manage in-house in 2020. Overall, we internally manage almost all of our office properties in Romania and c.84.2% of our properties in Poland, accounting for 83.6% of the total standing commercial portfolio by value (87.6% of office and mixed-use standing properties) as at 30 June 2020, and we actively continue to increase this.

During this period we performed a detailed review of how we conduct our business, resulting in the termination and/or suspension or negotiation of our supplier contracts, achieving significant savings, the majority of which will benefit our tenants in the future.

With the largest part of leases being triple net (i.e. the tenant is responsible for all the expenses of the property including real estate taxes, building insurance, and ordinary maintenance), the majority of the savings achieved will be passed on to the tenants, with the typical approach used was "capping" the service charge costs paid by the tenants in 2020, with the final reconciliation to take place early next year, thereby assisting our tenants during this very difficult period.

Our renovation and upgrade programme was well underway in the first quarter, however due to the Covid-19 pandemic we have significantly revised it, reducing our capital expenditure to the absolute essential from a health, safety and maintenance perspective.

In the first half of 2020, €4.2 million were invested in our standing portfolio, with additional works of over €12.0 million planned for this year have been deferred to the future. Tenant fitout works, were not affected during this period which continued as normal, but at renegotiated prices with suppliers and/or contractors.

One repositioning / redevelopment project that has been planned, and for which we have taken the decision to undertake starting in Q3 has been Renoma. Works involving this landmark mixed-use property in Wroclaw, will involve the conversion of certain retail / commercial spaces to office, as well as the re-allocation of certain commercial uses, which are expected to be completed by the end of 2022.

SUSTAINABLE DEVELOPMENT UPDATE / OTHER INITIATIVES

Sustainable Development Update

Sustainability has always been an important focus for Globalworth. Consistent with our commitment to energy efficient properties, we added 6 environmentally certified properties to our portfolio in the first half of 2020.

We are very pleased that one of our landmark assets, Tower Center International in Bucharest, was awarded BREEAM Very Good certification in the first half of 2020, and one more industrial facility in Timisoara received BREEAM Very Good certification. In addition, all office buildings from our Hala Koszyki mixed-use property in Warsaw are now BREEAM Very Good certified.

Overall, as at 30 June 2020 our combined standing portfolio comprised 48 green certified properties, accounting for 83.8% of our standing commercial portfolio. BREEAM accredited properties account for 77.9% of our green certified portfolio by value (BREEAM Excellent: 45.1%, BREEAM Very Good: 31.0% and BREEAM Outstanding: 1.8%), with the remainder of properties being of other certification (LEED Gold or Platinum, Edge). In addition, we are aiming for 100% of our portfolio to be green accredited and are currently in the process of certifying or re-certifying 13 other properties in our portfolio principally targeting BREEAM certifications. In addition, in August Tower 3 in the Globalworth Campus project in Bucharest received BREEAM Excellent accreditation, receiving the highest Excellent rating among our properties.

In our efforts to demonstrate further our commitment in sustainable development and access to Green Financing (additional information under the "Capital Markets & Shareholder Structure Update" section of the report), we issued our Green Bond Framework ("GBF") for which received a second party confirmation by Sustainalytics, one of the leading providers for external reviews in the Green Bond Market.

Sustainalytics, following their review, confirmed that our Green Bond Framework aligns with the four core components - Use of Proceeds, Project Evaluation / Selection, Management of Proceeds and Reporting - of the Green Bond Principles 2018. Additionally, Sustainalytics considered that the projects to be funded by green bond proceeds will provide a positive environmental impact by improving the energy efficiency of the building portfolio owned and operated by Globalworth. Finally, Sustainalytics considered that Globalworth's Sustainable Development Strategy demonstrates a strong commitment to sustainability, with a focus on three key environmental principles:

· integrate efficient and sustainable operating policies, procedures and actions;

· be accountable as a team of professionals for environmental stewardship; and

· work with its shareholders and other stakeholders to make environmentally responsible decisions.

Globalworth Foundation Initiatives

In the first half of 2020, the Globalworth Foundation focused its efforts primarily in the fight against the Covid-19 pandemic in Romania and Poland.

The Foundation, together with the entire Globalworth team, have been working to ensure the safety and wellbeing of our people, communities, and wider stakeholder universe.

Since the outbreak of the pandemic, the Foundation has donated over €650k to help fund medical supplies, as well as logistical, human and material support to hospitals, the red cross and related staff.

PORTFOLIO SNAPSHOT

Our real estate investments are in Poland and Romania, the two largest markets in the CEE. As at 30 June 2020, our portfolio was spread across 10 cities, with Poland accounting for 53.3% by value and Romania 46.7%.

CAPITAL MARKETS UPDATE

Equity Capital Market and Shareholder Structure Update

In the first quarter of 2020 we welcomed CPI Property Group ("CPIPG") who became the largest shareholder in Globalworth, holding 29.4% of the share capital. CPIPG acquired its stake through a series of share purchases, including the stake of Globalworth's Founder and CEO, Mr Papalekas.

CPIPG is one of the largest owners of real estate in the CEE with a portfolio of €9.1 billion as at December 31st, 2019.

Globalworth's share price performed well in the first part of 2020, trading at par or above its EPRA NAV level at a weighted average trading price of €9.71 per share between 1 January and 4 March, and reaching its year high at the end of January at €10.1 / share.

Since then, our share price has been impacted by the Covid-19 pandemic, gradually decreasing over time, and underperforming both FTSE EPRA Developed Europe and the FTSE EPRA Global indices since mid-April, mainly due to very limited trading volumes. On the last trading day of June, Globalworth's share price stood at €6.18, representing a 34% decrease since the beginning of the year.

Bonds Update

Globalworth in the first half of 2020 had two Eurobonds outstanding for a total of €1.1 billion. The two Eurobonds issued in June 2017 and March 2018 were of equal value, expiring in 2022 and 2025 respectively.

In our continuous effort to effectively manage the liabilities of the Group and further improve our debt maturity profile, at the end of July we initiated a parallel process resulting in:

· The issue of our inaugural green bond as part of our Euro Medium Term Notes Programme (EMTN), raising €400.0 million, with a 2.95% coupon and maturing in July 2026 from the debt capital markets

· The purchase of c.41% (€226.9 million) of GWI 17/22 outstanding Eurobond, at a premium of 2.0% over par. As part of the transaction any accrued and unpaid interest in respect purchased notes was also settled in cash. Following the transaction, c.€323.1 million of the GWI 17/22 Eurobond remain outstanding

Overall, we are very pleased with the outcome of our efforts, as our inaugural Green Bond was more than 2x oversubscribed by existing and new bond investors, further confirming of our strong performance, the quality of our portfolio and team, as well our overall approach to sustainable development and the creation of long term value for our stakeholders, in the period of increased uncertainty due to the Covid-19 pandemic.

Following the issue of the GWI 20/26 Green Bond, Globalworth has in total €1.3 billion in outstanding bonds, of which €950 million are part of its €1.5 billion EMTN Programme (additional €550 million capacity).

Globalworth is rated from all three major agencies, with all S&P, Fitch and Moody's maintaining their investment credit rating following the 2020 review of the Group, which is testament to the nature and quality of our portfolio, the resilience of our cash flow, and the protective measures we have taken to protect the business and its assets amidst very challenging market conditions.

We maintained our "BBB -" rating and "Stable" outlook from S&P and Fitch, with Moody's maintaining our "Baa3" rating, but changing their outlook from "Stable" to "Negative" mainly due to their house view on the Romanian economy.

FINANCIAL REVIEW

1. Highlights

Globalworth maintained its operational profitability growth trend despite the global impact of Covid-19 in Q2-20 aided by the further expansion of its platform during 2019.

1. See Glossary (pages 75-77) for definitions.

2. See note 12 of the unaudited condensed consolidated financial statements for calculation.

3. See note 19 of the unaudited condensed consolidated financial statements for calculation.

4. See page 21 for further details.

5. See note 21 of the unaudited condensed consolidated financial statements for calculation.

2. Revenues and Profitability

Consolidated revenues of €114.0 million in H1-20 up by 9.9% on H1-19 (€103.8 million), primarily as a result of a 13.1% increase in rental income to €81.2 million (H1-19: €71.8 million). The main drivers for this increase were:

· additional rental income of €7.3 million recognised in H1-20 versus H1-19 following the acquisition of standing properties in Poland after 1 January 2019, representing a 10.2% increase in rental income;

· a 4.0% increase in rental income contributed from RBC (50% JV partner's share acquired in Dec. 19), and 1.4% increase in rental income contributed from Globalworth Campus Tower 3 and TIP2-B2; and

· an offsetting impact resulting from a 2.5% reduction in underlying rental income derived from standing properties owned throughout both periods (Romania -0.2%, Poland -2.3%).

As a result of acquisition activity in Poland during 2019, Group revenues in H1-20 were split 56% Poland / 44% Romania, compared to 55% Poland / 45% Romania in H1-19.

Net Operating Income rose to €79.6 million, a 17.1% increase over H1-19 (€68.0 million) and in line with the increase in Group revenue. The growth in NOI reflected an increase of €6.1 million in Poland and an additional €5.5 million in Romania. NOI was split 57% Poland / 43% Romania, compared to 58% Poland / 42% Romania in H1-19.

Adjusted normalised EBITDA1 amounted to €71.5 million, which includes the share of minority interests, an increase of 16.1% over H1-19 (€61.6 million, which includes the share of minority interests eliminated in Q4-19), resulting from the net effect of the increase of NOI (by €11.6 million) and the increase in administrative expenses (by €1.8 million).

1Earnings before finance cost, tax, depreciation, amortisation of other non-current assets and purchase gain on acquisition of subsidiaries (H1-20: 24.8 million negative; H1-19: 104.7 million positive), (plus)/less: net fair value gains/(loss) on investment property and financial instruments (H1-20: €91.8 million loss; H1-19: €50.6 million gain), less: other income (H1-20: €0.3 million; H1-19: €0.6 million); plus: acquisition costs (H1-20: €2.3 million; H1-19: €0.0 million); plus: non-recurring administration and other expense items (H1-20: €2.5 million; H1-19: €8.1 million). The adjustments listed include the share of minority interests.

Net finance costs amounted to €22.3 million, a 6.6% increase over H1-19 (€20.9 million) reflecting the additional interest on bank loan financing and RCF facility drawn down during the period and lower interest income.

Joint ventures, including two light industrial properties under development in Romania, contributed €1.3m to the Group's result, a significant decrease on H1-19 (€4.4 million) resulting from the acquisition of the 50% joint venture partner for the RBC property and the recording of 100% of the revenues from this property (€2.9 million) under the Group's revenues. Our share of revaluation gains was €1.7 million while our share of deferred tax expense related to the valuation gains recorded by the joint ventures amounted to €0.3 million.

Earnings before tax turned to a loss of €46.1 million in H1-20 (H1-19: €88.0 million profit), mainly as a result of the €92.0 million revaluation loss recorded versus the valuation gain recorded in H1-19 (€49.0 million). EPRA earnings, however, amounted to €46.4 million, an increase of 24.4% over H1-19 (€37.3 million) as a result of the improvement in operational performance, as indicated by the increase in NOI and adjusted normalised EBITDA. EPRA Earnings per share for H1-20 was influenced by the higher weighted average number of shares in H1-20 (221.5 million) as compared to H1-19 (158.9 million), which resulted from the equity raise in October 2019, hence the reduction from 23 cents in H1-19 to 21 cents in H1-20.

Reconciliation of IFRS Earnings to EPRA Earnings

Following the earnings before tax, which turned to a loss in H1-20 due to the valuation loss recorded in the period, IFRS earnings per share was 22 cents negative compared to 44 cents positive in H1-19. The IFRS earnings were €48.6 million negative compared to €69.9 million positive in H1-19. The lower income tax expense by €9.7 million compared to H1-19 helped to reduce the magnitude of the negative result. Excluding the effects of investment property valuations, the net result for H1-20 was €43.4 million, 62% higher than for H1-19 (€26.8 million).

3. Balance Sheet

The combined portfolio open market value decreased marginally by €32 million, a decrease of 1.1% compared to 31 December 2019, to €3,013 million (31 Dec 19: €3,045 million). This comprises €2,966 million of investment property held on our balance sheet as at 30 June 2020, and a further €47 million representing the 100% value of joint venture properties comprising two light industrial properties under development in Romania (Chitila Industrial Hub and Constanta Business Park).

The balance sheet value of our investment property (freehold) portfolio at 30 June 2020 amounted to €2,967 million (31 December 2019: €3,017 million). The reduction is due to the fair value losses on freehold properties of €91.1 million that were split 69% Poland and 31% Romania, which capital expenditure on development projects and standing assets helped to reduce the effect of the valuation losses on the overall portfolio value.

Total assets as at 30 June 2020 were €3,691 million and higher by 6% compared to 31 December 2019 (€3,482 million), primarily due to the increase in cash and cash equivalents following the drawdown of bank loan facilities and the RCF in the period.

EPRA NAV Bridge from 31 December 2019 to 30 June 2020 (€ million)

EPRA NAV decreased to €1,957.5 million as at 30 June 2020, a decrease of 5.4% compared to 31 December 2019 (€2,069.4 million). As a result EPRA NAV per share also decreased to €8.80 per share (31 December 2019: €9.30 per share).

The main factors driving the change in EPRA NAV during H1-20 were:

· The negative net results for the period, being the net effect of the positive EPRA earnings of €46.4 million and the €92.0 million fair value loss on properties in Romania (€28.0 million) and Poland (€64.0 million); and

· The dividends of €66.4 million paid in February 2020 in respect of the six months ended 31 December 2019.

Evolution of EPRA NAV/share and OMV by semester

4. Results and dividends

The results for the period are set out in the consolidated statement of comprehensive income on page 30.

In January 2020, the Company made an interim dividend distribution of 30 cents per share in respect of the six-month period ended 31 December 2019. Post the period end, in August 2020 the Company declared its first interim dividend in respect of the year ending 31 December 2020 of 19 cents per share, being 90% of its EPRA Earnings for the period, in line with the dividend policy stipulated in the articles of incorporation of the Company.

5. Financing & Liquidity Review

Financing Activity in 2020 to date

In the context of the Covid-19 pandemic, the Group's main focus during 2020 to date was to preserve liquidity and to protect its revenues in order to mitigate the economic impact over its businesses.

The Group had in 2020 to date an active year in the capital markets, conducting various debt financing activities, that helped preserve the significant liquidity position and minimise the negative impact of the Covid-19 pandemic over the operations.

In March 2020, the Group fully drew the €200 million unsecured Revolving Credit Facility ("RCF"). The RCF facility has an additional €50 million uncommitted accordion option. In July 2020 the Group exercised this option, partly, and successfully achieved an increase of RCF committed facility limit by €15 million. This amount is available to use under the same terms and conditions. The remaining uncommitted accordion option of €35 million remains available until April 2021.

Post the reporting period, in July 2020 the Group successfully completed under its €1.5 billion Euro Medium Term Notes Programme the issuance of €400 million new Notes due in 2026 at a very competitive coupon rate. Out of this amount, approximately €226.9 million was tendered from the €550 million Notes due in 2022 and the Group collected net proceeds of €158.7 million. Following the successful new Bond issuance in July, the outstanding balance on the RCF was repaid but the full €215 million facility remains available for utilisation until March 2024.

The most significant events during the period ended 30 June 2020 as regards to the secured bank loans are outlined below:

In Romania:

- In June 2020, the €15 million outstanding balance on the bank loan secured on the UniCredit HQ property was extended until May 2025; and

- In April 2020, the contracted amount of the 10-year bank loan secured on Globalworth Tower was increased to €85 million under the same terms and conditions; the increase of €20 million was drawn down in June 2020.

In Poland:

- In January 2020, the €65 million 10-year bank loan secured on Warsaw Trade Tower was drawn down; and

- In February 2020, the €62 million 7-year bank loan secured on Retro House and Silesia Star properties was drawn down.

Dividends

In February 2020 the Company paid an interim dividend of 30 cents per share (c.€66.4 million) in respect of the six-month period ended 31 December 2019, while in August 2020 it announced the payment of an interim dividend of 19 cents per share (c.€42 million) in respect of the six-month period ended 30 June 2020.

Debt Summary

The total debt portfolio of the Group at 30 June 2020 of €1.65 billion (31 December 2019: €1.32 billion) comprises medium to long-term debt, denominated entirely in Euro and no debt maturity until June 2022.

The Group has extended in 2020 its strategy over the last few years of reducing the applicable weighted average interest rate. At 30 June 2020, the weighted average interest rate decreased from 2.83% at 31 December 2019 to 2.52%, while the average period to maturity of 4.2 years remained largely unchanged (4.3 years at 31 December 2019), as presented in the chart below:

Weighted average interest rate versus debt duration to maturity

It is worth mentioning that the recently issued Notes due in 2026 and the partial settlement of the Notes due in 2022 led to an improvement in weighted average period to maturity (to 4.8 years as at 31 August 2020), while weighted average interest rate remained largely unchanged.

Servicing of Debt During H1-20

In the first half of 2020, we repaid in total €2.1 million of loan capital and €35.5 million of accrued interest on the Group's drawn debt facilities, including €32.3 million in relation to the full annual coupon for both Eurobonds of the Company.

Liquidity & Loan to value ratio

Although for the time being the Group suspended new investments, its aim is to maintain at all times sufficient liquidity to have the flexibility to react quickly at the moment when attractive new investment opportunities may arise.

As at 30 June 2020, the Group had cash and cash equivalents of €567.1 million (31 December 2019: €291.7 million) available to use.

The Group's loan to value ratio at 30 June 2020 was 36.9%, compared to 34.7% at 31 December 2019. This is consistent with the Group's strategy to manage its long-term target LTV of below 40%, whilst pursuing its strong growth profile.

Debt Structure as at 30 June 2020

Debt Structure - Secured vs. Unsecured Debt

The majority of the Group's debt at 30 June 2020 is unsecured: 78.0% (31 December 2019: 83.3%), with the remainder secured with real estate mortgages, pledges on shares, receivables and loan subordination agreements in favour of the financing parties.

The slight decrease in the percentage of the unsecured debt compared to 31 December 2019 is connected with the secured bank loans entered by the Group in Romania and Poland due the advantageous cost conditions obtained, hence the decrease in the weighted average interest rate.

Loans and borrowings maturity and short-term / long-term debt structure mix

The Group has at 30 June 2020 credit facilities and Eurobonds with different maturities, all on medium and long-term (similar to 31 December 2019), as presented in the chart below:

Maturity by year of the principal balance outstanding at 30 June 2020 (€ million)

Debt Denomination Currency and Interest Rate Risk

Our loan facilities are entirely Euro denominated and bear interest based either at one month or three months Euribor plus a margin (20.7% of the outstanding balance), or at a fixed interest rate (79.3% of the outstanding balance). The slight increase of the floating interest rate balances compared to 31 December 2019 (9.5% of the outstanding balance) is connected with the drawdown of the RCF at a competitive interest margin.

The high degree of fixed interest rate debt ensures a natural hedging to the Euro, the currency in which the most significant part of our liquid assets (cash and cash equivalents and rental receivables) is originally denominated and the currency for the fair market value of our investment property.

Debt Covenants

The Group's financial indebtedness is arranged with standard terms and financial covenants, the most notable as at 30 June 2020 being the following:

Unsecured Eurobonds and Revolving Credit Facility

· the Consolidated Coverage Ratio, with minimum value of 200%;

· the Consolidated Leverage Ratio, with maximum value of 60%;

· the Consolidated Secured Leverage Ratio with a maximum value of 30%; and

· the Total Unencumbered Assets Ratio, with minimum value of 125%.

Secured Bank Loans

· the debt service cover ratio ('DSCR') / interest cover ratio ('ICR'), with values ranging from 120% to 350% (be it either historic or projected); and

· the LTV ratio, with contractual values ranging from 60% to 83%.

There have been no breaches of the aforementioned covenants occurring during the period ended 30 June 2020.

Further details on the Group's debt financing facilities are provided in note 13 of the unaudited condensed consolidated financial statements.

Cash flows

· Cash flows from operating activities increased to €24.7 million, compared to €19.6 million in H1-19, reflecting the growth of the Group's operating activities following the acquisition of three additional standing office buildings in Poland, the completion of two properties under development in Romania, and the acquisition of the remaining 50% share in the RBC property in Romania since 30 June 2019.

· Proceeds of €146.6 million from the drawdown of three secured bank loan facilities and €200 million from the drawdown of the unsecured RCF during the period.

· Proceeds from the successful disposal of a ROFO property in Poland (Browary) of €16.2 million and apartments in Romania of €1.5 million.

· Cash used on capital expenditure on advancing development projects (three in Romania, two of which are developed by joint ventures, and one in Poland) of €31.3 million and on standing assets of €13.8 million.

· Dividends paid in H1-20 of €66.4 million in respect of the six-month period ended 31 December 2019, compared to €35.8 million in H1-19 in respect of the six-month period ended 31 December 2018.

· Cash and cash equivalents as at 30 June 2020 reached €567.1 million, compared to €291.7 million at 31 December 2019.

6. Principal Risks and Uncertainties

The key risks which may have a material impact on the Group's performance, together with the corresponding mitigating actions, are presented on pages 142 to 147 of the Annual Report for the year ended 31 December 2019, which is available at www.globalworth.com.

These risks comprise the following:

· Exposure to the economic environment in Romania and Poland and changes in the political or regulatory framework in Romania, Poland or the European Union;

· Inability to execute planned acquisition of properties and lack of available financing;

· Sustainable portfolio risk;

· Counterparty credit risk;

· Risk of changes in interest rates and exchange rates;

· Risk of negative changes in the valuation of the portfolio;

· Inability to lease space and renew expiring leases;

· Inability to complete projects under development on time;

· Risk of breach of loan covenants;

· Risk of change in fiscal and tax regulations; and

· Compliance with fire, structural or other health and safety regulations.

There has been no significant change in these risks during the six months period ended 30 June 2020, and these risks are expected to continue to remain relevant during the second half of 2020.

7. Going Concern

The Directors have considered the Company's ability to continue to operate as a going concern based on the Management's cash flow projections for the 15 months subsequent to the date of approval of the unaudited interim condensed consolidated financial statements. The Directors believe that the Company would have sufficient cash resources to meet its obligations as they fall due and continue to adopt the going concern basis in preparing the unaudited interim condensed consolidated financial statements as of and for the six months ended 30 June 2020.

GLOBALWORTH REAL ESTATE INVESTMENTS LIMITED

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2020

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2020

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2020

The financial statements were approved by the Board of Directors on 15 September 2020 and were signed on its behalf

by:

John Whittle

Director

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2020

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2020

1 Net of the €1.0 million restricted cash reserve (31 December 2019: €1.0 million), see note 16.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SECTION I: BASIS OF PREPARATION

1 Basis of Preparation

Corporate Information

Globalworth Real Estate Investments Limited ('the Company' or 'Globalworth') is a company with liability limited by shares and incorporated in Guernsey on 14 February 2013, with registered number 56250. The registered office of the Company is at Anson Court, La Route des Camps, St Martin, Guernsey GY4 6AD. Globalworth, being a real estate Company, has had its ordinary shares admitted to trading on AIM (Alternative Investment Market of the London Stock Exchange) under the ticker "GWI" since 2013. The Company's Eurobonds have been admitted to trading on the official List of the Irish Stock Exchange and the Bucharest Stock Exchange since 2017. The Group's principal activities and nature of its operations are set out in the strategic report section of the 2019 Annual Report.

Directors

The Directors of the Company are:

• Dimitris Raptis, Executive, Co-Chief Executive Officer and Chief Investment Officer, Member of the Investment Committee

• Geoff Miller, Independent Non-executive, Chair of the Board, Investment and Nomination Committees, Member of the Remuneration Committee

• John Whittle, Independent Non-executive, Chair of the Audit Committee, Member of the Remuneration Committee

• Andreea Petreanu, Independent Non-executive Director, Chair of the Risk Committee, Member of the Audit and Nomination Committees

• Richard van Vliet, Independent Non-executive, Member of the Audit, Risk and Nomination Committees

• Norbert Sasse, Non-executive, Member of Investment Committee

• Martin Bartyzal, Non-executive, Chair of the Remuneration Committee, Member of the Risk Committee

• David Maimon, Non-executive, Member of the Risk and Investment Committees

On 16 March 2020, Ioannis Papalekas stepped down as Executive Director from the Board of Directors of the Company but remained CEO of the Company. Dimitris Raptis, the current Chief Investment Officer and Deputy CEO, has been appointed co-CEO alongside Ioannis Papalekas whilst retaining his role as Chief Investment Officer. 

On 30 March 2020, Eli Alroy, a Non-executive Director, stepped down from the Board of Directors of the Company.

On 23 April 2020, Bruce Buck, George Muchanya and Peter Fechter, Non-executive Directors, stepped down from the Board of Directors of Company and Martin Bartyzal was appointed as new Non-Executive Director of the Board.

On 28 May 2020, David Maimon was appointed to the Board as a Non-Executive Director.

Basis of Preparation and Compliance

The condensed consolidated financial statements of the Group (or 'financial statements' or 'consolidated financial statements') as of and for the six-month period ended 30 June 2020 have been prepared in accordance with International Accounting Standard (IAS) 34 "Interim Financial Reporting". These consolidated financial statements are prepared in Euro ("EUR" or "€"), rounded to the nearest thousand, being the functional currency and presentation currency of the Company. These financial statements have been prepared on a historical cost basis, except for investment property, financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income which are measured at fair value.

These financial statements are prepared on a going concern basis. The Directors believe that it is appropriate to adopt the going concern basis in preparing the financial statements. The Directors based their assessment on the Group's detailed cash flow projections for the period up to 31 December 2021. These projections take into account the current very significant available cash resources of the Group of c.€530 million, the latest contracted rental income, anticipated additional rental income from new possible lease agreements during projection period, modification of existing lease contracts due to COVID-19 concessions in conjunction in most cases with lease period extensions, as well as contracted debt financing, CAPEX, and other commitments. The Directors have also considered potential stress-test scenarios that could exert a downward pressure on projected cash flows and consequently affect debt covenant calculations as a result of factors outside the Group's control, resulting from the current Covid-19 pandemic and its potential economic effects in the countries the Group operates. The projections and related sensitivity analysis carried out show that, in the period up to 31 December 2021, the Company anticipates to have sufficient liquid resources to continue to fund ongoing operations and asset development without the need to raise any additional debt or equity financing, or the need to reschedule existing debt facilities or other commitments. Further details on the Company's response to the Covid-19 pandemic can be found in other sections of the Interim Report.

Accounting policies

These consolidated financial statements apply the same accounting policies, presentation and methods of calculation as those followed in the preparation of the Group's consolidated financial statements for the year ended 31 December 2019, which were prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU') and the Companies (Guernsey) Law 2008, as amended. The consolidated financial statements included in this Interim Report should be read in conjunction with the consolidated financial statements for the year ended 31 December 2019. On 1 January 2020, the Group adopted certain new accounting policies where necessary to comply with amendments to IFRS, refer to note 26 for more details.

Basis of Consolidation

These consolidated financial statements comprise the financial statements of the Company and its subsidiaries ('the Group') as of and for the period ended 30 June. Subsidiaries are fully consolidated, refer to note 23, from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the period from the date of obtaining control to 30 June, using consistent accounting policies. All intra-group balances, transactions and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Non-controlling interest represents the portion of profit or loss and net assets not held by the Group and are presented separately in the income statement and within equity in the consolidated statement of financial position, separately from net assets and profit and loss attributable to equity holders of the Company.

Foreign Currency transactions and balances

Foreign currency transactions during the period are initially recorded in the functional currency at the exchange rates approximating those ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies other than functional currency of the Company and its subsidiaries are retranslated at the rates of exchange prevailing on the statement of financial position date. Gains and losses on translation are taken to profit and loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

2 Critical Accounting Judgements, Estimates and Assumptions

The preparation of consolidated financial statements in conformity with IFRS requires management to make certain judgements, estimates and assumptions that affect reported amounts of revenue, expenses, assets and liabilities, and the accompanying disclosures and the disclosures of contingent liabilities.

Selection of Functional Currency

The Company and its subsidiaries used their judgment, based on the criteria outlined in IAS 21 "The Effects of Changes in Foreign Exchanges Rates", and determined that the functional currency of all the entities is the EUR. As a consequence, the Company uses EURO (€) as the functional currency, rather than the local currency Romanian Lei (RON) for the subsidiaries incorporated in Romania, Zloty (PLN) for the subsidiaries in Poland and Pounds Sterling (GBP) for the Company and the subsidiary incorporated in Guernsey.

Judgements were made in assessing the impact of Covid-19 on the financial statements. The potential areas which may have been potentially affected by Covid-19 are identified throughout the notes to the financial statements.

Further additional critical accounting judgements, estimates and assumptions are disclosed in the following notes to the financial statements.

Investment Property, see note 3 and Fair value measurement and related estimates and judgements, see note 4;

Commitments (operating leases commitments - Group as lessor), see note 6;

Taxation, see note 11;

Financial assets at fair value through profit or loss, see note 14;

Share-based payment reserve, see note 20;

Investment in joint ventures, see note 22; and

Investment in Subsidiaries, see note 23.

SECTION II: INVESTMENT PROPERTY

3 Investment Property