1
CONSOLIDATED
ANNUAL
REPORT
OF GLOBE TRADE CENTRE S.A.
CAPITAL
GROUP
FOR
THE FINANCIAL YEAR
ENDED 31 DECEMBER
2022
Place and date of publication:
Warsaw, 25 April 2023
2
LIST OF CONTENTS:
01. Letter of the management board
02. Management board’s report on the activities of Globe Trade Centre S.A.
Capital Group in the financial year ended 31 December 2022 including
Statement on the application of the principles of corporate governance for
the financial year ended 31 December 2022
03. Management board’s representations
04. Management board’s information on the appointment of the audit company
05. Supervisory board’s statement
06. Assessment of the supervisory board
07. Consolidated financial statements for the year ended 31 December 2022
08. Independent auditor’s report on the audit of the annual consolidated financial
statements
3
Dear Stakeholders,
The year 2022 has been challenging due to economic conditions, but we have managed to
adapt to the changing reality. We reshuffled our portfolio to higher rated countries by selling
14 buildings (mostly in Belgrade). We also completed 3 office buildings: Pillar ( Hungary),
GTC X (Serbia) and Sofia Tower 2 (Bulgaria). Our financial
performance is stable. What
pleases us immensely is that the shopping centres have successfully regained their pre-
pandemic turnovers.
We have expanded our strategy pursuing new investments in certain new sectors. Potential
new sectors identified to be considered for investment as part of the new strategy include:
• investment in innovation and technology parks
• investment in renewable energy facilities
• investment in development of PRS assets (private rented sector property -
residential).
The new investments should:
• help GTC diversify its portfolio in new and fast-growing sectors which may be either
based on direct real estate investments or operating in related investment platforms
• achieve expected returns from such investments at least the same or higher than the
returns on currently held assets in the portfolio;
• involve sectors with more sustainable growth compared to traditional real estate;
• be made in segments of the market which should be resilient to present turbulent
market conditions.
The Group made its first transaction under the new strategy – a joint venture investment
worth EUR 115 million into a technology park project in Ireland. With this decision, GTC
wanted to, among others, diversify its portfolio in new and fast-growing yet more sustainable
sectors compared to traditional real estate.
We prioritize ESG principles. 87
% of buildings within the Group's portfolio have been
awarded green certificates or are under recertification process. All our properties in Poland,
Romania, Hungary and Croatia, as well as the Advance Business Center office complex in
Bulgaria use green energy. In addition, we cooperated with WWF Poland to raise awareness
among our tenants, employees, business representa
tives and the public about the
importance of environmental protection in today's world. Our educational campaigns have
reached more than a million people,
who helped purchase equipment that will play an
important role in protecting endangered tigers in Mal
aysia and the sparse brown bear
population in Poland.
During 2022, a number of talented professionals at GTC
have taken on management
positions, while the Group
has undergone a transformation to strengthen the role of the
regional leaders who best understand local markets. This allows us to respond faster and
better to emerge opportunities and challenges on the individual markets.
 
4
PORTFOLIO DEVELOPMENT
We put a lot of effort into optimizing our portfolio, focusing on sustainable investments
compliant with the ESG principles in key CEE markets, while disposing of some of our assets.
We invested over EUR 310 million in income producing assets in Hungary. The funds from
sale of the landmark sale of a standing office portfolio in Belgrade were shifted towards higher
rated countries At the beginning of 2022 the sale of office properties in Belgrade ( Green
Heart, FortyOne, Belgrade Business Center, 19 Avenue and GTC House with 122,175 sq m
GLA), has been finalized. The transaction, valued at EUR 267.6 million; above the book value,
became one of the biggest transactions of its kind in the CEE region, the funds were shifted
towards higher rated countries as we invested over EUR 310 million in income producing
assets in Hungary.
We also sold Cascade in Bucharest (making profit of close to 20%), Matrix A and B in Zagreb
(return on cost exceeding 22% and 7% above book value) and at the beginning of 2023 Forest
Offices in Debrecen.
We also focused on our development activity. In 2022, after completed the Pillar office building
in Budapest (29,100 sq m), which was fully preleased we commenced the construction of a
brand new Centre Point 3 (36,000 sq m GLA) office building in Budapest. Moreover after the
success of Matrix A & B we started the construction of Matrix C, an A-class office building in
Zagreb (10,500 sq m GLA). We have also purchased land for our future developments.
TENANT MANAGEMENT
For many years we have been building a tenant-friendly and tenant-oriented real estate
environment in Central and Eastern Europe. We equip our office and retail spaces with modern
solutions that meet strict industry requirements. This approach, combined with efficient
management and the new projects in our portfolio, has allowed us to maintain a high
occupancy rate of 88% with signed leases for 163,600 sq m.
We are seeing more leasing activity than in the past year, and our properties are gaining
interest from potential tenants due to the high quality, modernity or attractive location of the
buildings in our portfolio. Our office leasing teams are constantly working with tenants,
monitoring their needs and changes in working models. Tenants appreciate our activities in
the corporate social responsibility and sustainable construction areas. This confidence is
confirmed by a number of contracts involving lease extensions and expansions, but also by
the high share of new clients in the overall number of contracts concluded. We signed office
leases for 110,600 sq m.
We are seeing a positive trend in all shopping centers. The number of visitors is increasing,
and turnover has exceeded pre-Covid levels. Retailers continue to expand and prolong their
leases. The shopping centers remaining in our portfolio, despite the difficult recent economic
conditions, showed excellent rental performance, generating strong revenues. Occupancy
rates have reached 96%– our success is due to a combination of factors, including strategic
location selection, a high-quality tenant mix and a proactive management approach. As a
result, our shopping centers have become popular destinations for customers and achieved
strong sales and revenue growth.
5
We remain focused on delivering value for our investors and are confident in our ability to
continue generating strong rental income in the future.
SUSTAINABILITY FOR THE WIN
Sustainability is our priority. We actively strive to develop environmentally neutral buildings,
featuring the latest solutions that meet the strictest BREEAM or LEED criteria. The major
accomplishments in 2022 included LEED Platinum certification for Nothus office building in
Aeropark Business Centre in Warsaw and LEED Gold certification for Pillar office building in
Budapest. In total, we have renewed or received green certificates for 19 buildings in 2022.
We are proud to say that currently 87% of buildings within the Group's portfolio are
LEED/BREEAM certified or under recertification process, which confirms the use of green
solutions in the properties. 13% is currently under certification process, as we are determined
to obtain full certification of our portfolio.
Moreover, we have been improving our operations to meet the highest ESG indicators. All our
properties in Poland, Romania, Hungary and Croatia, as well as the Advance Business Center
I and II office buildings in Bulgaria use green energy. Galeria Północna in Warsaw has taken
an important step towards sustainability – in 2022, it has begun to produce its own energy after
224 photovoltaic panels had been activated on the roof of the facility.
Local offices have also engaged in pro-environmental activities. We are proud of our
cooperation with WWF Poland aimed to raise awareness among the public and business
representatives about the importance of environmental protection in today's world through
educational campaigns.
All these and other activities have been summarized in our second ESG report.
FINANCIAL RESULTS
We have a very solid, well performing property portfolio, with retail assets outperforming the
market. At the end of December 2022, our total revenues reached EUR 167 million. The Group
recognized decrease in rental revenues following the sale of Serbian office portfolio in the first
quarter of 2022 and Cascade office building in the third quarter of 2022 and due to a decline
in average occupancy rate of the office portfolio in Poland and Romania. The decrease was
partially compensated by an increase in rental revenues following acquisition of income
generating properties and the completion of Pillar and an increase in rental revenues from the
retail portfolio as a result of the end of the Covid-19 related discounts and measures taken to
help the retail tenants, as well as an increase in an average rental rate following the indexation
of its rental rates to the European CPI.
Rental gross margin reached EUR 119 million.
FFO I reached EUR 68 million (FFO per share at EUR 0.12). EPRA NTA amounted to EUR
1.273 million, EPRA NTA per share at EUR 2.22. Net LTV ratio amounted to 45.6% (LTV
adjusted for disposal of Forrest Offices Debrecen, concluded on 30 January 2023, is 44.5%).
We have a solid cash position of EUR 115 million, which is primarily due to the sale of Serbian
assets, one Romanian entity and 2 Croatian assets (net of cash in disposed entities) combined
with capital increase partially offset by an investment in Kildare Technology Campus purchase
of completed assets and land and expenditure on investment property. Available credit
facilities amount to EUR 94 million.
6
Our Group's success can be attributed to our commitment to delivering high-quality services
to our clients and our focus on innovation and continuous improvement. We have also been
able to effectively adapt to changing market conditions and leverage new opportunities for
growth.
CORPORATE GOVERNANCE
The year 2022 brought further significant changes to both the Management Board and regional
offices. Following Yovav Carmi's resignation from the President of Management Board, in his
place the Company's Supervisory Board appointed Zoltán Fekete, who since March has
headed all GTC's operations in Central and Eastern Europe.
Danny Bercovich has been promoted to the position of Regional Director of Retail and is now
heading the company's operations and development strategy in the retail segment. Ziv Gigi,
who previously served as Country Manager of Bulgaria and Romania, has been promoted to
the position of Executive Director SEE Region – his responsibilities include executing the
company's strategy and development plan, as well as overseeing all operational activities in
Bulgaria, Romania, Serbia and Croatia. In early November, Agnieszka Ciupak joined GTC as
Executive Director for Poland – she is responsible for all operations including leasing,
adaptation work, asset management, marketing and HR across the Group.
During the year, a number of talented professionals at GTC have taken on management
positions, and the Group has undergone a transformation to strengthen the role of our regional
leaders who best understand local markets. This will allow us to respond faster and better to
emerging opportunities and challenges on the individual markets.
AWARDS & RECOGNITIONS
The continued efforts to improve the environmental impact of our properties have been met
with numerous awards and recognitions. In 2022, EPRA Sustainability Best Practices
Recommendations has once again marked GTC’s ESG report with Silver Award for the
excellent reporting standards and comprehensive data provided.
Moreover, GTC has been recognized for its work at the 2022-2023 European Property Awards,
receiving awards in the Mixed Use Architecture and Mixed Use Development categories for
Sofia Tower II in Bulgaria.
The sale of the Belgrade office portfolio to Indotek Group has also been recognized and
honored with Investment Deal of the Year Award at the 4th annual CRE Awards.
Big thank you and congratulations to everyone behind this amazing success!
IN RELATIONSHIP WE TRUST
We would like to thank all our stakeholders and business partners for the trust and boundless
faith in the GTC Group’s performance. The year 2022 has yet again proved the strength
coming from our employees. Without their engagement, experience, and extensive sector
knowledge, we would not have succeeded.
7
GTC Group is resilient, diversified, open to new possibilities and fully committed to facing the
challenges and opportunities that 2023 holds for us. We look into the future with confidence
and hope, believing that we could enhance the deal flow, mitigate risk, and optimize
performance effectively through our regional platform. Thank you for being a part of our journey
– your trust in our mission and vision is what drives us towards new ambitious goals and
projects.
Our success, and our abil
ity to face future challenges, would not be possible without our
employees, tenants, banks and bondholders. Whatever 2023
holds, we look forward to
working together and believe in the future full of possibilities.
Sincerely,
Members of the management board
Globe Trade Centre S.A.
Zoltán Fekete
Chief Executive Officer
Ariel A. Ferstman
Chief Financial
Officer
János Gárdai
Chief Operating Officer
8
MANAGEMENT BOARD’S REPORT
ON THE ACTIVITIES OF GLOBE TRADE CENTRE S.A. CAPITAL GROUP
IN THE FINANCIAL YEAR ENDED 31 DECEMBER 2022
9
TABLE OF CONTENT
1. Introduction ......................................................................................................................11
2. Selected financial data .....................................................................................................16
3. Key risk factors .................................................................................................................17
4. Presentation of the Group.................................................................................................46
4.1 General information about the Group ..........................................................................46
4.2 Main events of 2022 ....................................................................................................47
4.3 Structure of the Group.................................................................................................53
4.4 Changes to the principal rules of the management of the Company and the Group ....54
4.5 The Group’s Strategy ..................................................................................................55
4.6 Business overview ......................................................................................................63
4.6.1 Overview of the investment portfolio .....................................................................65
4.6.1.1 Overview of income generating portfolio including real estate assets held
for sale .............................................................................................................66
4.6.1.1.1 Overview of the office portfolio ........................................................................67
4.6.1.1.1.1 Office portfolio in Hungary ...........................................................................68
4.6.1.1.1.2 Office portfolio in Poland ..............................................................................69
4.6.1.1.1.3 Office portfolio in Sofia .................................................................................70
4.6.1.1.1.4 Office portfolio in Bucharest .........................................................................71
4.6.1.1.1.5 Office portfolio in Belgrade ...........................................................................71
4.6.1.1.1.6 Office portfolio in Zagreb..............................................................................72
4.6.1.1.2 Overview of the retail portfolio ........................................................................73
4.6.1.1.2.1 Retail portfolio in Poland ..............................................................................73
4.6.1.1.2.2 Retail portfolio in Belgrade ...........................................................................74
4.6.1.1.2.3 Retail portfolio in Zagreb ..............................................................................74
4.6.1.1.2.4 Retail portfolio in Sofia .................................................................................75
4.6.1.1.2.5 Retail portfolio in Budapest ..........................................................................75
4.6.1.2 Overview of properties under construction .........................................................76
4.6.1.3 Overview of investment property landbank ........................................................76
4.6.1.4 Right of use .......................................................................................................77
4.6.2 Residential landbank ............................................................................................77
4.6.3 Non-current financial assets (related to investment property) ...............................77
4.7 Overview of the markets on which the Group operates ............................................79
4.7.1 Office market ........................................................................................................80
4.7.2 Retail market ........................................................................................................87
4.7.3 Investment market ................................................................................................92
4.8 Information on the Company’s policy on sponsorship, charity, and other similar
activities. .....................................................................................................................96
5. Operating and financial review .........................................................................................98
5.1 General factors affecting operating and financial results .............................................98
5.2 Specific factors affecting financial and operating results ........................................... 103
5.3 Presentation of differences between achieved financial results and published
forecasts .................................................................................................................. 104
5.4 Statement of financial position .................................................................................. 105
5.4.1 Key items of the statement of financial position .................................................. 105
5.4.2 Financial position as of 31 December 2022 compared to 31 December 2021 ..... 106
5.5 Consolidated income statement ................................................................................ 108
5.5.1 Key items of the consolidated income statement ................................................ 108
5.5.2 Comparison of financial results for the year ended 31 December 2022 with the result
for the corresponding period of 2021 .................................................................. 110
5.6 Consolidated cash flow statement ............................................................................. 116
5.6.1 Key items from consolidated cash flow statement............................................... 116
5.6.2 Cash flow analysis .............................................................................................. 117
                                                    
10
5.7 Future liquidity and capital resources ........................................................................ 118
6. Information on the use of proceeds from the issuance of shares and bonds ................... 120
7. Information on loans granted with a particular emphasis on related entities ................... 120
8. Information on granted and received guarantees with a particular emphasis on guarantees
granted to related entities ............................................................................................... 120
9. Off balance liabilities ....................................................................................................... 120
10. Major investments, local and foreign (securities, financial instruments, intangible assets,
real estate), including capital investments outside the Group and its financing
method ......................................................................................................................... 121
11. Information on risk management .................................................................................. 121
12. Remuneration policy and human resources management ............................................ 127
12.1 Remuneration policy ............................................................................................... 127
12.2 Incentive system ..................................................................................................... 129
12.2.1 Phantom Shares program control system ............................................................ 130
12.3 Agreements concluded between GTC and management board members............... 130
12.4 Evaluation of the remuneration policy for the realization of its objectives ................ 131
12.5 Remuneration of the Members of the management board and supervisory board ... 131
12.6 Number of employees ............................................................................................. 133
12.7 Training policy ......................................................................................................... 133
12.8 Information on any liabilities arising from pension and similar benefits for former
members of the management board and the supervisory board ..................................... 134
13. Shares in GTC held by members of the management board and the supervisory
board ............................................................................................................................ 134
14. Transactions with related parties concluded on terms other than market terms ............ 135
15. Information on signed and terminated loan agreements within a given year ................. 135
16. Information on contracts of which the Company is aware of (including those concluded
after the balance sheet date) which could result in a change in the shareholding structure
in the future .................................................................................................................. 136
17. Proceedings before a court or public authority involving Globe Trade Centre SA or its
subsidiaries the total value of the liabilities or claims is material ................................... 137
18. Material contracts signed during the year, including insurance contracts and co-operation
contracts ....................................................................................................................... 137
19. Agreements with an entity certified to execute an audit of the financial statements ...... 138
20. Statement on the application of the principles of corporate governance for the financial
year ended 31 December 2022 .................................................................................... 138
                                   
11
1. Introduction
The GTC Group is an experienced, established, and fully
integrated, real estate company operating in the CEE and
SEE region with a primary focus
on Poland and Budapest and
capital cities in the SEE region including Bucharest, Belgrade,
Zagreb and Sofia, wh
ere it directly manages, acquires and
develops primarily high
-quality office and retail real estate
assets in prime locations. The Company is listed on the
Warsaw Stock Exchange and inward listed on the
Johannesburg Stock Exchange. The Group operates a ful
ly-
integrated asset management platform and is represented by
local teams in each of its core markets.
GTC GROUP:
Poland,
Hungary,
Belgrade,
Bucharest,
Sofia
and Zagreb
As of 31 December 2022, the book value of the Group’s total property portfolio was €2,321,908.
The breakdown of the Group's property portfolio was as follows:
• 44 completed commercial buildings (including 1 office building held for sale), including
38 office buildings and 6 retail properties with a total combined commercial space of
approximately 762 thousand sq m of GLA, an occupancy rate at 88% and a book value
of €2,050,571 which accounts for 88% of the Group's total property portfolio;
• three office buildings under construction with a total GLA of approximately 61 thousand
sq m and a book value of €51,487, which accounts for 2% of the Group's total property
portfolio;
• investment landbank intended for future development (including 1 land plot in Poland
held for sale in the amount of €3,198) with the book value of €153,604 which accounts
for 7% of the Group's total property portfolio;
• residential landbank which accounts for €26,226 (including part of land in Romania held
for sale in the amount of €680), which accounts for 1% of the Group's total property
portfolio; and
• right of use of lands under perpetual usufruct, including assets hale for sale with value
of €40,020 which accounts for 2% of the Group's total property portfolio.
44
1
762,000¹
3
landbank for
completed
buildings
sq m of
GLA
buildings
under
construction
future
development
1
Including 1 asset held for sale (24,900 sq m)
 
12
Additionally, GTC holds:
• 25% of technology campus (booked as a non-current financial assets) with nine
completed buildings with a total GLA of approximately 102 thousand sq m (extends
over 72 ha of which 34 ha is undeveloped) and GTC’s share of book value amounted
to €117,641, which accounts for 5% of the Group's total property portfolio including
non-current financial assets;
• 34% of 4 completed commercial buildings (booked as a non-current financial assets)
including 3 office buildings and 1 retail property with a total combined commercial space
of approximately 41 thousand sq m of GLA, and GTC’s share of book value amounted
to €12,627 which accounts for less than 1% of the Group's total property portfolio
including non-current financial assets.
As of 31 December 2022, the book value of the Group’s total property portfolio including non-
current financial assets was €2,452,176.
The Group’s headquarters are located in Warsaw, at Komitetu Obrony Robotników 45A.
TERMS AND ABBREVIATIONS
Terms and abbreviations capitalized in this management's board Report shall have the
following meanings unless the context indicates otherwise:
the
Company
or GTC
are to Globe Trade Centre S.A.;
the Group
or the GTC
Group
are to Globe Trade Centre S.A. and its consolidated subsidiaries;
Shares
is to the shares in Globe Trade Centre S.A., which were introduced to public
trading on the Warsaw Stock Exchange in May 2004 and later and are
marked under the PLGTC0000037 code and inward listed on Johannesburg
Stock Exchange in August 2016;
Bonds is to the bonds issued by Globe Trade Centre S.A. or
its consolidated
subsidiaries and introduced to alternative trading market and marked with
the ISIN codes PLGTC0000292,
PLGTC0000318, HU0000360102,
HU0000360284 and XS2356039268;
the Report is to the consolidated annual report prepared according to art. 71
of the
Decree of the Finance Minister of 29 March 2018 on current and periodical
information published by issuers of securities and conditions of qualifying as
equivalent the information required by the provisions of the law of a country
not being a member state;
13
CEE is to the Group of countries that are within the region of Central and Eastern
Europe (Poland, Hungary);
SEE is to the Group of countries that are within the region of South-Eastern
Europe (Bulgaria, Croatia, Romania, and Serbia);
Net rentable
area, NRA,
or net
leasable
area, NLA
are to the metric of the area of a given property as indicated by the property
appraisal experts to prepare the relevant property valuations. With respect
to commercial properties, the net leasable (rentable) area is all the office or
retail leasable area of a property exclusive of non-leasable space, such as
hallways, building foyers, and areas devoted to heating and air conditioning
installations, elevators, and other utility areas. The specific methods of
calculation of NRA may vary among particular properties, which is due to
different methodologies and standards applicable in the various geographic
markets on which the Group operates;
Gross
rentable
area or
gross
leasable
area, GLA
are to the amount of the office or retail space available to be rented in
completed assets multiplied by add-on-factor. The gross leasable area is
the area for which tenants pay rent, and thus the area that produces income
for the Group;
Total
property
portfolio
is to book value of the Group’s property portfolio, including
: investment
properties (completed, under
construction and landbank), residential
landbank, assets held for sale, and the rights of use of lands under perpetual
usufruct;
Commercial
properties
is to properties with respect to which GTC Group derives revenue from rent
and includes both office and retail properties;
Occupancy
rate
is to average occupancy of the completed assets based on square meters
("sq m") of the gross leasable area;
Funds From
Operations,
FFO,
FFO I
are to profit before tax less tax paid, after adjusting for non-cash transactions
(such as fair value or real estate remeasurement, depreciation and
amortization share base payment provision and unpaid financial expenses),
the share of profit/(loss) of associates and joint ventures, and one-off items
(such as FX differences and residential activity and other non-recurring
items);
EPRA NTA
is a net asset value measure under the assumption that the entities buy and
sell assets, thereby crystallizing certain levels of deferred tax liability. It is
computed as the total equity less non-
controlling interest, excluding the
derivatives at fair value as well as deferred taxation on property (unless such
item is related to assets held for sale)
;
14
In-place rent is to rental income that was in place as of the reporting date. It includes
headline rent from premises, income from parking, and other rental income;
Net loan to
value (LTV);
net loan-to-
value ratio
are to net debt divided by Gross Asset Value. Net debt is calculated as total
financial debt net of cash and cash equivalents and deposits and excluding
loans from non-controlling interest and deferred debt issuance costs. Gross
Asset Value is investment properties (excluding the right of use under land
leases), residential landbank, assets held for sale, f
inancial assets,
building for own use, and share on equity investments. Net loan to value
provides a general assessment of financial risk undertaken;
The average
cost of debt;
average
interest rate
is calculated as a weighted average interest rate of total debt, as adjusted
to reflect the impact of contracted interest rate swaps and cross-currency
swaps by the Group;
EUR, €
or euro
are to the single currency of the participating Member States in the Third
Stage of European Economic and Monetary Union of the Treaty
Establishing the European Community, as amended from time to time;
PLN or zloty are to the lawful currency of Poland;
HUF is to the lawful currency of Hungary;
JSE is to the Johannesburg Stock Exchange.
PRESENTATION OF FINANCIAL INFORMATION
Unless indicated otherwise, the financial information presented in this Report was prepared
according to International Financial Reporting Standards (“IFRS”) as approved for use in the
European Union.
All the financial data in this Report is presented in euro or PLN and expressed in thousands
unless indicated otherwise.
Certain financial information in this Report was adjusted by rounding. As a result, certain
numerical figures shown as totals in this Report may not be exact arithmetic aggregations of
the figures that precede them.
PRESENTATION OF PROPERTY INFORMATION
Information on properties is presented pro-rata to the Group’s consolidation method in each of
the properties. The properties' valuation is based on the value that the Group consolidates in
its consolidated financial statements. The occupancy rate given for each of the markets is as
of 31 December 2022.
15
INDUSTRY AND MARKET DATA
In this Report the Group sets out information relating to its business and the markets in which
it operates and in which its competitors operate. The information regarding the markets, their
potential, macroeconomic situation, occupancy rates, rental rates, and other industry data
relating to the Group's markets are based on data and reports compiled by various third-party
entities. The information included in that section is not expressed in thousand and is prepared
by Jones Lang LaSalle IP, Inc („JLL”). It is based on material that JLL believes to be reliable.
While every effort has been made to ensure its accuracy, GTC cannot offer any warranty that
contains no factual errors.
Moreover, in numerous cases, the Group has made statements in this Report regarding the
industry in which it operates based on its own experience and examining market conditions.
The Group cannot guarantee that any of these assumptions properly reflect the Group’s
understanding of the markets on which it operates. Its internal surveys have not been verified
by any independent sources.
FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements relating to future expectations regarding the
Group’s business, financial condition, and results of operations. You can find these statements
by looking for words such as "may", "will", "expect", "anticipate", "believe", "estimate", and
similar words used in this Report. By their nature, forward-looking statements are subject to
numerous assumptions, risks, and uncertainties. Accordingly, actual results may differ
materially from those expressed or implied by forward-looking statements. The Group cautions
you not to place undue reliance on such statements, which speak only as of this Report's date.
The cautionary statements set out above should be considered in connection with any
subsequent written or oral forward-looking statements that the Group or persons acting on its
behalf may issue. The Group does not undertake any obligation to review or confirm analysts’
expectations or estimates or to release publicly any revisions to any forward-looking
statements to reflect events or circumstances after the date of this Report.
The Group discloses essential risk factors that could cause its actual results to differ materially
from its expectations under Item 3. “Key risk factors”, Item 5. “Operating and financial review”,
and elsewhere in this Report. These cautionary statements qualify all forward-looking
statements attributable to us or persons acting on behalf of the Group. When the Group
indicates that an event, condition, or circumstance could or would have an adverse effect on
the Group, it means to include effects upon its business, financial situation, and results of
operations
16
2. Selected financial data
The following tables present the Group’s selected historical financial data for the financial year
ended 31 December 2022 and 2021. The historical financial data should be read in conjunction
with Item 5. “Operating and financial review” and the consolidated financial statements for the
year ended 31 December 2022 (including the notes thereto). The Group has derived the
financial data presented in accordance with IFRS from the audited consolidated financial
statements for the year ended 31 December 2022.
Selected financial data presented in PLN is derived from the consolidated financial
statements for the year ended 31 December 2022 presented in accordance with IFRS and
prepared in the Polish language and Polish zloty as a presentation currency. The financial
statements of Group’s companies prepared in their functional currencies are included in the
consolidated financial statements by a translation into euro or PLN
using appropriate
exchange rates outlined in IAS 21 The Effects of Changes in Foreign Exchange Rates.
The reader is advised not to view such conversions as a representation that such zloty
amounts actually represent such euro amounts or could be or could have been converted into
euro at the rates indicated or at any other rate.
For the 12-month period ended 31 December
2022
2021
€
PLN
€
PLN
Consolidated Income Statement
166,563
780,664
171,951
785,369
(47,365)
(222,000)
(44,356)
(202,592)
119,198
558,664
127,595
582,777
(1,768)
(8,286)
(1,652)
(7,545)
(15,040)
(70,491)
(14,145)
(64,606)
Loss from revaluation of investment property
(29,422) (139,166)
(12,867) (59,493)
(31,696)
(148,556)
(42,977)
(196,294)
24,761
115,216
42,736
194,644
0.04 0.19
0.09 0.39
Weighted average number of issued ordinary
shares (not in thousands)
574,255,122 574,255,122 487,742,245 487,742,245
Consolidated Cash Flow Statement
88,088
412,860
106,427
486,095
(77,740)
(364,519)
(366,652)
(1,674,644)
10,797
38,003
84,906
387,799
115,079 539,709
96,633 444,454
17
For the 12-
month period ended
31 December
2022
2021
€
PLN
€
PLN
2,054,358 9,634,734
2,062,389 9,485,752
150,406
705,389
139,843
643,194
38,899
182,432
38,428
176,746
26,610
124,798
27,002
124,193
51,635
242,163
292,001
1,343,029
115,079
539,709
87,468
402,300
-
-
123,425
567,681
Non-current financial assets
130,341 611,286
- -
102,554
480,968
73,193
336,643
2,669,882
12,521,479
2,843,749
13,079,538
1,433,841
6,724,580
1,487,683
6,842,449
Current liabilities
100,454 471,110
239,077 1,099,610
1,135,587
5,325,789
1,116,989
5,137,479
12,920
57,426
11,007
48,556
-
-
120,295
557,939
3. Key risk factors
THE IMPACT OF THE GEOPOLITICAL SITUATION DUE TO THE WAR IN UKRAINE ON
THE GROUP'S OPERATIONS AND FINANCIAL RESULTS
Even though the Group does not conduct any activities in the territory of Ukraine, Russia or
Belarus, it cannot be ruled out that the current geopolitical situation in Europe triggered by the
ongoing war in Ukraine, which has resulted in a number of macroeconomic consequences for
Poland and other European countries, may also have an impact on the Group’s operations.
The risk area related with the conflict in Ukraine includes, inter alia, limitations in the availability
of construction materials, equipment, services, interruption or disruption in the continuity of
supplies, an extraordinary increase in the prices of key raw materials, limited availability of
employees, especially male workers from Ukraine resulting from their return to their country to
participate in military operations, a decline in demand on the property market due to uncertainty
as to the possible development of the current economic and political situation, combined with
18
high inflation, an increase in interest rates as well as decreased availability and higher cost of
external debt financing, which has resulted in a slowdown in the real estate market.
Moreover, the continuation of the war, its scale and further course of military operations may
cause an extension of the set of economic sanctions imposed thus far, further disruption in
supply chains, limited availability of subcontractors and a general increase in the prices of
materials resulting from, among others, rising energy prices, which in turn may translate into
significant costs of the implementation of investments carried out by the Group.
A significantly higher and volatile costs of energy (severe energy crunch because of steep cuts
in natural gas supplies from Russia following the outbreak of the Russia-Ukraine conflict) and
general uncertainties related to the impact of the war in Ukraine on both global and the
SEE/CEE economy and the deterioration of the global and regional economies may adversely
impact the economic situation of the Group’s tenant and limit their spending and the appetite
for extending the lease agreements. The above may have an adverse effect on the Group’s
business, financial condition and results of operations.
As at the date of this Report, the impact of the war in Ukraine on the Group’s operations is not
material; however, it is not possible to estimate the scale of such impact in the future and due
to high volatility, the management board monitors the situation on an ongoing basis and
analyses its potential impact both from the perspective of individual projects and the entire
Group and its long-term investment plans.
THE IMPACT OF THE COVID-19 PANDEMIC AND ANY POTENTIAL OTHER PANDEMICS
ON THE OPERATIONS AND FINANCIAL STANDING OF THE GROUP
While the risk of the COVID-19 pandemic cannot yet be ruled out (e.g. given the recent
outbreaks in China), its expected impact on the Group’s business might be lower than in 2020
or in 2021, when its operations were exposed to a number of measures taken by the
government in order to minimise the risk of the spread of the COVID-19 pandemic, including
lockdowns and closures of shopping centres, limited operations, limited working hours, etc.
The restrictions introduced by the government directly affected the course of business
processes and the organisation of the Group’s operations. For instance, the tenants in the
Group’s shopping centres were unable to trade for three to five months during 2020 and around
an average of three months during 2021 (in the period between January and May). As a
consequence, following the lockdown periods, in Poland tenants were released from rent
payment obligations while in other countries the tenants were given various discounts and
other relief in order to continue operating in very challenging circumstances. The Group cannot
rule out that it will need to take the same course of action if analogous restrictions are
introduced in the future in case of an outbreak of any new pandemic or the spread of COVID-
19 or further variants thereof.
Even though it seems that the peak of the COVID-19 pandemic has already passed since
numerous people have been vaccinated and the number of infected persons has decreased
significantly, the risk of the further spread of the SARS-CoV-2 virus and the occurrence of its
mutations cannot be ruled out entirely. The Group cannot exclude the risk of the occurrence
of any new pandemic that will have consequences similar to the COVID-19 pandemic. Thus,
the extent of the impact of the COVID-19 pandemic or any future pandemic on the Group is
still uncertain and depends on a number of factors, such as the duration and scope of the
19
pandemic, and the suitability and effectiveness of measures adopted by authorities in response
to the pandemic. The occurrence or escalation of one or more of the above developments may
significantly negatively impact the Group's business, financial condition, prospects and results
of operations.
THE CHANGE IN THE WORKING MODEL MAY HAVE A NEGATIVE IMPACT ON THE
OPERATIONS AND FINANCIAL RESULTS OF THE GROUP
The Group observes that the COVID-19 pandemic hastened a change of work patterns and
resulted in a growing share of employees working in a hybrid mode combining work from home
with office work as well as working only from home. This trend is continuing despite lifting the
pandemic restrictions.
Such changes in the work model are also reflected in recent changes in the labour law that
were introduced in Poland concerning the regulation of remote working (the regulations entered
into force on 7 April 2023).
Both those factors, i.e. the introduced legal regulations and the practise of hybrid work and
working from home are leading to a significant decrease in the occupancy of office buildings,
especially in regional cities in Poland (including Katowice, Poznań and Łódź), resulting in lower
rental income generated by such buildings and in consequence possibly having a material
adverse effect on the Group’s business, financial condition, and operational results.
THE GROUP IS EXPOSED TO GENERAL COMMERCIAL PROPERTY RISKS INCLUDING
ECONOMIC, DEMOGRAPHIC AND MARKET DEVELOPMENTS
The Group is exposed to all of the risks inherent in the business of owning, managing and
using commercial real estate. Its performance may be adversely affected by an oversupply or
a downturn in the commercial real estate market in general, or in the commercial real estate
market in those cities in which the properties are located. Rental income and the market value
for properties are generally affected by overall conditions in the EU and national and local
economies, such as growth in gross domestic product ("GDP"), inflation and changes in
interest rates.
The current unfavourable macroeconomic trends including growing inflation and higher interest
rates may have a negative impact on the Group and lead to a decrease in purchasing power
and lower store turnovers and, as a consequence, result in pressure on rental rates in shopping
centres or may impact the tenants' ability to meet their rental obligations towards the Group,
especially in light of the higher total rental costs due to an increase in service charges.
Additionally, a weakening economy, coupled with higher rental costs and a hybrid working
model may have a negative impact on demand for office space and lead to higher vacancy
levels (resulting in lower-than-expected revenue streams). Despite the temporary slowdown in
the e-commerce market, its further growth is expected and such growth, in the long term, may
result in a reduced demand for retail space and decreased rental income.
Rising inflation translated into an increase in interest rates (and further increases in interest
rates are expected), which has an impact on availability and cost of debt, which can decrease
demand for real properties or/and increase the cost of financing. However, as at 31 December
2022, 95% of the Group’s debt was either based on a fixed rate or hedged against interest rate
fluctuations by using derivative instruments, meaning its exposure to changes in interest rates
20
is limited. Decreased demand for real properties may lead to a decrease in prices that real
estate investors are prepared to pay for real properties and, as a consequence, a decline in
the value of properties cannot be ruled out.
Other factors which could have an impact on the value of a property are more general in nature,
such as national, regional or local economic conditions (including key business closures,
industry slowdowns and unemployment rates, and any cyclical patterns relating to these
trends); local property conditions from time to time (such as the balance between supply and
demand); demographic factors; consumer confidence; consumer tastes and preferences;
changes in governmental regulations including retrospective changes in building codes;
planning/zoning or tax laws; potential environmental legislation or liabilities; the availability of
refinancing; and changes in interest rate levels or yields required by investors in income
producing commercial properties.
The demand for commercial properties and the ability of such properties to generate income
and sustain market value is based on a number of factors, including:
• the economic and demographic environment;
• renovation work required on vacant units before they are re-let;
• tenant credit risk;
• workplace trends including growth rate, telecommuting and tenants' use of space
sharing;
• local infrastructure and access to public transportation;
• the competitive environment; and
• tenant expectations of facility quality and upkeep.
Any deterioration in demand may result in increased pressure to offer new and renewing
tenants financial and other incentives, which in turn may lead to an overall negative impact on
net rental incomes as operating expenses increase. The occurrence of any one or a
combination of the factors noted above may have a material adverse effect on the value of the
properties, the potential to increase rent following rent reviews and the ability of the Group to
sell its properties on favourable terms or at all. Any deterioration on net rental income, the
value of the properties, or the Group's ability to sell its properties may have a material adverse
effect on the Group’s business, financial condition, and results of operations.
THE GROUP MAY FAIL TO IMPLEMENT ITS STRATEGY AND THERE CAN BE NO
ASSURANCE THAT THE SUCCESSFUL IMPLEMENTATION OF THE GROUP'S
STRATEGY WOULD ACHIEVE ITS GOALS
The Group’s strategy aims to achieve growth by: (i) expanding the Group’s property portfolio
by acquiring and improving yielding properties in Poland and in capital cities in the countries
in which the Group operates, supplemented by selected development projects in the Group’s
property portfolio; (ii) improving the efficiency of the Group’s asset management activities to
maximise operating performance; and (iii) selling the Group’s non-core assets, which should
allow the Group to reduce its financial leverage or obtain funds to be used for new investments.
Moreover, the management board, expanding the existing strategy of the Group, decided to
pursue potential new investments in certain new sectors and geographical regions that may
21
diverge from the current core scope of the Group’s operations (namely, the development and
management of office, retail and certain other types of real estate). Potential new sectors
identified by the Group to be considered for investment as part of the new strategy include: (i)
investment in innovation and technology parks; (ii) investment in selected renewable energy
facilities in Poland and Hungary to complement its current offering and better address tenants’
needs; and (iii) investment in the development of PRS assets (private rented sector property –
residential) in Poland by investing as a minority shareholder in an investment platform with an
experienced developer and financial investors and taking advantage of potential favourable
developments in this sector.
On 9 August 2022, an agreement concerning a transaction involving a joint venture investment
in an innovation park in Kildare, Ireland that involves an investment of approximately EUR
115,000 thousand was concluded. The project involves six lettable buildings with designated
uses including industrial, warehouse, manufacturing and office/lab space. The site and the
campus are planned to be converted into a Life Science and Technology campus. Although
investment in these new sectors will not constitute more than 10% of the Group’s assets, the
successful implementation of the Group’s strategy may result in certain changes to the Group’s
property portfolio, including, for example, its geographic composition and composition by asset
classes (i.e. retail, office, residential and other properties). As a result, various measures of
the Group’s business and recurring cash flows derived from rental income may change.
Moreover, no assurance can be given that the future performance of the Group’s property
portfolio or future investment strategies effected pursuant to the Group’s strategy will enhance
the value of its property portfolio and increase the Group’s profitability.
The success of the Group’s strategy relies, in part, on various assumptions and contingencies,
including assumptions with respect to the level of profitability of any acquisition targets to be
achieved in the future and investment criteria that have been developed by the Group to
achieve the expected level of returns on acquired assets. Such assumptions may prove to be
partially or wholly incorrect or inaccurate and as a result, the return on an investment may be
lower than expected. It is possible that the Group or its service providers will misjudge
individual aspects of a given project when making acquisition decisions or that assessments
on which the Group bases its decisions are inaccurate or based on assumptions that turn out
to be incorrect. Such judgment errors may lead to an inaccurate analysis and valuation of a
project by the Group in connection with investment decisions that may only become apparent
at a later stage and force the Group to revise its valuation downwards. The Group can also not
guarantee that the service provider it chooses to carry out its due diligence will identify all of
the risks related to a given project. In addition, the Group cannot guarantee that it will be able
to have recourse to the seller of a given property for not disclosing such risks.
Furthermore, as part of its strategy, the Group is reorganising its property portfolio and intends
to acquire appreciating and value-added properties and to sell its non-core assets. The Group
intends to integrate any newly acquired properties with the existing portfolio and rent them out
in order to generate rental income for the Group. If these properties are not fully rented and/or
the rental rates are agreed below the estimated rental values, the Group may not be able to
realise its expected rates of return on the new acquisitions.
Moreover, the Group may fail to achieve its goals due to internal and external factors of a
regulatory, legal, financial, social or operational nature, some of which may be beyond the
Group’s control, such as volatile market conditions, a lack of capital resources needed for
22
expansion and the changing price and availability of investment targets in the relevant markets,
as well as amendments to applicable laws.
As a consequence, the Group may be unable to implement its strategy in part or in full; it may
decide to change, suspend or withdraw from its strategy or development programme, and it
may be unable to achieve, or it could encounter delays in achieving, the planned outcomes of
its strategy and development programme. This could have a material adverse effect on the
Group’s business, financial condition and results of operations.
THE VALUATION OF THE GROUP'S PROPERTIES AND, CONSEQUENTLY, THE
GROUP'S CONSOLIDATED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT MAY
BE SUBJECT TO SIGNIFICANT FLUCTUATIONS
The Group’s income depends heavily on the changes in the value of assets on the property
markets, which is subject to fluctuations. The fair values of the Group’s investment properties
are assessed semi-annually (as at 30 June and 31 December of each year), by reputable
external valuers, based on the discounted cash-flows method (DCF) from investment
properties, which method is inherently subjective and uncertain, as such assessment is based
on assumptions that may change or turn out to be incorrect (e.g. as to expected rental values,
fit-out costs, the time necessary for renting a specific property, etc.).
The property valuations are performed by external valuation agents and are not guarantees of
present or future value. One external valuation agent may reach a different conclusion to the
conclusion that would be reached if a different external valuation agent were appraising the
same property, and similarly the same external valuation agent may come to a different
conclusion at different periods of time. The valuation of property is inherently subjective and
uncertain as it is based on different methodologies, forecasts and assumptions.
The Group’s property valuations are made using the discounted rates applicable to the relevant
local real estate market or, in the case of certain properties, by reference to the sale value of
comparable properties. Such valuations are reviewed internally and, if necessary, confirmed
by the Group’s independent, certified appraiser and, verified by the Group’s management.
Any change in the discounted rates used by the valuer will have an impact on the valuation of
a given property. Furthermore, any change to the valuation methodology may result in gains
or losses in the Group’s consolidated income statement based on the change to each
property’s valuation compared with prior valuations. As a result, the Group can have significant
non-cash revenue gains or losses from period to period depending on the changes in the fair
values of its investment properties, regardless of whether such properties are sold. For
instance, in some years, the Group may recognise revaluation losses and impairment in
respect of certain assets and residential projects, and in other years profits for the same assets
and residential projects.
Additionally, the valuation and planning of projects is impacted by estimates of construction
costs which are based on current prices and future price forecasts, whereas the actual costs
involved may be different. Moreover, certain valuations are based on assumptions regarding
future zoning decisions, which may prove to be inaccurate and, as a result, the Group may not
be able to develop certain properties in accordance with its plans. This may adversely impact
the valuation of such properties in the future.
23
Furthermore, if the forecasts and assumptions on which the valuations of the projects in the
Group’s portfolio are based prove to be inaccurate or are subject to changes due to the
changing environment, the actual values of the projects in the Group’s portfolio may differ
materially from those stated in the valuation reports. Valuations based on inaccurate
assumptions of the Group’s properties and fluctuations in valuations may have a material
adverse effect on the Group’s business, financial condition and results of operations.
THE GROUP’S BUSINESS IS DEPENDENT ON ITS ABILITY TO ACTIVELY MANAGE ITS
ASSETS
A core part of the Group’s operations is the active management of its assets, which includes
the management of vacancy rates and rent levels and the terms of executed lease agreements
in the case of commercial properties, as well as achieving a desired tenant mix in the case of
retail properties.
The active management of the Group’s large-scale commercial properties is of particular
importance. In addition to legal constraints, the Group’s ability to reduce vacancies, renegotiate
rents and create a desired tenant mix is partly subject to market-related factors. Some of these
factors, such as the general economic environment, consumer confidence, inflation and
interest rates, and others are beyond the Group’s control. During periods of recession or
downturns in the economy, increased inflation and higher interest rates as well as taking into
account a growing significance of e-commerce and changes of work patterns connected with
working in a hybrid mode by combining work from home with office work or from home only, it
is more challenging for developers to attract new tenants and to retain existing ones, and
competition between developers for each tenant is much stronger.
If the Group is unable to create or capture demand for its properties by, for example, improving
tenant services or motivating its external sales agents, it may not be able to reduce vacancy
rates or renegotiate rents as desired. Moreover, tenants that experience liquidity shortages
may not pay their rent on time over prolonged periods, but, despite that, the Group may not be
able to replace them with different tenants with a better financial standing.
A prolonged period of higher vacancy rates could lower the rents tenants generally pay and
make it more difficult to increase the average rent that the Group expects to charge. Higher
vacancy rates would also increase the Group’s overall operating costs, as the Group would
have to cover expenses generated by empty properties or units. Any such decrease in rental
revenue or increase in operating costs could have a material adverse effect on the Group’s
business, financial condition and results of operations.
THE GROUP’S GROWTH AND PROFITABILITY WILL DEPEND ON THE GROUP’S
ABILITY TO IDENTIFY AND ACQUIRE ATTRACTIVE INCOME-GENERATING
PROPERTIES AND DEVELOP SELECTED PROJECTS
In accordance with the strategy of the Group, the Group intends to expand its business
through:
(i) the acquisition of yielding properties; (ii) asset management focused on realising
the full potential of, and maximising returns from, the Group’s portfolio; and (iii) the
development of selected projects as well as investments in new sectors, including innovation
and technology parks, renewable energy facilities and PRS asset development. The growth
and profitability of the Group and the success of its proposed business strategy depend, to a
24
significant extent, on its continued ability to locate and acquire properties at attractive prices
and on favourable terms and conditions.
The ability to identify and secure accretive value-added acquisition opportunities involves
uncertainties and risks, including the risk that the acquisition will not generate an income after
the Group has carried out business, technical, environmental, accounting and legal
examinations of the property or project.
In addition, the Group also faces the risk that competitors may anticipate certain investment
opportunities and compete for their acquisition. Additionally, any potential acquisition of
properties may give rise to pre-acquisition costs which have to be paid by the Group even if
the purchase of a property is not concluded. There can be no assurance that the Group will be
able to: (i) identify and secure investments that satisfy its rate of return objective and realise
their values; and (ii) acquire properties and develop the intended projects.
The Group also intends to focus on maximising the operating performance and efficiency of its
income-generating commercial property portfolio. In pursuing this objective, the Group may
expend considerable resources (including funds and management time) on managing
properties that do not generate the expected returns and maintain certain ratios at the required
level due to, for example, a decrease in demand for rental units or in rental levels which are
not possible to anticipate.
The failure of the Group to identify and acquire suitable properties, effectively manage its
existing properties portfolio and develop its projects could have a material adverse effect on
the Group’s business, financial condition and results of operations or prospects.
THE GROUP MIGHT NOT RECEIVE ADEQUATE INFORMATION ON RISKS RELATING TO,
OR MIGHT MAKE ERRORS IN JUDGMENT REGARDING, FUTURE ACQUISITIONS OF
REAL ESTATE
The acquisition of real estate requires a precise analysis of the factors that create value, in
particular the levels of future rental values and the potential for the improvement of the net
operating income ("NOI"). Such an analysis is subject to a wide variety of factors as well as
subjective assessments and is based on various assumptions. It is possible that the Group or
its service providers will misjudge individual aspects of a given project when making acquisition
decisions or that assessments on which the Group bases its decisions are inaccurate or based
on assumptions that turn out to be incorrect. The Group may also overestimate the probability
of obtaining the required approvals and administrative decisions or a temporary delay in
obtaining them. Any incorrect assessment of the attractiveness of a given location and the
possibility of implementing a project in accordance with the assumptions may result in
difficulties in achieving the expected rate of return within a specified time. Such judgment errors
may lead to an inaccurate analysis and valuation of the properties by the Group in connection
with investment decisions that may only become apparent at a later stage and force the Group
to revise its valuation figures downwards.
The Group can also not guarantee that the service provider it chooses to carry out its due
diligence when purchasing property will identify all of the risks related to the property in question
(e.g. soil contamination, discovery of archaeological monuments, unexploded ordnance or other
specific conditions), and as a consequence, the assumed return rate for a given project will not
25
be achieved. Additionally, in connection with any potential contamination or hazardous
substances, penalties may be imposed on the Group, including the Group being forced to incur
unforeseen costs of repairing damages related to such contamination. The Group also cannot
guarantee that it will be able to have recourse to the seller of the property for not disclosing
such risks. The Group may suffer financial loss if it is unable to learn of such risks. The
occurrence of one or several of such risks could have a material adverse effect on the Group’s
business, financial condition and results of operations.
THE GROUP CANNOT GUARANTEE THAT IT WILL CONTINUE TO GENERATE RENTAL
INCOME AT ASSUMED LEVELS
Rental levels of the Group’s properties are generally affected by overall conditions in the
economies in which the Group operates, as well as the conditions of the Group's property
portfolio itself (including future acquisitions of properties and the performance of the existing
property portfolio), the development of the selected existing projects, their infrastructure
condition, and vacancy rates. All of these elements are subject to various factors, many of which
are outside of the Group’s control.
In particular, due to increased competition and pressure on rents, amidst the general economic
uncertainty arising from both the COVID-19 pandemic and war in Ukraine, there can be no
assurance that tenants will renew their leases on terms favourable to the Group at the end of
their current tenancies or, if they do not, that new tenants of equivalent standing (or any new
tenants) will be found to take-up replacement leases. There is also a risk of reduced demand
for office and retail space resulting from changes in the working model due to the increase of
working in a hybrid mode or working from home, as well as changes in shopping preferences
combined with the growing significance of online shopping instead of conventional shopping.
Moreover, the Group’s property portfolio includes numerous properties with non-fixed rents tied
to the turnover of the tenants. Accordingly, if the turnover of such tenants declines, the rent
payable by them will also decrease. For the year ended 31 December 2022, 5% of the Group's
revenues from rental activity came from properties on which the rents were tied to the turnover
of the tenants. In addition, the Group has no influence on the operations of its tenants and may
not be able to monitor on an ongoing basis the tenants’ turnover in order to ensure that the level
of turnover reflects the best and actual performance efforts of its tenants. Consequently, the
amounts of rental income generated by the Group’s office and retail properties in the past
cannot be used to predict future rental income and there can be no assurance that rental income
will develop positively in the future.
Additionally, any investments in new sectors, including investments in innovation and
technology parks or renewable energy facilities may not achieve the expected returns on at
least the same or higher than the returns on assets there are currently held in the portfolio of
the Group.
The Group’s rental income may also decrease as a result of asset disposals or acquisitions of
properties with no or unsatisfactory income-generating capabilities. As part of its strategy, the
Group is reorganising its property portfolio and intends to acquire appreciating and value-added
properties and to sell its non-core assets. The Group intends to integrate any newly acquired
26
properties with the existing portfolio and rent them out in order to generate rental income for the
Group. If these properties are not fully rented and/or the rental rates are agreed below the
estimated rental values, the Group may not be able to realise its expected rates of return on the
new acquisitions. Subdued or negative rental return and profits could have a material adverse
effect on the Group’s business, financial condition and results of operations.
ANY DECLINE IN OCCUPANCY LEVELS MAY HAVE A DIRECT IMPACT ON THE
GROUP'S CASH FLOWS
The Group invests in real estate and derives a significant proportion of its cash flows from rental
payments received from the tenants occupying its properties. Any significant decline in
occupancy levels in respect of the properties could have a material adverse effect on the ability
of the Group to generate cash flow at the earlier assumed values. Factors affecting occupancy
may include, but are not limited to:
• demand for office and retail space;
• the age, quality and design of a property relative to comparable properties in the local
market;
• the property's location relative to public transportation;
• the standard of maintenance and upkeep of a property, including any work done by
third-party service providers; and
• perceptions regarding the safety, convenience and attractiveness of the property.
There can be no assurance that tenants will renew their leases on terms favourable to the Group
at the end of their current tenancies or, if they do not, that new tenants of equivalent standing
(or any new tenants) will be found to take-up replacement leases.
Any failure of the Group to sustain an adequate occupancy level would result in lower rental
income from the management of the existing portfolio and in a lower valuation of the Group’s
properties and overall portfolio. Expected vacancies are reflected in the valuation reports as at
31 December 2022. If a significant portion of the Group's property portfolio remains vacant for
a prolonged period of time, the fixed costs for maintaining such vacant spaces and the lack of
rental income generated by such spaces could have a material adverse effect on the Group’s
business, financial condition and results of operations.
THE ENERGY CRISIS MAY HAVE A NEGATIVE EFFECT ON THE LEVEL OF SERVICE
CHARGES IMPOSED BY THE GROUP ON ITS TENANTS AND, AS A RESULT, ON THE
ABILITY OF TENANTS TO COVER SUCH SERVICE CHARGES AND MAY LEAD TO
INTRODUCTION OF RESTRICTIONS ON THE SUPPLY AND OFF-TAKE OF ELECTRICITY
Russia's invasion of Ukraine resulted in immediate volatility on the global stock markets, and
uncertainties are anticipated in relation to the cost and availability of energy and natural
resources, in particular in Europe. The Group cannot exclude that further rapid growth of
electricity and gas prices will not have a negative effect on its annual spending on service
27
charges (which are forecasted annually at the beginning of each calendar year and settled with
tenants after the end of the year), which in addition to rental rates constitute the total cost of
renting an office or retail space for the tenant. With insufficient state aid being provided to
enterprises in connection with the current energy crisis, it also cannot be ruled out that tenants
of the Group will be unable to cover rental costs.
Moreover, in certain circumstances, inter alia, in the event of a threat to the energy security of
the Republic of Poland consisting of a long-term imbalance in the fuel and energy market, the
relevant restrictions on the supply and off-take of electricity may be introduced. The landlords
as off-takers may be liable in the case of the non-application of such restrictions. The
introduction of such restrictions may in turn affect the performance of the obligations of the
landlords under the lease agreements concluded by the Group, in particular to ensure the
supply of electricity to the subject of a given lease. In some situations, e.g. if the tenant is not
able to use the subject of the lease in accordance with its intended use for an extended period
due to such restrictions, this may result in the tenants demanding rent reductions or even
attempting to terminate the lease agreements.
The above may have an adverse effect on the Group’s business, financial condition and results
of operations.
THE GROUP MAY BE UNABLE TO FULLY RECOVER THE COSTS OF OPERATING THE
PROPERTIES FROM THE TENANTS
The majority of the Group’s lease contracts are structured in a way that allows the Group to
pass on certain of the costs related to the leased property to the tenant, including marketing
costs, electricity costs on common space, real estate taxes, building insurance, and
maintenance costs.
However, the Group is not able to pass on all such costs to the tenants, especially in a very
competitive environment, where the Group has to offer attractive conditions and terms to be
able to compete with other office buildings or has to improve conditions offered to attract new
tenants to its retail projects. Deteriorating market conditions, increased competition and tenants’
requirements may further limit the Group’s ability to transfer such costs, in full or in part, to its
tenants. The service charges of the Group's properties may increase due to a number of factors,
including an increase in electricity costs or maintenance costs. Moreover, if vacancy rates
increase, the Group must cover the portion of the service charge that is related to the vacant
space. Some lease agreements provide for the maximum value combined rental rate and
service charged to be paid by the tenant. In such cases, if the maintenance charges increase,
the Group would be unable to pass on such increases to the tenants.
Any significant increases in property costs that cannot be compensated by increasing the level
of costs passed on to its tenants may have an adverse effect on the Group’s business, financial
condition and results of operations.
28
THE GROUP MAY BE MATERIALLY AFFECTED BY THE LOSS OF ATTRACTIVE
TENANTS
The presence of reputable tenants, especially anchor tenants, in the Group’s retail projects is
important for its commercial success. Such tenants play an important role in generating
customer traffic and attracting other tenants. The Group targets anchor tenants of varying sizes.
A suitable anchor tenant typically depends on the size of the relevant shopping centre and the
relative size, in GLA terms, of the anchor tenant unit in a given shopping centre. It may be more
difficult for the Group to attract tenants to enter into leases during periods when market rents
are increasing, general consumer activity is decreasing, the importance of e-commerce is
increasing, or if there is competition for such tenants from competing developments. In addition,
the termination of a lease agreement by any significant tenant may adversely affect the
attractiveness of a project.
If the Group fails to renew the leases of anchor tenants, or to replace such tenants in a timely
manner, the Group may incur material additional costs or loss of revenues, which may, in turn,
have a material adverse effect on the Group’s business, financial condition and results of
operations.
THE GROUP FACES COMPETITION FROM OTHER OWNERS, REAL ESTATE
MANAGERS, AND DEVELOPERS OF COMMERCIAL REAL ESTATE
The Group has faced and continues to face increased competition from other owners, local and
international real estate managers and developers of commercial real estate. Such competition
may affect the Group’s ability to attract and retain tenants and may reduce the rents that the
Group is able to charge. Such competing properties may have vacancy rates that are higher
than the vacancy rates of the Group’s properties, which could result in their owners being willing
to rent their properties at lower rental rates than the Group would normally be prepared to offer
but which the Group may have to match. Competition in the real estate market may also lead
to increased marketing and development costs.
Given that the successful growth and profitability of the Group depends on: (i) the level of its
vacancy rates; (ii) the increase and maintenance of occupancy on the best achievable market
terms; (iii) the level of lease rent and rent collection; (iv) minimising property maintenance costs;
and (v) the acquisition of real estate at the lowest available prices, increased competition from
other owners, real estate managers and developers of commercial real estate and surrounding
factors could adversely affect the Group’s business, financial condition and results of
operations.
THE GROUP MAY BE SUBJECT TO SIGNIFICANT COMPETITION IN SEEKING
INVESTMENTS AND MAY INCREASE THE PURCHASE PRICE OF PROPERTIES TO BE
ACQUIRED
The Group competes with a number of real estate companies and developers for properties,
developments, contractors and customers. Some of the Group's competitors may be larger or
have greater financial, technical and marketing resources than the Group and therefore the
Group may not be able to compete successfully for investments or developments.
29
In addition, new acquisitions of existing properties at yields that the Group considers attractive
may become difficult to complete for a number of factors that may be beyond the Group's control
including, for example, increased competition. Accordingly, the implementation of the Group's
strategy to make suitable investments in prime locations may be delayed or may not be
possible.
Competition in the real estate market may also lead to a significant increase in prices for real
estate available for sale, which could be potential acquisition targets for the Group. Each of
these risks could have a material adverse effect on the Group’s business, financial condition
and results of operations.
THE GROUP MAY NOT BE ABLE TO SELL ITS PROPERTIES ON A TIMELY BASIS
As part of its strategy, the Group sells from time to time its real-estate properties to recycle its
equity and reinvest in new projects. The sale of a real estate project is usually a complex and
lengthy process. There may be situations, however, when it would be beneficial for the Group
to be able to sell one or more of its projects quickly. For example, the Group may wish to sell
on short notice if it believes that market conditions are optimal or if it is approached by a party
interested in purchasing a particular property on commercially attractive terms. The Group’s
ability to sell its property quickly may, however, be hindered by a number of factors beyond its
control.
The Group’s properties may constitute collateral established in favour of entities providing
external financing, which may further restrict and/or delay their transferability if the lender’s
consent must first be obtained. Several of the Group’s projects are also held through joint
ventures with third parties and may, as a result, be subject to legal and/or contractual limitations
on transferability, such as first refusal and co-sale rights, or a requirement to obtain joint
approval for any such sale. Such limitations could adversely affect the Group’s ability to
complete a transaction and to generate cash flow as needed through the timely sale of its
projects at favourable prices or to vary its property portfolio in response to economic or other
conditions impacting the property value. It may be particularly difficult to sell real properties
taking into account the unfavourable macroeconomic situation caused by the COVID-19
pandemic and the war in Ukraine. If the Group cannot sell a particular project within
a reasonable time, it may not be able to generate the cash flow it may require to service ongoing
operations or invest in new projects, or it may be unable to take advantage of favourable
economic conditions or mitigate the impact of unfavourable economic conditions should they
arise, which could have a material adverse effect on the Group’s business, financial condition
and results of operations.
THE GROUP'S PROPERTIES COULD SUFFER DAMAGE DUE TO UNDISCOVERED
DEFECTS OR EXTERNAL INFLUENCES
The Group’s properties could suffer damage due to undiscovered or underestimated defects or
from external influences (e.g., earthquakes, floods, landslides or mining damage). In addition
to the significant health risks and related costs, the Group could also be required to pay for the
removal and disposal of hazardous substances, as well as the related maintenance and
restoration work, without the ability to pass those costs onto third parties. The occurrence of
30
any such risk could have a material adverse effect on the Group’s business, financial condition
and results of operations.
If a given property is under renovation or undergoing modernisation, there can be no assurance
that any space that has not been pre-leased, can be let or otherwise marketed during or
following the renovation or modernisation phase on the appropriate terms and conditions. Such
developments could have a material adverse effect on the Group’s business, financial condition
and results of operations.
FAILURE TO OBTAIN THE REQUIRED ZONING OR CONSTRUCTION PERMITS, OR ANY
OTHER APPROVALS IN A TIMELY MANNER OR AT ALL MAY DELAY OR PREVENT THE
DEVELOPMENT OF CERTAIN OF THE GROUP’S PROJECTS
The completion of projects, in particular the implementation of new developments by the Group
requires the obtainment of various consents, arrangements and permits (including planning
permission, environmental permits, building permits and occupancy permits). Obtaining the
relevant administrative decisions is a formal and legal requirement for the commencement,
operation and delivery of any development project to its users, whereas any errors, internal
discrepancies in such decisions or the completion of the investment otherwise than in
compliance with the terms thereof may result in the suspension of or delay in the investment
process. For example, as part of its operations, the Group, may occasionally purchase land that
requires rezoning or a new or amended local spatial development plan or planning permission.
The issuance of a required permission cannot be guaranteed, and the Group has encountered
difficulties in the past in that respect.
As the relevant decisions concerning the development process are issued by the respective
public administration authorities in accordance with administrative procedure regulations, with
a special focus on satisfying the interests of local communities (e.g. some environmental
protection and planning matters are subject to extensive social consultations), the Group does
not have full control over the efficiency of the process of securing the required administrative
decisions and cannot guarantee that all of the necessary documents will be issued within the
expected deadlines or that they are not appealed before they become final, or that the obtained
consents and decisions will not be withdrawn.
Failure to obtain the required decisions, any delay in obtaining such or any changes thereto
may adversely affect the ability to commence, conduct or complete any existing or new projects
of the Group. Furthermore, one cannot entirely rule out the risk of changes to administrative
decisions concerning any completed projects or such decisions being challenged in the case of
the disclosure of legal defects of such decisions, or even declaring the invalidity of any
administrative decisions issued in violation of applicable law.
Additionally, no assurances can be given that permits, consents or approvals required from
various government entities in connection with existing or new development projects will be
obtained by the Group in a timely manner, as the procedure of obtaining the necessary
administrative decisions may also be subject to delays related to hostile actions of any third
parties entitled to challenge any issued decisions, including entities holding ownership titles to
any properties neighbouring the properties on which investment projects of the Group are
31
carried out or will be carried out in the future. Third parties may, by participating in administrative
proceedings related to investment procedures, take action preventing the Group from obtaining
the relevant decisions, including by appealing against any decisions issued in the course of
investment procedures to administrative authorities of the second instance or to administrative
courts.
Such actions may result in the suspension of or delays in any deadlines stated in the
timetable and abandoning the investment. Any claims raised against the Group, regardless of
their validity, may also adversely affect the image of the Group and its projects or the perception
of the Group’s operations and its projects by its end customers or investors.
If the Group cannot obtain the required approvals and permits in a timely manner or at all, its
projects may be delayed or cancelled, which could have a material adverse effect on the
Group’s business, financial condition and results of operations.
THE GROUP MAY BE SUBJECT TO INCREASED COSTS OR PROJECT DELAYS OR
CANCELLATIONS IF IT IS UNABLE TO HIRE GENERAL CONTRACTORS TO BUILD ITS
PROJECTS ON COMMERCIALLY REASONABLE TERMS, OR AT ALL, OR IF THE
GENERAL CONTRACTORS IT HIRES FAIL TO BUILD THE GROUP’S PROJECTS TO
ACCEPTED STANDARDS, IN A TIMELY MANNER OR WITHIN THE BUDGET
The Group outsources the construction of its projects to reputable general contractors and the
successful construction of the Group’s projects depends on its ability to hire general contractors
to build its projects to accepted standards of quality and safety on commercially reasonable
terms, within the limits of an agreed timeframe or an approved budget.
Accordingly, the Group’s failure to hire general contractors on commercially reasonable terms
could result in increased costs and a failure to hire general contractors at all could result in
project delays or cancellations. The failure of general contractors to meet accepted standards
of quality and safety or to complete the construction within an agreed timeframe or within an
approved budget may result in increased costs, project delays or claims against the Group.
Additionally, such failure may damage the Group's reputation and affect the marketability of the
completed properties. If the Group is unable to enter into contracting arrangements with quality
general contractors or subcontractors on commercially reasonable terms, or their performance
is substandard, this could have a material adverse effect on the Group’s business, financial
condition and results of operations.
The financial strength and liquidity of the Group’s general contractors may be insufficient in the
case of a severe downturn in the real estate market, which, in turn, could lead to their
insolvency. Although most of the Group's subsidiaries’ agreements with general contractors
provide for the indemnification of the subsidiaries against any claims raised by sub-contractors
engaged by such general contractors, there can be no assurance that such indemnification
provisions will be fully effective, in particular if such indemnification is challenged in court or
upon the insolvency of the general contractors. The Group requires general contractors to
secure the performance of their obligations under their respective agreements through, for
example, presenting bank guarantees. However, there can be no assurance that such
guarantees will cover the entirety of costs and damages incurred by the Group in connection
with the non-performance of agreements entered into with general contractors.
32
The Group’s reliance on general contractors and subcontractors exposes it to risks associated
with the poor performance of such contractors and their subcontractors and employees and
construction defects. The Group may incur losses as a result of being required to engage
contractors to repair defective work or pay damages to persons who have suffered losses as a
result of such defective work. Furthermore, these losses and costs may not be covered by the
Group’s professional liability insurance, by the contractor or by any relevant subcontractor – in
particular in the case of the architects engaged by the general contractors as both the scope of
their liability and their financial strength is limited in comparison to the value of the Group’s
projects. If the performance of the Group’s general contractors or subcontractors is
substandard, this could have a material adverse effect on the Group’s business, financial
condition and results of operations.
THE GROUP MAY FACE CLAIMS FOR DEFECTIVE CONSTRUCTION AND RISKS
ASSOCIATED WITH ADVERSE PUBLICITY, WHICH COULD HAVE AN ADVERSE EFFECT
ON ITS COMPETITIVE POSITION
The construction, lease and sale of properties are subject to a risk of claims for defective
construction, corrective or other works and associated adverse publicity. There can be no
assurance that such claims will not be asserted against the Group in the future, or that such
corrective or other works will not be necessary. Further, any claim brought against the Group,
and the surrounding negative publicity concerning the quality of the Group’s properties or
projects, irrespective of whether the claim is successful, could also have a material adverse
effect on how the Group's business, properties and projects are perceived by target customers,
tenants or investors. This could negatively affect the Group’s ability to market, lease and sell its
properties and projects successfully in the future, which could have a material adverse effect
on the Group’s business, financial condition and results of operations.
THE CONSTRUCTION OF THE GROUP’S PROJECTS MAY BE DELAYED OR OTHERWISE
NEGATIVELY AFFECTED BY FACTORS OVER WHICH THE GROUP HAS LIMITED OR NO
CONTROL
The construction of the Group’s projects may be delayed or otherwise negatively affected by,
among others, the following factors over which the Group has limited or no control:
• increased material, labour or other costs, as well as the lack or limited availability of
materials and of qualified workers which may make completion of projects
uneconomical;
• costs of external financing;
• acts of nature, such as harsh climate conditions, earthquakes and floods, that may
damage or delay the construction of properties;
• industrial accidents, deterioration of ground conditions (for example, the presence of
underground water) and potential liability under environmental laws and other laws
related to, for example, ground contamination, archaeological findings or unexploded
ordnance;
33
• acts of terrorism, riots, strikes or social unrest;
• building code violations or as yet undetected existing contamination, soil pollution, or
construction materials that are determined to be harmful to health;
• changes in applicable laws, regulations, rules or standards that take effect after the
commencement by the Group of the planning or construction of a project that result in
the incurrence of costs by the Group or delays in the development of a project; and
• defective building methods or materials.
The inability to complete the construction of a project on schedule, within budget or at all for
any of the above or other reasons may result in increased costs or cause the project to be
delayed or cancelled, which could have a material adverse effect on the Group’s business,
financial condition and results of operations.
THE GROUP IS SUBJECT TO GENERAL DEVELOPMENT RISKS THAT MAY INCREASE
COSTS AND/OR DELAY OR PREVENT THE DEVELOPMENT OF ITS PROJECTS
Development of certain of the Group’s projects has not yet begun and, as of the date of this
Report, these projects do not generate any revenues. The successful development of these
projects is an important factor for the Group’s future success and involves a large number of
highly variable factors which are complex and inherently subject to risk. Development risks to
which the Group is sensitive include, among others:
• additional construction costs for a development project being incurred in excess of the
amount originally agreed with the general contractor;
• liability to subcontractors related with bankruptcy of the general contractor;
• changes in existing legislation or the interpretation or application thereof (e.g. an
increase of the rate of the goods and services tax, which impacts the demand for
housing);
• actions of governmental and local authorities resulting in unforeseen changes in urban
planning, zoning and architectural requirements;
• potential defects or restrictions in the legal title to plots of land or buildings acquired by
the Group, or defects, qualifications or conditions related to approvals or other
authorizations relating to plots of land held by the Group;
• the Group’s potential inability to obtain financing on favourable terms or at all for
individual projects or in the context of multiple projects being developed at the same
time;
• potential liabilities relating to acquired land, properties or entities owning properties with
respect to which the Group may have limited or no recourse;
• tenants’ unwillingness to vacate a development site;
34
• obligations regarding the development of adjacent properties;
• inability to receive required zoning permissions for intended use;
• discrepancies between the planned area and the post-construction area of
developments;
• obligations relating to the preservation and protection of the environment and the historic
and cultural heritage of jurisdictions in which the Group conducts its operations, as well
as other social obligations.
These factors, including factors over which the Group has little or no control, may increase
costs, give rise to liabilities or otherwise create difficulties or obstacles to the development of
the Group’s projects. The inability to complete the construction of a property on schedule or at
all for any of the above reasons may result in increased costs or cause the projects to be
delayed or cancelled, which may have a material adverse effect on the Group’s business,
financial condition and results of operations.
WITHOUT SUFFICIENT LOCAL INFRASTRUCTURE AND UTILITIES, THE
CONSTRUCTION OF THE GROUP’S PROJECTS MAY BE DELAYED OR CANCELED, OR
IT MAY BE UNABLE TO REALISE THE FULL EXPECTED VALUE OF ITS COMPLETED
PROJECTS
The Group’s projects can only be carried out if the sites on which they are located have access
to the relevant technical infrastructure required by law (e.g. internal roads, utility connections,
and fire prevention equipment and procedures). In cases where such sites do not have the
necessary infrastructure, a use permit for the project may not be issued until such infrastructure
is assured. It is also possible that the relevant authorities may require the Group to develop the
relevant infrastructure as a part of the works related to the project, which may have a significant
impact on the costs of the construction works. The authorities may also demand that the investor
develop technical infrastructure that is not required from the project’s perspective but may be
expected by the authorities as a contribution by the investor to the development of the local
municipality.
In addition to the necessity of having adequate infrastructure during the construction process,
the viability of the Group’s projects, once completed, depends on the availability and sufficiency
of the local infrastructure and utilities. In some cases, utilities, communications and logistics
networks have not been adequately funded or maintained in recent decades and may be non-
existent, obsolete or experience failures. To be sufficient, the existing local infrastructure and
utilities may need to be improved, upgraded or replaced. As a consequence of this lack of
maintenance, for example, the Group may from time to time experience shortages in the
availability of energy and other utilities. There can be no assurance that improvements to the
infrastructure in and around the Group’s projects, or the infrastructure integrated into its
projects, will be completed prior to the completion of the Group's projects or that any such
improvement will be sufficient to support the Group’s completed projects. This may have
a material adverse effect on the Group’s business, financial condition and results of operations.
35
THE GROUP IS DEPENDENT ON A LIMITED NUMBER OF KEY MEMBERS OF ITS
MANAGEMENT
The Group's success depends on the activities and expertise of the members of its
management. If the Group is unable to retain the key members of its management, this could
result in a significant loss of expertise and could have a material adverse effect on the Group’s
business, financial condition, results of operations.
SHORTAGES OF QUALIFIED EMPLOYEES AND OTHER SKILLED PROFESSIONALS
COULD DELAY THE COMPLETION OF THE PROJECTS OF THE GROUP OR INCREASE
ITS COSTS
The Group relies on a skilled team of professionals, including its key management and project
managers, mid-level managers, accountants and other financial professionals, in the
development of its projects. The Group has in the past experienced delays in the completion of
certain projects as a result of shortages of qualified employees and skilled professionals and, if
the Group is unable to hire the necessary employees, staffing shortages may adversely affect
its ability to adequately manage the completion of its projects and efficiently manage its assets
or force it to pay increased salaries to attract skilled professionals or the necessary employees.
Furthermore, the future success of the Group depends on its ability to hire senior personnel
such as managers with extensive experience in the identification, acquisition, financing,
construction, marketing and management of development projects and investment properties.
The failure by the Group to recruit and retain appropriate personnel may have a material
adverse effect on the Group’s business, financial condition and results of operations.
CLIMATE CHANGES MAY REQUIRE CHANGES IN THE OPERATION OF THE GROUP’S
PROPERTIES, AND NOT ADAPTING TO THESE CHANGES IN A TIMELY MANNER
COULD CREATE A COMPETITIVE DISADVANTAGE AND DECREASE IN RENTAL
REVENUE, WHILE ADAPTING TO CHANGES MAY REQUIRE ADDITIONAL CAPITAL
EXPENDITURE
Over last several years the Group has observed changes in climate with significant changes in
the average air temperature in the region in which the Group operates. As a result, the Group
has invested to upgrade infrastructure in certain of its properties in order to address such
increases in average air temperatures. The Group strives to prepare its properties for changing
climate in the best possible way. However, it cannot be guaranteed that the Group will not suffer
a competitive disadvantage or decrease in rental revenue as a result of not adapting to those
changes in timely or appropriate manner. Additionally, the Group cannot asses at that stage
what adjustments to its properties will be required going forward to adopt the properties to the
changes in climate and what capital expenditure will be required to make those adaptations.
36
CHANGES IN TAX LAWS OR THEIR INTERPRETATION COULD AFFECT THE GROUP’S
FINANCIAL CONDITION AND THE CASH FLOWS AVAILABLE TO THE GROUP
Tax regulations in a number of countries the Group operates in, including Poland, are complex
and they are subject to frequent changes. The approach of the tax authorities in the countries
in which the Group operates is not uniform or consistent and there are rather significant
discrepancies between the judicial decisions issued by administrative courts in tax law matters.
No assurance may be given that tax authorities will not employ a different interpretation of the
tax laws which apply to the Group, and which may prove unfavourable to the Group. No
assurance may be given that the specific individual tax interpretations already obtained and
applied by the Group will not be changed or challenged. There is also a risk that once new tax
law regulations are introduced, the Group companies will need to take actions to adjust to these
laws, which may result in greater costs forced by circumstances related with complying with the
changed or new regulations. Thus, despite monitoring the risks in the various areas of the
Group’s operations, the risk of disputes with the tax authorities in terms of the assessment of
the tax consequences of certain events or transactions specific to the business of the Group
and the industry in which it operates cannot be ruled out.
In light of the foregoing, there can be no assurance given that the tax authorities will not question
the accuracy of tax reporting and tax payments made by the Group companies, in the scope of
tax liabilities not barred by the statute of limitations, and that they will not determine the tax
arrears of the Group companies, which may have a material adverse effect on the Group
companies’ business, financial standing, growth prospects or results of the Group.
Moreover, in relation to the cross-border nature of the Group’s business, the international
agreements, including the double tax treaties, to which members of the Group are a party, also
have an effect on the Group companies’ business. Different interpretations of the double tax
treaties by the tax authorities as well as any changes to these treaties may have a material
adverse effect on the business, financial standing or results of the Group companies.
CHANGES IN LAWS COULD ADVERSELY AFFECT THE GROUP
The Group’s operations are subject to various regulations in Poland, Romania, Hungary,
Croatia, Serbia, Bulgaria and other jurisdictions in which the Group conducts business activities,
such as fire and safety requirements, environmental regulations, labour laws, and land use
restrictions. If the Group’s projects and properties do not comply with these requirements, the
Group may incur regulatory fines or damages.
In addition, changes in the labour law introduced in Poland concerning the regulation of remote
working may result in a growing share of employees working from home or in a hybrid mode,
which may result in a reduced demand for office space.
Moreover, there can be no assurance that if perpetual usufruct fees in Poland are increased,
the Group will be able to pass such costs onto its tenants in the form of increased service
charges as such increase might lead to a given property becoming less competitive as
compared to properties not situated on land subject to perpetual usufruct fees.
37
Furthermore, the imposition of more strict environmental, health and safety laws or enforcement
policies in Central and Eastern Europe ("CEE") and South Eastern Europe ("SEE") could result
in substantial costs and liabilities for the Group and could subject the properties that the Group
owns or operates (or those formerly owned or operated by the Group) to more rigorous scrutiny
than is currently applied. Consequently, compliance with these laws could result in substantial
costs resulting from any required removal, investigation or remediation, and the presence of
such substances on the Group’s properties may restrict its ability to sell the property or use the
property as collateral.
New, or amendments to existing, laws, rules, regulations, or ordinances could require significant
unanticipated expenditures or impose restrictions on the use of the properties and could have
a material adverse effect on the Group’s business, financial condition and results of operations.
THE GROUP MAY BE SUBJECT TO LEGAL DISPUTES AND RISKS
The Group’s business involves the acquisition, rental, sale and administration of properties,
including under cooperation agreements that, as a matter of ordinary course of business,
expose the Group to a certain degree of small-scale litigation and other legal proceedings. Legal
disputes which, taken individually, are relatively immaterial, may be joined with disputes based
on similar facts such that the aggregate exposure of the Group might become material to its
business. Furthermore, the Group may face claims and may be held liable in connection with
incidents occurring on its construction sites such as accidents, injuries or fatalities of its
employees, employees of its contractors or other visitors on the sites.
It is standard practice in real estate transactions for the seller to make representations and
warranties in the purchase agreement concerning certain features of the property. Typically, the
assurances the seller gives regarding the property in the purchase agreement do not cover all
of the risks or potential problems that can arise for the Group in connection with the purchase
of property by the Group. The Group’s possible rights of recourse towards the sellers of
properties could fail for a variety of reasons, including due to the inability to establish that the
persons in question knew or should have known about the defects, due to the expiration of the
statute of limitations, due to the insolvency of the parties opposing the claim, or for other
reasons. If this were to occur, the Group may suffer a financial loss.
The Group provides different types of guarantees when it leases real estate, especially with
regard to legal title and the absence of defects in quality, as well as existing levels of hazardous
contamination and the portfolio of leases. The same applies to the sale of real estate. Claims
could be brought against the Group for breach of such guarantees and/or for the existence of
defects of which the Group was not aware, but of which it should have been aware, when it
concluded the transaction. The occurrence of one or several of the aforementioned risks could
have a material adverse effect on the Group’s business, financial condition and results of
operations.
Conversely, when the Group disposes of its projects, it may be required to give certain
representations, warranties and undertakings which, if breached, could result in liability to pay
damages. As a consequence, the Group may become involved in disputes or litigation
concerning such provisions and may be required to make payments to third parties, which may
38
have a material adverse effect on the Group’s business, financial condition and results of
operations.
Moreover, if the Group’s properties are subjected to legal claims by third parties and no
resolution or agreement is reached, these claims can delay, for significant periods of time,
planned actions of the Group. Such situations may include, for example, claims from third
parties relating to plots of land where the Group has developed and completed a real estate
asset which it then intends to sell, as well as claims from third parties relating to specific land
plots the Group needs to acquire in order to complete a particular project (for example plots
adjoining plots it owned as of the date of the delivery of this Report), which could delay the
acquisition by the Group of such plots.
The occurrence of one or several of the aforementioned risks could have a material adverse
effect on the Group’s business, financial condition and results of operations.
THE GROUP MAY BE EXPOSED TO CERTAIN ENVIRONMENTAL LIABILITIES AND
COMPLIANCE COSTS
The Group is subject to environmental laws in CEE and SEE, pursuant to which it is required to
conduct remedial action on sites contaminated with hazardous or toxic substances. Such laws
often impose liability without regard to whether the owner of such site knew of, or was
responsible for, the presence of such contaminating substances. In such circumstances, the
owner’s liability is generally not limited under such laws, and the costs of any required removal,
investigation or remediation can be substantial. The presence of such substances on any of the
Group’s properties, or the liability for the failure to remedy contamination from such substances,
could adversely affect the Group’s ability to sell or let such property or to borrow funds using
such property as collateral. In addition, the presence of hazardous or toxic substances on
a property may prevent, delay or restrict the development or redevelopment of such property,
which could have a material adverse effect on the Group’s business, financial condition and
results of operations.
THE GROUP’S INSURANCE MAY BE INADEQUATE
The Group’s insurance policies may not cover it for all losses that may be suffered by the Group
in the conduct of its business, and certain types of insurance are not available on commercially
reasonable terms or at all.
As a result, the Group’s insurance may not fully compensate it for losses associated with
damage to its real estate properties. In addition, there are certain types of risks, generally of a
catastrophic nature, such as floods, hurricanes, terrorism or acts of war that may be uninsurable
or that are not economically insurable. Other factors may also result in insurance proceeds
being insufficient to repair or replace a property if it is damaged or destroyed, such as inflation,
changes in building codes and ordinances and environmental considerations. The Group may
incur significant losses or damage to its properties or business for which it may not be
compensated fully or at all. As a result, the Group may not have sufficient coverage against all
losses that it may experience. Should an uninsured loss or a loss in excess of insured limits
occur, the Group may lose capital invested in the affected developments as well as anticipated
future revenues from such project. In addition, the Group may be liable to repair damage caused
39
by uninsured risks. The Group could also remain liable for any debt or other financial obligation
related to such damaged property. No assurance can be given that material losses in excess
of insurance coverage limits will not occur in the future. Any uninsured losses or losses in
excess of insured limits could have a material adverse effect on the Group’s business, financial
condition and results of operations.
THE GROUP'S LEVERAGE AND DEBT SERVICE OBLIGATIONS ARE MATERIAL AND
MAY INCREASE, ADVERSELY AFFECTING ITS BUSINESS, FINANCIAL CONDITION, OR
RESULTS OF OPERATIONS
As of the date of this Report, the Group is leveraged and has significant debt service obligations.
In addition, the Group may incur additional indebtedness in the future. The incurrence of
additional indebtedness would increase the leverage-related risks described in this Report and
may have a material adverse effect on the Group’s business, financial condition and results of
operations. The Group’s leverage could have material consequences for investors, including,
but not limited to, the following:
• increasing vulnerability to and simultaneously reducing flexibility to respond to
downturns in the Group’s business or general adverse economic and industry
conditions, including adverse economic conditions in the jurisdictions in which the Group
operates;
• limiting the Group’s ability to obtain additional financing to fund future operations, capital
expenditures, business opportunities, acquisitions and other general corporate
purposes and increasing the cost of any future borrowings;
• forcing the Group to dispose of its properties in order to enable it to meet its financing
obligations, including compliance with certain covenants under loan agreements;
• requiring the dedication of a substantial portion of the Group’s cash flows from
operations to the payment of the principal of and interest on its indebtedness, meaning
that these cash flows will not be available to fund its operations, capital expenditures,
acquisitions or other corporate purposes;
• limiting the Group’s flexibility in planning for, or reacting to, changes in its business, the
competitive environment and the real estate market; and
• placing the Group at a competitive disadvantage compared to its competitors that are
not as highly leveraged.
Any of these or other consequences or events could have a material adverse effect on the
Group’s ability to satisfy its obligations.
40
THE GROUP MAY INCUR SUBSTANTIAL LOSSES IF IT FAILS TO MEET THE
OBLIGATIONS AND REQUIREMENTS OF ITS DEBT FINANCING AND, FURTHERMORE,
THE RESTRICTIONS IMPOSED BY ITS DEBT FINANCING MAY PREVENT IT FROM
SELLING ITS PROJECTS
In order to secure its loans, the Group has in the past and/or may in the future mortgage its
assets, pledge participation interests in its subsidiaries, enter into guarantees and covenant to
its creditors that it would not establish any further mortgages or pledges on its present and/or
future assets without their consent (negative pledges provisions). In addition, the Group’s loans
contain restrictions on its ability to dispose of certain key assets, which in turn may be required
in order to satisfy certain financial covenants. The Group could fail to make principal and/or
interest payments due under the Group’s loans or breach any of the covenants included in the
loan agreements to which the Group has entered. In some cases, the Group may breach these
covenants due to circumstances which may be beyond the control of the Group. These may
include requirements to meet certain loan-to-value ratio, debt service coverage and working
capital requirements. A breach of such covenants by the Group could result in the forfeiture of
its mortgaged assets, the acceleration of its payment obligations, the acceleration of payment
guarantees, trigger cross-default clauses or make future borrowing difficult or impossible. In
these circumstances, the Group could also be forced in the long term to sell some of its assets
to meet its loan obligations or the completion of its affected projects could be delayed or
curtailed.
Any of the events described above could have a material adverse effect on the Group’s
business, financial condition and results of operations.
THE GROUP MIGHT BE UNABLE TO RENEW OR REFINANCE LOANS OR OTHER DEBT
AS THEY MATURE OR MIGHT BE ABLE TO RENEW OR REFINANCE SUCH LOANS OR
DEBT ONLY ON LESS FAVOURABLE TERMS
The Group’s real estate developments are financed under loans that have been provided for
a limited term. The Group may not be able to renew or refinance the remaining obligations in
part or at all or may have to accept less favourable terms in respect of such refinancing. If the
Group is unable to renew a loan or secure refinancing, the Group could be forced to sell one or
more of its office properties in order to procure the necessary liquidity. Additionally, if the Group
is not able to renew certain loans, those properties which are financed through loans will
become low leveraged and, as a consequence, will not be able to generate the expected returns
on equity. Any combination of the above would have material adverse effects on the Group’s
business, cash flows, financial condition and results of operations.
THE GROUP IS EXPOSED TO FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE
RATES
The Group’s financial statements are expressed in euro and the Group's functional currency is
the euro. Moreover, the majority of the Group’s revenues, specifically rent revenues, are
expressed in euro. However, certain of the Group’s costs, such as certain construction costs,
labour costs and remuneration for certain general contractors, are incurred in the currencies of
41
the geographical markets in which the Group operates, including Polish zloty, Bulgarian leva,
Hungarian forint, Romanian lei or Serbian dinar.
In making assumptions regarding the levels of equity required to implement its strategic
objectives, the Group used euro as the reference currency. Additionally, the majority of the
investments that the Group plans to make as part of its business strategy are expressed in euro.
Therefore, no assurance can be given that the proceeds derived and expressed in Polish zloty
will suffice to meet the investment requirements of the Group’s proposed acquisitions. While
the Group may engage in currency hedging in an attempt to reduce the impact of currency
fluctuations and the volatility of returns that may result from its exposure by, among other things,
entering into derivatives transactions, obtaining debt financing denominated in euro, as well as
concluding agreements with contractors specifying remuneration expressed in euro, there can
be no assurance that such hedging will be fully effective or beneficial.
Moreover, given the fact that certain contractors of the Group engage in hedging arrangements
with respect to their remuneration on the basis of, among other things, construction contracts,
their flexibility to postpone certain phases of construction may be limited and may result in their
financial distress. In addition, given that payments under most of the Group’s commercial leases
are expressed as the local currency equivalent of a euro-denominated amount, some of the
Group’s tenants, specifically those leasing retail space, may face difficulties in meeting their
payment obligations under such leases as they derive revenues in their respective local
currencies. Consequently, any future material appreciation of the local currencies against the
euro could significantly decrease the Group’s income in terms of the local currencies and could
have a material adverse effect on the Group’s business, financial condition and results of
operations.
THE GROUP IS SUBJECT TO INTEREST RATE RISK
The Group currently has and intends to incur certain indebtedness under existing debt facilities
which is subject to variable interest rates. Interest rates are highly sensitive to many factors,
including government monetary policies and domestic and international economic and political
conditions, as well as other factors beyond the Group’s control. The Group’s exposure to
interest risk and the extent to which the Group attempts to hedge such exposure vary
significantly between the geographical markets in which the Group operates, but any changes
in the relevant interest rates may increase the Group’s costs of borrowing in relation to existing
loans, thus impacting its profitability. The need to hedge interest rate risk is reviewed by the
Group on a case by case basis, except for those projects in which the lenders require it to hedge
the relevant interest rate risk. Changes in interest rates may have a material adverse effect on
the Group’s business, financial condition, results of operations.
THE GROUP’S BUSINESS IS CAPITAL INTENSIVE, AND ADDITIONAL FINANCING MAY
NOT BE AVAILABLE ON FAVOURABLE TERMS, ON A TIMELY BASIS OR AT ALL
The Group requires substantial up-front expenditures for land acquisition, development
construction and design costs. As a result, the Group requires substantial amounts of cash and
construction financing from banks for its operations. The Group’s capital needs depend on many
factors, in particular on market conditions, which are beyond the Group’s control. Should its
42
capital needs differ significantly from those currently planned, the Group might require additional
financing. In the case of difficulties in obtaining additional financing, the scale of the Group’s
growth and the pace of achievement of certain strategic objectives can be slower than originally
assumed. It is not certain whether the Group will be able to obtain the required financing if
needed or if such funds will be provided on conditions favourable to the Group.
In addition, construction loan agreements generally permit the drawdown of the loan funds
against the achievement of predetermined construction and space leasing milestones or the
sale of a specific number of flats. If the Group fails to achieve these milestones, the availability
of the loan funds may be delayed, thereby causing a further delay in the construction schedule.
Restrictions of or delays in the access to sources of external financing and conditions of such
financing that are less favourable than assumed can have a material adverse effect on the
Group’s business, financial condition and results of operations
.
POLITICAL, ECONOMIC, AND LEGAL RISKS ASSOCIATED WITH COUNTRIES IN
EMERGING MARKETS, INCLUDING CEE AND SEE COUNTRIES
Investors in emerging and developing markets such as the regions of CEE and SEE, in which
the Group operates, should be aware that these markets are subject to greater legal, economic,
fiscal and political risks than mature markets and are subject to rapid and sometimes
unpredictable change. As a result, investing in the securities of issuers with substantial
operations in emerging or developing markets generally involves a higher degree of risk than
investing in the securities of issuers with substantial operations in the countries of Western
Europe or other similar jurisdictions.
For 12-month period ended 31 December 2022, all of the Group’s revenues were sourced from
its operations in CEE and SEE countries, particularly Poland (41%), Hungary (28%), Bulgaria
(9%), Croatia (9%), Romania (7%) and Serbia (6%). These markets are subject to greater risk
than more developed markets. CEE and SEE countries still present various risks to investors,
such as instability or changes in national or local government authorities, land expropriation,
changes in taxation legislation or regulation, changes to business practices or customs,
changes to laws and regulations relating to currency repatriation and limitations on the level of
foreign investment or development. In particular, the Group is affected by rules and regulations
regarding foreign ownership of real estate and personal property. Such rules may change
quickly and significantly and, as a result, impact the Group’s ownership and may cause it to
lose property or assets without legal recourse.
Furthermore, some countries in which the Group operates (such as Serbia) may regulate or
require governmental approval for the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. In addition, if there is a deterioration in a country’s
balance of payments or for other reasons, a country may impose temporary restrictions on
foreign capital remittances abroad. Any such restrictions may adversely affect the Group’s
ability to repatriate investment loans or to remit dividends. Some CEE and SEE countries, have
experienced substantial, and in some periods extremely high, rates of inflation for many years.
43
Inflation and rapid fluctuations in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain emerging countries.
In addition, adverse political or economic developments in the countries in which the Group
operates and/or neighbouring countries could have a significant negative impact on, among
other things, gross domestic product, foreign trade or economies in general of individual
countries. The countries and the region in which the Group operates have experienced and
may still be subject to potential political instability caused by changes in governments, political
deadlock in the legislative process, tension and conflict between federal and regional
authorities, corruption among government officials and social and ethnic unrest. In particular,
the ongoing armed conflict in the territory of Ukraine and uncertainties regarding its duration,
scale and the relationship of the CEE and SEE countries with Russia may affect the attitude of
investors towards the regional real estate market and their willingness to invest in the countries
neighbouring with Ukraine and Russia, where the Group operates.
The materialisation of any of the foregoing risks would have a material adverse effect on the
Group’s business, financial condition and results of operations.
THE LOCATIONS OF THE GROUP’S PROPERTIES ARE EXPOSED TO REGIONAL RISKS
AND COULD LOSE SOME OF THEIR APPEAL
The locations of each of the properties are influenced by macro-economic developments in the
regions in which the Group operates, as well as being subject to specific local conditions in a
given regional market. The Group’s real estate portfolio focuses on commercial premises, which
significantly exposes the Group to negative developments in those segments of the real estate
market in the countries where the Group operates, including intensified competition or increased
saturation.
Insolvencies, close-downs or moves of large companies or companies from individual or several
sectors as a consequence of adverse developments or for other reasons could have a negative
effect on the economic development of the location in question and, consequently, on the
Group’s portfolio as a whole. The Group has no control over such factors. Negative economic
developments at one or more of the locations could reduce the Group’s rental income or result
in a loss of rent, which stem from a number of tenants being unable to pay their rent in full or in
part, as well as cause a decline in the market value of the Group’s properties, which may have
a material adverse effect on the Group’s business, financial condition and results of operations.
UNLAWFUL, SELECTIVE, OR ARBITRARY GOVERNMENT ACTIONS MAY IMPACT THE
GROUP’S ABILITY TO SECURE THE AGREEMENTS, CONTRACTS, AND PERMITS
REQUIRED FOR IT TO DEVELOP ITS PROJECTS
Government authorities in the countries in which the Group operates have a high degree of
discretion and may not be subject to supervision by other authorities, requirements to provide
a hearing or prior notice or public scrutiny. Therefore, government authorities may exercise their
discretion arbitrarily or selectively or in an unlawful manner and may be influenced by political
or commercial considerations. The Group has faced administrative decisions in the past which
forced it to unexpectedly change its investment plans (including limiting the scale of a project).
44
Such discretion may have a material adverse effect on the Group’s business, financial condition
and results of operations.
THE LAND AND MORTGAGE REGISTRY SYSTEMS IN CERTAIN OF THE CEE AND SEE
JURISDICTIONS ARE OPAQUE AND INEFFICIENT, AND THE GROUP’S PROPERTIES
MAY BE SUBJECT TO RESTITUTION CLAIMS
The land and mortgage registry systems in certain of the CEE and SEE jurisdictions are non-
transparent and inefficient, which may result in delays in the land acquisition process and the
registration of many plots into one consolidated plot, which is a requirement before certain
projects can be developed. This inefficiency could have a material adverse effect on the
business, cash flows, financial condition and results of operations of the Group.
Moreover, the Group may be exposed to the inherent risk related to investing in real estate
situated in CEE and SEE countries resulting from the unregulated legal status of some of such
real estate properties. Following the introduction of nationalisation in certain CEE and SEE
jurisdictions, including Poland and Hungary, during the post-war years, many privately-owned
properties and businesses were taken over by such states. In many cases, the requisition of
the property took place in contravention of prevailing laws. After the CEE and SEE countries
moved to a market economy system in 1989-1990, many former property owners or their legal
successors took steps to recover the properties or businesses lost after the war or to obtain
compensation. For many years, efforts have been made to regulate the issue of restitution
claims in Poland. Despite several attempts, no act regulating the restitution process has been
passed in Poland. Under the current law, former owners of properties or their legal successors
may file applications with the authorities for the administrative decisions under which the
properties were taken away from them to be declared invalid, unless a period of ten years has
lapsed from the date of their delivery or announcement. As at the date of the Report, there are
no proceedings underway seeking the invalidation of administrative decisions issued by the
authorities concerning properties held by the Group. There is no guarantee, however, that
restitution claims may not be brought against the Group in the future, and this could have
a material adverse effect on the Group’s business, financial condition and results of operations.
THE GROUP’S CLAIMS TO THE TITLES TO INVESTMENT AND DEVELOPMENT
PROPERTIES MAY BE SUBJECT TO CHALLENGE IN CERTAIN CASES, AND PERMITS
IN RELATION TO SUCH PROPERTIES MAY HAVE BEEN OBTAINED IN BREACH OF
APPLICABLE LAWS
It may be difficult or, in certain cases, impossible for the Group to establish with certainty that
title to a property has been vested in a relevant Group company due to the fact that real estate
laws in Poland and other jurisdictions in which the Group operates are complicated and often
ambiguous and/or contradictory and the relevant registries may not be reliable. For example,
under the laws of Poland, transactions involving real estate may be challenged on many
grounds, including where the seller or assignor to a given property did not have the right to
dispose of such property, for a breach of the corporate approval requirements by a counterparty
or a failure to register the transfer of a title in an official register, when required. Also, even if a
title to real property is registered, it may still be contested. Therefore, there can be no assurance
that the Group’s claim to a title would be upheld if challenged. Further, it is possible that permits,
authorisations, re-zoning approvals or other similar decisions may have been obtained in
45
breach of applicable laws or regulations. Such matters would be susceptible to subsequent
challenge. Similar issues may arise in the context of compliance with privatisation procedures
and auctions related to the acquisition of land leases and development rights. It may be difficult,
or impossible, to monitor, assess or verify these concerns. If any of these permits,
authorisations, re-zoning approvals or other similar requirements were to be challenged, this
may have a material adverse effect on the Group’s business, financial condition and results of
operations.
THERE MAY BE POTENTIAL CONFLICT OF INTEREST BETWEEN THE GROUP AND THE
GROUP’S CONTROLLING SHAREHOLDER
As at the date of this Report,
the GTC’s dominant entity is Optimum Venture Private Equity
Fund, which is a sole shareholder of GTC Holding Zártkörüen Müködö Részvénytársaság
holding directly 3.81% of the Company’s share capital and a sole shareholder of Alpine Holding
Korlátolt Felelősségű Társaságthe, which indirectly, i.e. through Global Debt Strategy S.à r.l.
and further through GTC Dutch Holdings B.V. (“GTC Dutch”) holds 43.1% of the Company’s
share capital. Optimum is an investment fund managed by Optima Investment Fund
Management Zrt. (“Optima”), controlled by Pallas Athene Foundation. Furthermore, on 18
February 2022, GTC Dutch and Icona Securitization Opportunities Group S.A. R.L. (“Icona”),
holding 15.7% of the share capital of the Company, concluded an assignment agreement, which
came into force on 1 March 2022, based on which Icona transferred to GTC Dutch its rights to
exercise the voting rights attached to the shares held by Icona. Under such agreement, Icona
granted to GTC Dutch an unconditional and irrevocable power of attorney to exercise all of the
voting rights attached to its shares in the Company. Moreover, since 1 March 2022, GTC
Holding Zrt., GTC Dutch and Icona have been acting in concert based on an agreement
concerning their jointly agreed policy towards the Company and the exercise of voting rights in
respect of selected matters (such as the approval of the annual report, the distribution of profits
generated by the Company, the discharge of duties, the determination of the annual dividend
and any interim dividend distributed by the Company, changes to the remuneration policy, etc.)
at the general meeting of the Company.
As at the date of this Report, Optima representatives constitute the majority of the supervisory
board and may thus control the appointment of the management board. Consequently, Optima
may influence the decision making process for the Group. Accordingly, when considering any
investment, business and operational matters of the Group and the most appropriate uses of
the Group’s available cash, the interests of Optima, GTC Dutch, GTC Holding Zrt. and Icona
may not be aligned with the interests of the Group or of its other stakeholders. Any such conflicts
of interest may have a material adverse effect on the Group’s business, financial condition and
results of operations.
Moreover, Optima operates in the same market as the Group and they may compete over
investments that the Group may be interested in. Any such conflicts of interest may have an
adverse effect on the Group’s business, financial condition and results of operations.
46
Furthermore, as in the case of any significant shareholder, all of the shares of the Group may
be offered for sale without any restrictions and there can be no assurance as to whether or not
they will be sold on the market and at which price. Such sale, or new issuance of shares, may
adversely affect the price of the Group's share in the market, or an offering of the Company’s
shares, if any.
THE RELATED-PARTY TRANSACTIONS CARRIED OUT BY THE GROUP COMPANIES
COULD BE QUESTIONED BY THE TAX AUTHORITIES
The Group has carried out transactions with related parties. When concluding and performing
related party transactions, the Group seeks to ensure that such transactions (i) comply with the
applicable transfer pricing regulations and (ii) are completed following the issue of a fairness
opinion. However, due to the specific nature of related-party transactions, the complexity and
ambiguity of legal regulations governing the methods of examining the prices applied, as well
as the difficulties in identifying comparable transactions for reference purposes, no assurance
can be given that specific Group companies will not be subject to inspections or other
investigative activities undertaken by tax authorities or fiscal control authorities. Should the
methods of determining arm’s-length terms for the purpose of the above transactions be
challenged, this may have a material adverse effect on the business, financial condition and
results of operations of the Group companies.
4. Presentation of the Group
4.1 General information about the Group
The GTC Group is an experienced, established, and fully integrated real estate company
operating in the CEE and SEE region with a primary focus on Poland and Budapest and capital
cities in the SEE region, including Bucharest, Belgrade, Zagreb, and Sofia, where it directly
manages, acquires and develops primarily high-quality office and retail real estate assets in
prime locations. The Company is listed on the Warsaw Stock Exchange and listed on the
Johannesburg Stock Exchange. The Group operates a fully-integrated asset management
platform and is represented by local teams in each of its core markets.
As of 31 December 2022, the book value of the Group’s total pr
operty portfolio was
€2,321,908. The breakdown of the Group's property portfolio was as follows:
• 44 completed commercial buildings (including
1 office building held for sale),
including 38 office buildings and 6 retail properties with a total combined commercial
space of approximately 762 thousand sq m of GLA, an occupancy rate at
88% and
a book value of €2,050,571 which accounts for 88% of the Group's total property
portfolio;
47
• three office buildings under construction with a total GLA of approximately 61
thousand sq m and a book value of €51,487, which accounts for 2% of the Group's
total property portfolio;
• investment landbank intended for future development (including 1 land plot in Poland
held for sale in the amount of €3,198) with the book value of €153,604 which
accounts for 7% of the Group's total property portfolio;
• residential landbank which accounts for €26,226 (including part of land in Romania
held for sale in the amount of €680),
which accounts for 1% of the Group's total
property portfolio; and
• right of use of lands under perpetual usufruct with value of €40,020 which accounts
for 2% of the Group's total property portfolio.
Additionally, GTC holds
• 25% of technology campus (booked as a non-current financial assets) with nine
completed buildings with a total GLA of approximately 102 thousand sq m (extends
over 72 ha of which 34 ha is undeveloped) and GTC’s share of book value amounted
to €117,641, which accounts for 5% of the Group's total property portfolio including
non-current financial assets;
• 34% of 4 completed commercial buildings (booked as a non-current financial assets)
including 3 office buildings and 1 retail property with a total combined commercial space
of approximately 41 thousand sq m of GLA, and GTC’s share of book value amounted
to €12,627 which accounts for less than 1% of the Group's total property portfolio
including non-current financial assets.
As of 31 December 2022, the book value of the Group’s total property portfolio including non-
current financial assets was €2,452,176.
The Group’s headquarters are located in Warsaw, at Komitetu Obrony Robotników 45A.
4.2 Main events of 2022
MANAGEMENT BOARD CHANGES AND OTHER CORPORATE EVENTS
On 4 January 2022, National Court Register registered the amendment to the Company’s
articles of association regarding the increase of the Company’s share capital through the
issuance of ordinary series O bearer shares. On 10-11 January 2022, the Group recorded
proceeds from issue of share capital (net of issuance costs) in amount of €120,400.
On 10 January 2022, the Company received notifications from GTC Holding Zrt and GTC
Dutch Holdings B.V regarding a change in the total number of votes in the Company resulting
from issue of 88,700,000 ordinary O series shares and registration of the increase in the
Company’s share capital. Before the abovementioned change, GTC Holding Zrt held, directly
and indirectly, 320,466,380 shares in the Company, entitling to 320,466,380 votes in the
48
Company, representing 66% of the share capital of the Company and carried the right to 66%
of the total number of votes in the Company.
After the abovementioned change, GTC Holding
Zrt holds, directly and indirectly, 359,528,880 shares in the Company, entitling to 359,528,880
votes in the Company, representing 62.61% of the share capital of the Company and carrying
the right to 62.61% of the total number of votes in the Company.
On 14 January 2022, GTC entered into a mutual employment contract termination agreement
with Mr. Yovav Carmi, former President of the Management Board. Subsequently, Mr Carmi
resigned from his seat on the Management Board of the Company and other subsidiaries.
On 21 January 2022, the management board of the Warsaw Stock Exchange (WSE) adopted
resolution regarding the admission and introduction to stock exchange trading on the main
market of the WSE of 88,700,000 ordinary bearer series O shares in the Company with
a nominal value of PLN 0.10 each, according to which the management board of the WSE
stated that the series O shares are admitted to trading on the main market and resolved to
introduce them to stock exchange trading on 26 January 2022.
On 28 January 2022, Mr. Gyula Nagy resigned from his seat on the Management Board of the
Company.
On 19 February 2022, the Company received notification from GTC Dutch Holdings B.V. with
its registered office in Amsterdam, the Netherlands (the “Seller”) and Icona Securitization
Opportunities Group S.à r.l. acting on behalf of its compartment Central European Investments
with its registered office in Luxembourg, Grand Duchy of Luxembourg (the “Buyer”) that the
Seller and the Buyer entered into a preliminary share purchase agreement relating to the
acquisition by the Buyer from the Seller of 15.7% of the shares in the Company.
However, pursuant to the notification, the Buyer and the Seller agreed that the shareholders’
agreement will constitute an acting in concert agreement within the meaning of Articles 87(1)(5)
and 87(1)(6) in connection with Article 87(3) of the Act of 29 July 2005 on Public Offerings and
the Conditions for the Introduction of Financial Instruments to the Organised Trading System
and Public Companies (the “Act on Public Offering”) on joint policy towards the Company and
exercising of voting rights on selected matters in an agreed manner. Also, pursuant to the
assignment agreement, the Buyer will, among others, transfer to the Seller its voting rights
attached to the Shares and grant the power of attorney to exercise voting rights attached to
the shares. The assignment agreement expires in case either call or put option under the call
and put option agreement is exercised and/or in case of a material default under the transaction
documentation. On 1 March 2022, the Company received notification that the transaction was
completed, and the Buyer acquired 15.7% of the shares in the Company.
As a result of execution of the transaction, Icona Securitization Opportunities Group S.à r.l.
holds 90,176,000 ordinary bearer shares in the Company which constitute 15.7% of total votes
at GTC's general meeting, with reservations that (i) all the voting rights were transferred to the
Seller and that (ii) Buyer granted the Power of Attorney to Buyer’s Voting Rights to the Seller.
As a result of execution of the Transaction GTC Holding Zrt holds jointly 269,352,880 shares
of the Company, entitling to 269,352,880 votes in the Company, representing 46.9% of the
49
share capital of the Company and carrying the right to 46.9% of the total number of votes in
the Company, including:
• directly holds 21,891,289 shares of the Company, entitling to 21,891,289 votes in the
Company, representing 3.8% of the share capital of the Company and carrying the right
to 3.8% of the total number of votes in the Company; and
• indirectly (i.e. through GTC Dutch Holdings B.V.) holds 247,461,591 shares of the
Company, entitling to 247,461,591 votes in the Company, representing 43.1% of the
share capital of the Company and carrying the right to 43.1% of the total number of
votes in the Company.
In addition, GTC Holding Zrt also holds indirectly, through GTC Dutch Holdings B.V., the
Buyer’s Voting Rights, i.e. the right to exercise 90,176,000 votes in the Company, entitling to
15.7% of the total number of votes in the Company.
Since 1 March 2022, GTC Holding Zrt, GTC Dutch Holdings B.V. and Icona Securitization
Opportunities Group S.à r.l. are acting in concert based on the agreement concerning joint
policy towards the Company and exercising of voting rights on selected matters at the general
meeting of the Company in an agreed manner.
On 17 March 2022, the supervisory board of the Company appointed Zoltán Fekete as the
President of the Management Board of the Company, effective immediately.
On 14 June 2022, the Company’s shareholders adopted a resolution regarding distribution of
dividend in the amount of PLN 160,800 (€34,400). On 18 October 2022, dividend to
shareholders was paid in the amount of €33,200.
On 5 July 2022, effective from 15 July 2022, Mr. Pedja Petronijevic resigned from his seat on
the Management Board of the Company.
On 10 August 2022, the Management Board of GTC S.A. announced re-orientation of strategy
of the Group, within which the Management Board decided to pursue potential new
investments in certain new sectors which may diverge from the current core scope of the
Company’s operations (namely, the development and management of office, retail and certain
other types of real estate). Potential new sectors identified for investment as part of the new
strategy include:
1. investment in innovation and technology parks;
2. investment in renewable energy facilities; and
3. investment in development of PRS assets (private rented sector property - residential).
On 12 September 2022, the Company received notification on a change in the shareholding
of the Company. Pursuant to the Notification, as a result of completion of the intra-group
corporate reorganization Global Debt Strategy S.à r.l. (“GDS”) being a subsidiary of Alpine
Holding Korlátolt Felelősségű Társaságthe (“Alpine”), directly acquired from GTC Holding
control over 100% of the shares of GTC Dutch Holdings B.V. As a result of the transaction
50
Alpine holds indirectly (i.e. through GDS, which in turn indirectly holds through GTC Dutch
Holdings B.V) 43.10% of GTC’s shares. For more details please see current report no 40/2022.
SUPERVISORY BOARD CHANGES
On 11 March 2022, Mr. Zoltán Fekete resigned from his seat on the supervisory board of the
Company. The resignation is effective immediately.
On 11 March 2022, GTC Dutch Holdings B.V. appointed Mr. Gyula Nagy as member of the
supervisory board of the Company, effective immediately.
On 22 April 2022, Icona Securitization Opportunities Group S.à r.l. appointed Mr. Bruno
Vannini as a member of the supervisory board of the Company, effective immediately.
On 1 June 2022, AVIVA Otwarty Fundusz Emerytalny Aviva Santander reappointed Mr. Marcin
Murawski as a member of the supervisory board of the Company, effective 14 June 2022.
On 14 June 2022, the term of office of Mariusz Grendowicz as an independent member of the
supervisory board of the Company expired.
On 14 June 2022, the Annual General Meeting appointed Artur Kozieja as an independent
member of the supervisory board for a period of three years.
On 2 September 2022 GTC Dutch Holdings B.V. appointed Mr. Mariusz Grendowicz as
member of the Supervisory Board of the Company, effective as of 2 September 2022.
On 15 November 2022, Mr. Daniel Obajtek resigned from his seat on the supervisory board of
the Company, effective immediately.
ACQUISITIONS AND DEVELOPMENTS
On 13 January 2022, GTC Origine Investments Pltd, a wholly-owned subsidiary of the
Company, acquired 100% holding of G-Zeta DBRNT Kft. ("GTC DBRNT Projekt Kft”) from a
company related to the majority shareholder of the Company, which owns an existing office
building on the Danube riverbank with GLA of 2,540 sqm for a consideration of €7,700. Due to
the nature of transaction, the transaction was treated as asset deal.
On 4 February 2022, GTC Origine Investments Pltd, a wholly-owned subsidiary of the
Company, acquired 100% holding of G-Epsilon PSZTSZR Kft. (“GTC PSZTSZR Projekt Kft”)
from a company related to the majority shareholder of the Company, which owns a land plot
of 25,330 sqm in Budapest with existing six old buildings for a consideration of €9,900. The
Group is refurbishing the existing buildings and once refurbished, the project will provide a
15,000 sqm new Class A office campus. Due to the nature of transaction, the transaction was
treated as asset deal.
On 11 February 2022, GTC Origine Investments Pltd., a wholly-owned subsidiary of the
Company, acquired from Groton Global Corp Napred company ("GTC B41 d.o.o.”) in Belgrade
holding a land plot of 19,537 sqm for a consideration of €33,800.
51
In March 2022, the Group has completed a Class A office building in Budapest, Hungary –
Pillar.
In March 2022, the Group commenced the development of the third building within the Matrix
Office Park in Zagreb – Matrix C.
On 4 July 2022, GTC Origine Investments Pltd., a wholly-owned subsidiary of the Company,
established GTC K43-45 Property Kft. in Budapest for future development project. In July 2022,
GTC K43-45 Property Kft acquired a landplot in CBD in Budapest for a consideration of €6,550.
The project has an existing building permit for the development of approximately 6,400 sqm of
hospitality, student housing or short-term rental apartments.
On 9 August 2022, the Group entered into an agreement concerning a transaction involving a
joint venture investment into an innovation park in County Kildare, Ireland (the “Transaction”).
The Transaction involves an investment of approximately €115,000 into the Kildare Innovation
Campus. The project involves other international professional investors acting through a
Luxemburg partnership advised by Icona Capital, an entity from the same group as GTC’s
minority partner (for more details please refer to note 18 in consolidated financial statement
for the year ended 31 December 2022).
On 28 August 2022, GTC Origine Investments Pltd., a wholly-owned subsidiary of the
Company, acquired 34% of units in Regional Multi Asset Fund Compartment 2 of Trigal
Alternative Investment Fund GP S.á.r.l. (“Fund”) for consideration of €12,600 from an entity
related to the majority shareholder. The Fund’s focus is commercial real estate investments in
Slovenia and Croatia with a total gross asset value of €68,750. The fund expected maturity is
in Q4 2028.
In December 2022, the Group has completed a Class A office building in Sofia, Bulgaria –
Sofia Tower 2.
In October 2022, the Group has completed a Class A office building in Belgrade, Serbia – GTC
X.
In the fourth quarter 2022, the Group commenced the development of the third building within
the Center Point complex in Budapest, Hungary – Center Point 3.
DISPOSAL OF SUBSIDIARIES
On 12 January 2022, GTC Group finalized sale of the entire share capital of Serbian
subsidiaries: Atlas Centar d.o.o. Beograd, Demo Invest d.o.o. Novi Beograd, GTC BBC d.o.o.,
GTC Business Park d.o.o. Beograd, GTC Medjunarodni Razvoj Nekretnina d.o.o. Beograd and
Commercial and Residential Ventures d.o.o. Beograd and Hungarian company Office Planet
Kft. ( which has 70% in shares of sold Serbian entities), following the satisfaction of customary
conditions precedent. For details please refer to note 33 to the Consolidated Financial
Statements for the year ended 31 December 2022.
On 28 July 2022, GTC has sold Cascade Building S.R.L., a wholly-owned subsidiary of the
Company owning Cascade Office Building in Bucharest (4,211 sqm) for €10,300. Net proceeds
from sale of subsidiary were €9,600.
52
On 30 November 2022, GTC has sold GTC Matrix d.o.o. a wholly-owned subsidiary of the
Company owning a portfolio of two A-class office buildings in Zagreb – Matrix A and B for
€52,200. Net proceeds from sale of GTC Matrix d.o.o. were €51,300.
DISPOSAL OF ASSETS
On 19 July 2022, GTC FOD Property Kft., a wholly-owned subsidiary of the Company, signed
a sale and purchase agreement, concerning the sale of the office building Forest Office
Debrecen owned by the subsidiary. The selling price under the agreement is HUF 19.1 billion
(an equivalent of €47,700 as at 31 December 2022). The transaction was closed on 30 January
2023.
REPAYMENT OF BONDS, BANK LOAN REFINANCING AND OTHER CHANGES
TO BANK LOAN AGREEMENTS
On 18 April 2022, GTC SA repaid all bonds issued under ISIN code PLGTC0000292 (full
redemption). The original nominal value was EUR 9,440. As of balance sheet date, credit
facility was not used.
On 13 May 2022, GTC SA signed an amendment agreement to the revolving facility agreement
dated 29 October 2021. As a result, the available amount of unsecured revolving credit facility
was increased to €94,000.
On 18 May 2022, Globis Wrocław Sp. z o.o., a wholly-owned subsidiary of the Company,
signed a prolongation of the existing facility with Santander Bank Polska. Final repayment date
was extended to 31 August 2025 and the outstanding balance of the loan in the amount of
€13,500 will be paid as a balloon payment on the maturity date.
On 28 June 2022, GTC UBP Sp. z o.o., a wholly-owned subsidiary of the Company, signed
with Berlin Hyp AG amendment agreement to bank loan agreement, according to which a
prepayment of €6,100 was made at the beginning of July 2022. The outstanding balance of
the loan will be paid as the balloon payment on the maturity date.
On 4 November 2022, GTC SA repaid partially bonds issued under ISIN code PLGTC0000318
(one-third of total issue) in the amount of €17,100 (PLN 73,333) – including hedge component.
IMPACT OF THE SITUATION IN UKRAINE ON GTC GROUP
Since the start of the war in Ukraine on 24 February 2022, even though the Group does not
conduct any activities in the territory of Ukraine, Russia or Belarus, it cannot be ruled out that
the current geopolitical situation in Europe triggered by this war, which has resulted in a
number of macroeconomic consequences for Poland and other European countries, may also
have an impact on the Group’s operations. The continuation of the war, its scale and further
course of military operations may cause an extension of the set of economic sanctions imposed
thus far, further disruption in supply chains, limited availability of subcontractors and a general
increase in the prices of materials resulting from, among others, rising energy prices, which in
turn may translate into significant costs of the implementation of investments carried out by the
Group. A significantly higher and volatile costs of energy (severe energy crunch because of
steep cuts in natural gas supplies from Russia following the outbreak of the Russia-Ukraine
53
conflict) and general uncertainties related to the impact of the war in Ukraine on both global
and the SEE/CEE economy and the deterioration of the global and regional economies may
adversely impact the economic situation of the Group.
As at the date of this report, the impact of the war in Ukraine on the Group’s operations is not
material. However, it is not possible to estimate the scale of such impact in the future and
due to high volatility, the Company monitors the situation on an ongoing basis and analyses
its potential impact both from the perspective of individual projects and the entire Group and
its long-term investment plans.
EVENTS THAT TOOK PLACE AFTER 31 DECEMBER 2022:
On 2 January 2023, Otwarty Fundusz Emerytalny PZU “Złota Jesień” appointed Mr. Sławomir
Niemierka as member of the Supervisory Board of the Company, effective as of 2 January
2023.
On 19 July 2022, GTC FOD Property Kft., a wholly-owned subsidiary of the Company, signed
a sale and purchase agreement, concerning the sale of the office building owned by the
subsidiary. The selling price under the Agreement is HUF 19.1 billion (ca. €47,700 as of 31
December 2022). As of 30 January 2023 the full purchase price was paid and the transaction
was completed.
On 31 March 2023, GTC Origine Zrt., a wholly-owned subsidiary of the Company, signed a
quota transfer agreement to acquire 100% holding of Tiszai Fény Alfa Kft, which owns 9 newly
developed solar power plants with installed nominal capacity of max 0.5 MW each, operating
in Tiszafüred, Hungary for a consideration of HUF 2.4 billion (ca EUR 6.4m). The project shall
be financed partially by a bank facility in the amount of EUR 2.6 million. The transaction is
expected to close in Q2 2023.
4.3 Structure of the Group
The structure of Globe Trade Centre S.A. Capital Group as of 31 December 2022 is presented
in the consolidated financial statements for the year ended 31 December 2022 in Note 8
“Investment in subsidiaries.”
The following changes in the structure of the Group occurred in the year ended 31 December
2022:
• acquisition of GTC PSZTSZR Projekt Kft,
• acquisition of GTC DBRNT Projekt Kft,
• acquisition of GTC B41 d.o.o.,
• acquisition of non-controlling interest and increase to 75% share in
GML American
Regency Pipera S.R.L.;
54
• sale of Office Planet Kft.,
• sale of Commercial and Residential Ventures d.o.o. Beograd,
• sale of GTC BBC d.o.o.,
• sale of Atlas Centar d.o.o. Beograd,
• sale of Demo Invest d.o.o. Novi Beograd,
• sale of GTC Business Park d.o.o. Beograd,
• sale of GTC Medj Razvoj Nekretnina d.o.o. Beograd,
• sale of Cascade Building S.R.L.,
• sale of GTC Matrix d.o.o.,
• establishment of wholly-owned subsidiary GTC Flex EAD,
• establishment of wholly-owned subsidiary GTC K43-45 Property Kft.,
• establishment of wholly-owned subsidiary GTC Liffey Kft.,
• establishment of wholly-owned subsidiary GTC UK Real Estate Investments Ltd.,
• change in Glamp d.o.o. Beograd shareholder structure: now GTC S.A. holds directly
30% of shares and remaining 70% shares through a wholly-owned subsidiary GTC
Hungary.
4.4 Changes to the principal rules of the management of the Company and the
Group
There were no changes to the principal rules of management of the Company and the Group.
During 2022, the following changes in the composition of the management board took place:
• on 13 December 2021, the supervisory board of the Company appointed Mr. Pedja
Petronijevic to the management board of the Company (Chief Development Officer)
effective as of 15 January 2022 and Mr. János Gárdai to the management board of the
Company (Chief Operating Officer) effective as of 1 February 2022. (see current report
no 18/2021);
• on 14 January 2022, GTC entered into a mutual employment contract termination
agreement with Mr. Yovav Carmi former President of the management board.
Subsequently Mr. Carmi resigned from his seat on the management board of the
Company and other subsidiaries The resignation is effective immediately (see current
report no 7/2022);
55
•
on 28 January 2022, Mr. Gyula Nagy resigned from his seat on the management board
of the Company. The resignation is effective immediately (see current report no
11/2022);
•
on 17 March 2022, the supervisory board of the Company appointed Mr. Zoltán Fekete
to the management board of the Company as the President of the management board
(see current report no 21/2022);
•
on 5 July 2022, Mr. Pedja Petronijevic resigned from his seat on the management board
of the Company. The resignation is effective on 15 July 2022 (see current report no
35/2022).
4.5 The Group’s Strategy
The Group's objective is to create value from
an active management of a growing
commercial real estate portfolio, supplemented by acquisitions and selected development
activities; and
The Group aims to create and maximize shareholder value by
continually adapting to
changes in the markets in which it operates while maintaining the maximum performance of
its core portfolio of assets, always taking into consideration the Group's prudent financing
policy.
Additionally, in August 2022, the management board of GTC announces strategy expansion.
Potential new sectors identified to be considered for investment as part of the new strategy
include:
• investment in innovation and technology parks
• investment in renewable energy facilities
• investment in development of PRS assets (private rented sector property -
residential).
The management board assumes that the new investments should:
• help GTC diversify its portfolio in new and fast-growing sectors which may be either
based on direct real estate investments or operating in related investment platforms
• achieve expected returns from such investments at least the same or higher than the
returns on currently held assets in the portfolio;
• involve sectors with more sustainable growth compared to traditional real estate;
• be made in segments of the market which should be resilient to present turbulent
market conditions.
 
56
The Group implements the following elements, among others, to achieve its strategic
objectives:
Achievement of continued portfolio and platform growth
One of the Group's primary strategic goals is the continued increase of the income-generating
portfolio through acquisition of yielding properties, while completing prime development
projects on already-owned or acquired land plots. Also, to have value-add acquisitions that
provide tangible potential through re-letting, improvement in occupancy and rental upside as
well as the realization of redevelopment potential. The Group will continue to convert ongoing
development projects and land reserves into income-generating properties and the sale of non-
core assets to unlock equity for new investments and acquisitions and increase the return on
invested equity. The Group intends to develop its pipeline in accordance with its environmental
and sustainability principles. The Group will carefully consider and evaluate attractive
investment opportunities, which meet the investment criteria of the Group while taking into
consideration the prevailing market yields and the Group's investment criteria targets. The
Group's acquisition strategy includes the acquisition of income generating real estate assets
located in European countries, preferable those with higher credit ratings, that have cash
generation ability (upon acquisition or shortly after) and demonstrate the potential for growth
of net operating income, through re-leasing, optimizing occupancy, rental rates, and/or
redevelopment and the potential to increase return on equity through active asset
management.
Optimisation of operating and financial performance
The Group is committed to improving the efficiency of asset management activities and
maximizing operating performance. This is achieved through active management of the
income-generating property portfolio to achieve and maintain cost efficiency, to improve rental
income and occupancy, and to diversify tenant risk by retaining a high-quality tenant base. The
Group's financial management strategies include further optimizing administrative and platform
costs through organizational streamlining and optimization of costs of finance through
deleveraging, planning and resource allocation, and through continuous refinancing at
improved terms to increase the recurring return on equity, always taking into consideration the
Group's prudent financing policy.
Strategic disposal of mature assets
The Group may sell certain of its mature assets from its portfolio (i.e., completed commercial
properties that generate a stable flow of rental income and have reached their long-term value
in the Group's view). Moreover, following the acquisition of existing income-generating
properties and increasing their value, the Group may also sell such properties. In furtherance
of this strategic objective, and based on the prevailing market conditions and Group’s strict
criteria, the Group in 2021 signed preliminary sale agreement and sold in Q1 2022 the office
portfolio located in Belgrade, Serbia including 11 office buildings above their book value.
57
Continued successful project delivery
The Group is committed to developing high-quality commercial projects, with focus on the
delivery of major projects in the next two to three years. The Group’s goal is to continue to
build track record of delivery of projects (a) on time, (b) on budget and (c) at a quality that
meets tenants’ demand and also continue to adhere to all relevant environmental aspects and
standards in the construction of developments (for example, continuing to develop Leadership
in Energy and Environmental Design ("LEED") certified buildings). The Group is a real estate
investor and developer and adjusts its development activities to market conditions. The
management board believes that this approach allows the Group to better respond to the
changing conditions of the real estate market and focus on more active and efficient asset
management of its existing as well as its expanding portfolio.
The development of projects, which at the date of the Report were in the construction stage or
the pre-construction stage, is an important value driver.
During 2022, the Group completed three projects consisting of 55 thousand sq m of office
space:
• Pillar - an office building in Budapest, Hungary with an intended GLA of approximately
29,100 sq m;
• Sofia Tower 2 - an office building (part of Mall of Sofia) in Sofia, Bulgaria, with an intended
GLA of approximately 7,800 sq m and
• GTC X - an office building in Belgrade, Serbia, with an intended GLA of approximately
17,700 sq m.
Currently, the Group has three projects consisting of 61 thousand sq m of office space under
construction:
• Matrix C - an office building in Zagreb, Croatia, with an intended GLA of approximately
10,500 sq m;
• Center Point 3 - an office building in Budapest, Hungary, with an intended GLA of
approximately 36,000 sq m and
• Rose Hill Business Campus - an office building in Budapest, Hungary, with an intended
GLA of approximately 14,700 sq m.
As of 31 December 2022, projects under construction represent approximately 2% of the
Group's portfolio value.
We hold a number of landplots allowing for further development of commercial space. The
Group’s rich commercial landbank designated for future development allows us to extend the
planned projects in areas where there will be demand for commercial properties.
58
Maintaining a balanced mix of investments and adapting to changes
in the real estate markets
The Group intends to continue its real estate management and development activities in
Warsaw or regional cities in Poland and in capital cities of European countries, characterized
by macroeconomic stability, continued GDP growth, and investor and tenant demand. The
Group believes that some other markets in which it operates also offer long-term growth
potential due to their relatively underdeveloped real estate markets and relatively illiquid
markets. Further investments in these markets will be explored on an opportunistic basis with
strict risk-adjusted return criteria. Simultaneously, specific performance requirements will be
imposed on all assets in the Group's portfolio.
Maintaing sustainability measures (ESG - Environmental, social, and
governance)
In 2015, the Group adopted the first iteration of its ESG policy. The Group undertook to develop
properties in an environmentally responsible and resource-efficient manner throughout a
building's lifecycle: from planning to design, construction, operation, maintenance, renovation,
and demolition. The Group made a commitment that all its existing projects where possible
and all new projects are assessed by sustainability certification schemes such as DGNB,
BREEAM or LEED.
In 2020, GTC implemented a policy of ESG reporting based on the Global Reporting Initiative's
Sustainability Reporting Standards (GRI), designed to be used by organizations to self-report
on their impact on the economy, the environment, and/or society. The Group engaged an
external consultant to help in the process of selection of measures to report on that formed the
basis of its ESG report for 2020.
The guiding principles of the Group's evolving ESG policy are:
• promoting a sustainable approach towards real estate development and management;
• contributing to environmental protection and the development of local communities in
which the Group operates;
• pursuing a sustainable business model that allows the Group to achieve its business
objectives without placing an excessive burden on the environment;
• actively managing the Group’s assets to continually improve environmental
performance, quality and resilience; and
• encouraging proactive contributions from all employees, tenants, customers and
stakeholders of the Group to meeting all objectives in compliance with the policy.
The Group recognizes that the responsible management of urban areas is vital to achieving
sustainable construction and development at industry level in the long-term. The Group seeks
to use modern technological solutions in construction and modern architecture so as to reduce
the negative environmental impact of the daily operation of entire communities. By
implementing investments in a responsible manner, revitalizing post-industrial areas, and
providing high-quality buildings. The Group believes it can continue to make a positive impact
on:
59
• reducing energy consumption in cities;
• improving the efficiency of water consumption;
• reducing the consumption of non-renewable resources;
• reducing the level of pollution; and
• preserving green areas.
Sustainability and environmental and social responsibility continue to be a priority for the
Group. The Group delivers modern buildings, equipped with technology solutions that meet
the strict BREEAM or LEED criteria. The Group's ESG policy aims to allow the Group to
increase its market share, improve financial results and reduce operational risk all while making
a positive contribution to the environment and society.
Additionally, the Group subscribes to all 17 Sustainable Development Goals ("SDGs") as
defined by the United Nations for the period 2015 - 2030, as well as the 2015 Paris Agreement
within the United Nations Framework Convention on Climate Change. The Group is at all times
cognisant of the SDGs in operating its business.
The Group is also a member of key industry initiatives, such as, the European Public Real
Estate Association ("EPRA"). By participating in task groups with leading developers,
consultants, engineers and manufacturers the Group gains practical insights into innovative
solutions for effective, environmentally friendly property management and access to
information on upcoming legislation and the regional transposition of EU law.
The Group acknowledges the importance of its real estate footprint to society and the
environment, and the benefits of maintaining and operating of an efficient and high-quality
portfolio.
ESG Policy Pillars
Environmental issues, including climate issues, are an important area of the Group
management. They are included in our ESG Policy which base on 3 pillars and 8 focus areas:
60
Pillar I. Focus on Environmental issues ( E )
Our main focus with regard to lowering the impact on the environment are:
E1. Green Buildings
• Delivering sustainable buildings that operate with a reduced impact on the climate,
use green energy and substantially fewer natural resources (like water), and focus on
well-being of tenants,
•
Reduction of our carbon footprint lever by thorough analysis of way to limits CO2
emission and development of proper low emission strategy,
•
Conduct our business in a closed-
loop system that minimises waste and resource
consumption,
• Developing processes as a result of which sustainability of our portfolio is confirmed
by relevant green certificates (LEED, BREEAM, DGNB and WELL),
• Contribution to circular economy through refurbishment, minimizing waste and making
the most of resources.
E2. Climate Change Mitigation
• Developing new buildings, acquire and manage assets with focus on protecting the
natural environment,
• Improving energy efficiency and lower carbon emissions in our buildings.
61
Pillar II Focus of Social Issues ( S )
Our main focus with regard to our social issues are:
S1. Our Tenants
• Loyalty through a professional approach;
• Direct and effective cooperation through tenant relationship between leasing teams
and tenants to resolve any arising issue and meet their current needs;
• Coordination by our asset management teams; the activities of other departments
and/or external suppliers when they are involved in tenant-related activities. We
cooperate with lawyers, public institutions, insurance companies, contractors, etc.
acting on behalf of our tenant;
• Involving tenants through cooperation
and raising awareness how to achieve
meaningful results on the properties’ impact on environmental and social issues.
S2. Our Employees:
• Creating a stable employment conditions in terms of respecting employees rights,
adequate remuneration and benefits;
• Creating a good working atmosphere based on mutual trust and respect;
• Maintaining a rigorous approach and compliance to occupational health and safety;
• Employee’s development through training and participation in industry events;
• Employee’s involvement in social activities such as sports events and charity;
• Confirming, through our actions, that we are a reliable and competitive employer.
62
S3. Local Communities:
Our main focus with regard to execute investments in a responsible manner taking in the
account local community’s concern through revitalization of post-
industrial areas, and
providing high-quality buildings, where we can make an impact on:
• building sustainable and accessible city spaces throu
gh our assets and local
infrastructure;
•
taking care of stimulating social growth and answering local needs in the
neighbourhood where are our properties are located.
Pillar III. Focus on Governance Issues ( G )
Our main focus with regard to governance issues are:
G1. Compliance
•
Continuously working with the highest business ethics in a pro-
active and open
manner;
• The operations of GTC should always be made within the frame of good practices;
• Z
ero tolerance for any forms of corruption, fraud, anti-
competitive and monopoly
behaviour;
• Considering legal compliance in every decision about our investments, developments,
management practices and other processes;
• Maintaining very good relations with our partners based on mutual trust.
G2. Risk management
• Conducting all the operations to assure sustained profitability of our business;
63
• identify key risk factors and effective ways to mitigate risks before they materialise;
• annually revise the risk management framework, and update our business procedures;
• First and foremost, we constantly raise our employees' awareness of the importance
of risk management and encourage them to actively report risky situations and threats
related to environment, social and governance issues in their daily business work
ESG risks, including climate risks, challenges and trends in this area, company goals and
progress in the implementation of major ESG initiatives – are discussed at least once a year
at the meetings of the management board and the supervisory board.
The process of raising social and environmental awareness and ESG knowledge of the
executives and employees of our organisation, developing and monitoring the implementation
of the Policy is coordinated by the management board, with the support and assistance of local
technical teams.
4.6 Business overview
The Group’s core business is geared towards commercial real estate, with a clear focus on
creating value from active management of a growing real estate portfolio in CEE and SEE
supplemented by selected development activities.
As of 31 December 2022, the book value of the Group’s investment property, residential
landbank, and real estate assets held for sale (including right of use) amounted to €2,321,908.
The Group's investment properties include income generating assets (completed properties
including 1 office building held for sale), projects under construction, commercial landbank,
and residential landbank as well as right of use of lands under perpetual usufruct and
residential landbank.
Additionally, GTC holds 25% of technology campus (booked as a non-current financial assets)
with GTC’s share of book value of €117,641, and 34% in the investment fund which holds 4
completed commercial buildings in the SEE region (booked as a non-current financial assets)
with GTC’s share of book value of €12,627.
INVESTMENT PORTFOLIO
COMPLETED INVESTMENT PORTFOLIO AND REAL ESTATE ASSETS HELD
FOR SALE
As of 31 December 2022
, the Group manages completed commercial properties with a
combined gross rentable area of approximately 762
2
thousand sq m, including 38 office
buildings and 6 shopping malls, which constituted 88% of the total property portfolio.
2
Includes 1 office building held for sale with 25 thousand GLA.
 
64
The Group’s office buildings provide convenient space, flexible interiors, and a comfortable
working environment. They are located in the heart of business districts and in proximity to the
most important transport routes, including international airports. All projects have earned the
trust of a significant number of multinational corporations and other prestigious institutions,
including ExxonMobil, evosoft, Ericsson, KEF, IBM, Allegro, MKB Bank, Rempetrol,
Concentrix, UniCredit, CBRE, LOT, Deloitte, KPMG and others.
The Group’s shopping centers are located in both capital cities as well as in secondary cities
in Poland, Serbia, Bulgaria, Croatia and Hungary. They are always very highly ranked in the
city of their location. The tenants include big multinationals as well as local brands like
Carrefour, Cinema City, H&M and the Inditex Group, and others.
PROJECTS UNDER CONSTRUCTION
As of 31 December 2022, the Group had three office buildings classified as an investment
under construction with a book value of €51,487, which constituted 2% of the Group’s total
property portfolio
.
INVESTEMENT PROPERTY LANDBANK
As of 31 December 2022 the Group had land of €153,604 classified as an investment property
landbank designated for the future development (€150,406) and commercial land in Poland
classified for sale (€3,198), which constituted 7% of the Group’s total property portfolio (by
value). The landbank has been designated for projects that are on the Group`s focus for the
coming year, but that have not yet begun, including, Advance Business Center 3 and Napred
combined with land plots with a longer estimated development period.
The Group’s rich investment property landbank designated for future development allows us
to extend the planned projects in areas where there will be demand for commercial
properties.
RIGHT OF USE - INVESTEMENT PROPERTY
The Group recognized the right of use of lands under perpetual usufruct in the amount €40,020
which constituted 2% of the Group’s total property portfolio. The right of use of lands under
perpetual usufruct mainly includes right of use of: investment property landbank of €17,526,
completed investment property of €21,373.
RESIDENTIAL LANDBANK
As of 31 December 2022, the Group held a residential landbank (including land in Romania
held for sale in amount €680 and right of use of residential landbank of €1,064) with a total
value of €27,290 which constituted 1% of the Group’s total property portfolio.
65
NON-CURRENT FINANCIAL ASSETS (RELATED TO INVESTMENT PROPERTY)
TECHNOLOGY HUB
On 9 August 2022, the Group entered into an agreement for a joint investment into an
innovation park in County Kildare, Ireland. This transaction involved an initial investment of
approximately EUR 115 million into the Kildare Innovation Campus and additional investment
of EUR 2 million as at 22 September 2022, according to agreement terms.
As of 31 December 2022, the Group held a minority of 25% of notes (debt instruments) issued
by a Luxembourg securitization vehicle financial instrument which accrues a variable return
subject to the future proceeds derived from project. The Kildare Innovation Campus extends
over 72 ha (of which 34 ha is undeveloped). The fair value of non-current financial assets
(Innovation Campus) was €117,641 (for more details please refer to note 18 in consolidated
financial statement for the year ended 31 December 2022).
REAL ESTATE INVESTMENTS IN SLOVENIA AND CROATIA
Additionally, as of 31 December 2022, the Group holds 34% of units in Regional Multi Asset
Fund Compartment 2 of Trigal Alternative Investment Fund GP S.á.r.l. (“Fund”) The Fund is
focus on commercial real estate investments in Slovenia and Croatia with a total gross asset
value of €68,750. The fund expected maturity is in Q4 2028. The fair value of non-current
financial assets (Fund) was €12,627.
As of 31 December 2022, the Group held a non-current financial assets (related to investment
property) measured at fair value through profit or loss with a total value of €130,341.
4.6.1 Overview of the investment portfolio
The Group`s strategy focuses on creating
value from active management of a growing
real estate portfolio in CEE and SEE. The
Group has a presence in Poland, Hungary,
Belgrade, Bucharest, Zagreb, and Sofia.
The Group focused on commercial assets,
mainly office buildings and office parks as
well as retail and entertainment centers.
The Group’s investment properties include
income generating assets (completed
properties and real estate assets held for
sale excluding right of use), projects under
construction, investment property landbank
(including land held for sale) and right of
use.
Investment property
under construction
2%
Investment
property landbank
(incl. AHFS)
7%
Right of
use
2%
Income generating portfolio
(incl. AHFS)
89%
% of Investment property
66
Poland
39%
Hungary
32%
Sofia
9%
Bucharest
8%
Belgrade
7%
Zagreb
5%
4.6.1.1 Overview of income generating portfolio including real estate assets
held for sale
As of 31 December 2022, the Group had 44 income generating assets totalling 762 thousand
sq m and valued at €2,050,571 including 1 office asset held for sale valued at €47,700
(disposed on 30 June 20223) The average occupancy rate within the income generating
portfolio was 88% (87% excluding office building held for sale) as of 31 December 2022. The
portfolio was valued based on an average yield of 6.8%. The average duration of leases in the
Group`s income generating portfolio was 3.7 years (3.6 years excluding office building held for
sale), and the average rental rate was €17.5/sq m/month (€17.7/sq m/month excluding office
building held for sale).
Approximately 39% of the income generating portfolio (by value) is located in Poland, 32% in
Hungary, 9% in Sofia, 8% in Bucharest, 7% in Belgrade, and 5% in Zagreb.
The following table presents income generating portfolio by country in which the Group
operates as of 31 December 2022:
Location
Total gross
leasable area
(sq m)
% of GLA
(sq m)
Average
occupancy
(%)
Book value
(€)
% of total
book value
Poland
309,300
41%
85%
799,138
39%
Hungary* 229,700 30% 89% 652,348
32%
Sofia 74,700 10% 91% 195,300
9%
Bucharest 62,500 8% 74% 163,785
8%
Belgrade 51,600 7% 98% 140,400
7%
Zagreb 34,400 4% 98% 99,600
5%
Total 762,200 100%
88%
2,050,571
100%
*Includes 1 office asset held for sale.
67
Office
65%
Retail
35%
The Group is focused on the office sector. As of 31 December 2022, office properties
accounted for around 65%, and retail properties accounted for the remaining 35% of the book
value of income generating portfolio.
The following table presents income generating portfolio by sector as of 31 December 2022:
Usage type
Total gross
leasable
area
(sq m)
% of GLA
(sq m)
Average
occupancy
(%)
Book
value
(€)
% of
total
book
value
Office 558,000 73% 84%
1,330,671
65%
Retail 204,200 27% 96% 719,900
35%
Total 762,200 100%
88%
2,050,571
100%
4.6.1.1.1 Overview of the office portfolio
As of 31 December 2022, the Group office portfolio comprises 38 office buildings (including 1
building held for sale). Total gross rentable office space was 558 thousand sq m compared to
649 thousand sq m as of 31 December 2021. The total value of the office portfolio as of 31
December 2022 was €1,330,671 ( including the book value asset held for sale in the amount
of €47,700) compared to €1,475,542 ( including the book value assets held for sale in the
amount of €266,763) as of 31 December 2021. The decrease in value is mainly attributable to
sale of Serbian office portfolio partially offset by completion of 3 office buildings – Pillar
(Budapest) ,GTC X (Belgrade) and Sofia Tower 2 (Sofia).
The Group’s office buildings are located in Poland and Hungary and capital cities of CEE and
SEE region: Belgrade, Zagreb, Bucharest, and Sofia.
68
The following table presents the office portfolio by country as of 31 December 2022:
Location
Total gross
leasable
area
(sq m)
% of
GLA
(sq m)
Average
occupancy
(%)
Book
value
(€)
% of total
book value
Hungary 223,200 40% 89% 631,648
47%
Poland 195,700 35% 80%
356,438
27%
Bucharest 62,500 11% 74% 163,785
12%
Sofia 52,000 10% 89% 113,600
9%
Belgrade 17,700 3% 94% 50,400
4%
Zagreb 6,900 1% 96% 14,800
1%
Total 558,000 100% 84% 1.330,671
100%
4.6.1.1.1.1 Office portfolio in Hungary
The Group’s total gross rentable area in Hungary comprises 223 thousand sq m in twelve office
buildings located mostly in Budapest (one office building in Debrecen was classified as held
for sale and finally sold on 30 January 2023). The occupancy rate was 89% (87% excluding
office building held for sale). The average duration of leases was 4.1 years at the year-end
(3.9 years excluding office building held for sale), and the applied average yield was 6.1%
(6.0% excluding office building held for sale). The average rental rate generated by the office
portfolio in Hungary was €16.4 sq m/month (€16.8/sq m/month excluding office building held
for sale). The book value of the Group’s office portfolio in Hungary amounted to €631,648 as
of 31 December 2022, as compared to €505,437 as of 31 December 2021. This increase is
attributable mainly to the completion of Pillar office building and acquisition of one office
building.
Hungary
47%
Poland
27%
Bucharest
12%
Sofia
9%
Belgrade
4%
Zagreb
1%
69
The following table lists the Group’s office properties located in Hungary:
Property Location
GTC’s
share
Total gross
rentable area
Year of
completion
(%)
(sq m)
Center Point I&II
Budapest
100%
40,700
2004/2006
under
redevelopment
Duna Tower
Budapest
100%
31,200
2006
GTC Metro
Budapest
100%
16,200
2010
Vaci 173-177
1
Budapest
100%
6,400
-
Vaci Greens D
Budapest
100%
15,600
2018
Ericsson Headquarter
Budapest
100%
21,100
2017
evosoft Hungary Ltd.
Headquarter
Budapest
100%
20,700
2020
V188
Budapest
100%
15,000
2001
Forest Offices ²
Debrecen
100%
24,900
2018
Döbrentei
1
³
Budapest
100%
2,300
-
Pillar
Budapest
100%
29,100
2022
Total 223,200
1
Property acquired as landbank for future development, with a small office building located on the plot.
² Building classified as asset held for sale and finally disposed in January 2023..
³ Acquired in 2022.
4.6.1.1.1.2 Office portfolio in Poland
The total gross rentable area in Poland comprises 196 thousand sq m in 16 office buildings
located in Warsaw, Kraków, Łódź, Katowice, Poznań and Wrocław. The average occupancy
rate was at the level of 80%. The average duration of leases was 3.0 years at the year-end,
and applied average yield was at the level of 7.7%. The average rental rate generated by the
office portfolio in Poland was at the level of €14.7/sq m/month. The book value of the office
portfolio in Poland amounted to €356,438 as of 31 December 2022 compared to €373,639 as
of 31 December 2021. The decrease comes from a decline in expected rental values and an
decrease in occupancy rate.
   
70
The following table lists the Group’s office properties located in Poland:
Property
Location
GTC’s
share
Total gross
rentable area
Year of
completion
(%)
(sq m)
Galileo Kraków 100% 10,600
2003
Globis Poznań Poznań 100% 13,800
2003
Newton Kraków 100%
10,800
2007
Edison Kraków 100% 10,900 2007
Nothus Warsaw 100%
9,600
2007
Zephirus Warsaw 100%
9,600
2008
Globis Wrocław Wrocław 100%
16,100
2008
University Business Park A Łódź 100%
20,200
2010
Francuska Office Centre A&B Katowice 100% 23,000 2010
Sterlinga Business Center Łódź 100% 13,400 2010
Corius Warsaw 100%
9,600
2011
Pixel Poznań 100% 14,400 2013
Pascal Kraków 100%
5,900
2014
University Business Park B Łódź 100% 20,200 2016
Artico Warsaw 100% 7,600 2017
Total 195,700
4.6.1.1.1.3 Office portfolio in Sofia
The Group’s total gross rentable area in Sofia comprises 52 thousand sq m in four office
buildings. The occupancy rate of the Group’s office portfolio in Sofia was 89%. The average
duration of leases was 3.4 years at the year-end, and the applied average yield was 7.9%. The
average rental rate generated by the office portfolio in Sofia was at the level of €16.0/sq
m/month. Book value of the Group’s office portfolio in Sofia amounted to €113,600 as of 31
December 2022 compared to €95,800 as of 31 December 2021. The increase in value was
attributed to the completion of Sofia Tower 2.
71
The following table lists the Group’s office investment properties located in Sofia:
Property
GTC’s
share
Total gross
rentable area
Year of
completion
(%)
(sq m)
Advance Business Center I 100% 16,000 2019
Advance Business Center II 100% 17,800 2020
Sofia Tower 100% 10,400 2006
Sofia Tower 2 100% 7,800 2022
Total 52,000
4.6.1.1.1.4 Office portfolio in Bucharest
The Group’s total gross rentable area in Bucharest comprises 62 thousand sq m in four office
buildings. The occupancy rate was 74%. The average duration of leases was 4.0 years at the
year-end, and the applied average yield was 6.3%. The average rental rate generated by the
office portfolio in Bucharest was at the level of €18.8/sq m/month. Book value of the Group’s
office portfolio in Bucharest amounted to €163,785 as of 31 December 2022, compared to
€171,985 as of 31 December 2021. The decrease comes mainly from sale of Cascade office
building.
The following table lists the Group’s office properties located in Bucharest:
Property
GTC’s
share
Total gross
rentable area
Year of
completion
(%)
(sq m)
Premium Plaza
100% 8,500
2008
City Gate
100% 47,600
2009
Premium Point
100% 6,400
2009
Total 62,500
4.6.1.1.1.5 Office portfolio in Belgrade
The Group’s total gross rentable area in Belgrade comprises 18 thousand sq m in one office
building. The occupancy rate was at the level of 94%. The average duration of leases was 5.8
years at the year-end, and the applied average yield was 7.2%. The average rental rate
generated by the office portfolio in Belgrade was at €18.0/sq m/month. The book value of the
Group’s office portfolio in Belgrade amounted to €50,400 as of 31 December 2022 compared
to €266,763 as of 31 December 2021. All the 11 office assets in Belgrade were held for sale
72
in 2021. The decrease in value was attributed to the sale of completed office portfolio in Q1
2022 partially offset by completion of GTC X in Q3 2022.
The following table lists the Group’s office properties located in Belgrade:
Property
GTC’s
share
Total gross
rentable area
Year of
completion
(%)
(sq m)
GTC X 100% 17,700
2022
Total 17,700
4.6.1.1.1.6 Office portfolio in Zagreb
The Group’s total gross rentable area in Zagreb comprises 7 thousand sq m in one office
building. The occupancy rate of the Group’s office portfolio in Zagreb was 96%. The average
duration of leases was 2.9 years at the year-end and applied average yield was 8.4%. The
average rental rate generated by the office portfolio in Zagreb was at the level of €15.5/sq
m/month. Book value of the Group’s office portfolio in Zagreb amounted to €14,800 as of 31
December 2022 compared to €61,918 as of 31 December 2021. The decrease in value was
attributed to the sale of Matrix A and B.
The following table lists the Group’s office investment properties located in Zagreb:
Property
GTC’s
share
Total gross
rentable area
Year of
completion
(%)
(sq m)
Avenue Centre 70% 6,900 2007
Total 6,900
73
4.6.1.1.2 Overview of the retail portfolio
As of 31 December 2022, the Group’s retail properties comprised six shopping centres with a
total gross rentable area of 204 thousand sq m. The total value of retail investment properties
as of 31 December 2022 was €719,900 compared to €721,200 as of 31 December 2021.
The following table presents the retail portfolio by country as of 31 December 2022:
Location
Total gross
leasable area
(sq m)
% of total
retail
portfolio
(%)
Average
occupancy
(%)
Book
value
(€)
% of total
book
value
Poland
113,600
56%
95%
442,700
61%
Belgrade 33,900 17% 100% 90,000 13%
Zagreb 27,500 13% 98% 84,800
12%
Sofia 22,700 11% 97% 81,700 11%
Budapest 6,500 3% 89% 20,700 3%
Total 204,200 100%
96% 719,900 100%
4.6.1.1.2.1 Retail portfolio in Poland
The total gross rentable retail space in Poland comprises 114 thousand sq m in two retail
schemes located in Warsaw and Częstochowa. The average occupancy rate was 95%. The
average duration of leases was 3.3 years at the year-end, and the applied average yield was
6.2%. The average rental rate generated by the retail portfolio in Poland was €21.5/sq
m/month. The book value of the Group’s retail portfolio in Poland amounted to €442,700 as of
31 December 2022, as compared to €443,000 as of 31 December 2021.
Poland
61%
Belgrade
13%
Zagreb
12%
Sofia
11%
Budapest
3%
74
The following table lists the Group’s retail properties located in Poland:
Property
Location
GTC’s
share
Total gross
rentable area
Year of
completion
(%)
(sq m)
Galeria Jurajska Częstochowa 100% 48,600
2009
Galeria Północna Warsaw 100% 65,000
2017
Total 113,600
4.6.1.1.2.2 Retail portfolio in Belgrade
The total gross rentable retail space in Belgrade comprises 34 thousand sq m in one shopping
mall. The average occupancy rate was 100%. The average duration of leases was 4.4 years
at the year-end, and the applied average yield was 8.5%. The average rental rate generated
by the retail portfolio in Belgrade was at €18.7/ sq m/month. Book value of the Group’s retail
portfolio in Belgrade amounted to €90,000 as of 31 December 2022 as compared to €90,700
as of 31 December 2021.
The following table lists the Group’s retail properties located in Belgrade:
Property
GTC’s
share
Total gross
rentable area
Year of
completion
(%)
(sq m)
Ada Mall 100% 33,900 2019
Total 33,900
4.6.1.1.2.3 Retail portfolio in Zagreb
The Group’s total gross rentable retail space in Zagreb comprises 28 thousand sq m in one
retail scheme. The occupancy rate was 98%. The average duration of leases was 4.0 years at
the year-end, and the applied average yield was 8.3%. The average rental rate generated by
the retail portfolio in Zagreb was at the €21.7/sq m/month. Book value of the Group’s retail
portfolio in Zagreb amounted to €84,800 as of 31 December 2022 compared to €85,400 as of
31 December 2021.
75
The following table lists the Group’s retail properties located in Zagreb:
Property
GTC’s
share
Total gross
rentable area
Year of
completion
(%)
(sq m)
Avenue Mall Zagreb
70% 27,500 2007
Total
27,500
4.6.1.1.2.4 Retail portfolio in Sofia
The Group’s total gross rentable retail space in Sofia comprises 23 thousand sq m in one retail
scheme. The occupancy rate was 97%. The average duration of leases was 4.1 years at the
year-end, and the applied average yield was 7.2%. The average rental rate generated by the
retail portfolio in Sofia was €22.3 /sq m/month. The book value of the Group’s retail portfolio in
Sofia amounted to €81,700 as of 31 December 2022 as compared to €80,500 as of 31
December 2021.
The following table lists the Group’s retail properties located in Sofia:
Property
GTC’s
share
Total gross
rentable area
Year of
completion
(%)
(sq m)
Mall of Sofia 100%
22,700 2006
Total
22,700
4.6.1.1.2.5 Retail portfolio in Budapest
The Group’s total gross rentable retail space in Budapest comprises 6 thousand sq m in one
retail scheme. The occupancy rate was 89%. The average duration of leases was 4.9 years at
the year-end, and the applied average yield was 6.0%. The average rental rate generated by
the retail portfolio in Budapest was at €18.1/sq m/month. The book value of the Group’s retail
portfolio in Budapest amounted to €20,700 thousand as of 31 December 2022 as compared
to €21,600 as of 31 December 2021.
The following table lists the Group’s retail properties located in Budapest.
Property
GTC’s
share
Total gross
rentable area
Year of
completion
(%)
(sq m)
Hegyvidék Office and Retail
Center
100% 6,500
2012
Total 6,500
76
4.6.1.2 Overview of properties under construction
As of 31 December 2022, the Group had three office projects with a total gross rentable area
of 61 thousand sq m and a book value of €51,487.
The following table lists the Group’s properties under construction:
Property
Segment
Location
GTC’s
share
Total gross
leasable
area
(sq m)
Expected
completion
Matrix C office
Zagreb,
Croatia
100% 10,500 Q2 2023
Center Point 3 office
Budapest,
Hungary
100% 36,000 Q3 2025
Rose Hill Campus office
Budapest,
Hungary
100% 14,700 Q1 2024
Total
61,200
4.6.1.3 Overview of investment property landbank
Management has conducted a thorough, asset by asset, review of the whole portfolio, in
parallel to its decision to focus on Group’s new developments efforts, solely on the strongest
markets and, whilst supporting only the projects in its portfolio, which give the strongest mid-
term upside potential, while reducing. Concurrently, the Management decided to reduce the
cash allocation towards projects that has a longer-term investment horizon. The above-implied
re-assessment of some of GTC's landbank projects development timetable and rescheduling
them to a later stage or designating them for sale.
Additionally, in some cases, in view due to the decline in consumption and deteriorating of
purchasing power, the timetable for stabilization of in relevant catchment areas around certain
completed and cash generating assets in SEE, the timeframe for stabilization of had to be re-
assessed, and consequently expectations for stabilized income were deferred.
As of 31 December 2022, the Group had land classified as investment property landbank
designated for future commercial development of €150,406 and land bank held for sale of
€3,198. The landbank, designated for future commercial development, includes projects on
Group`s focus for the coming years.
77
The following table lists the Group’s projects that are ready to be launched in next 24
months:
Property
Segment
Location
GTC’s
share
Total gross
leasable area
(sq m)
Advance Business Center 3 office Sofia, Bulgaria 100% 9,200
Spatio residential
Bucharest,
Romania
100% 23,100
Napred office Belgrade, Serbia 100% 72,400
Total 104,700
The Group’s rich investment property landbank designated for future development allows us
to extend the planned projects in areas where there will be demand for commercial properties.
4.6.1.4 Right of use
The Group recognized the right of use of lands under perpetual usufruct in the amount €40,020
which constituted 2% of the Group’s total property portfolio. The right of use of lands under
perpetual usufruct mainly includes right of use of: investment property landbank of €17,526,
completed investment property of €21,373.
4.6.2 Residential landbank
As of 31 December 2022, the Group held a residential landbank (including land in Romania
held for sale in amount €680 and right of use of residential landbank of €1,064.) with a total
value of €27,290 which constituted 1% of the Group’s total property portfolio.
4.6.3 Non-current financial assets (related to investment property)
GTC holds 25% of technology campus (booked as a non-current financial assets) with GTC’s
share of book value of €117,641, and 34% of 4 completed commercial buildings (booked as a
non-current financial assets) with GTC’s share of book value of €12,627.
As of 31 December 2022, the Group held a non-current financial assets (related to investment
property) measured at fair value through profit or loss with a total value of €130,341.
The fair value of non-current financial assets was as follows:
31 December 2022
Notes (Ireland)
117,641
Units (Trigal)
12,627
Other
73
Total
130,341
78
Technology
hub (Ireland)
90%
Real estate investment in
Slovenia and Croatia (Trigal)
10%
Other
0%
TECHNOLOGY HUB
On 9 August 2022, the Group entered into an agreement for a joint investment into an
innovation park in County Kildare, Ireland. This transaction involved an initial investment of
approximately EUR 115 million into the Kildare Innovation Campus and additional investment
of EUR 2 million as at 22 September 2022, according to agreement terms. GTC acquired
financial instruments, a minority of 25% of notes (debt instruments) issued by a Luxembourg
securitization vehicle, which entitle to participate in profit generated by the campus. The debt
instruments do not meet SPPI test therefore they are measured at fair value through profit or
loss.
Kildare Innovation Campus, located outside of Dublin, extends over 72 ha (of which 34 ha is
undeveloped). There are nine buildings that form the campus (around 101,685 sqm): six are
lettable buildings with designated uses including industrial, warehouse, manufacturing and
office/lab space. In addition, there are three amenity buildings, comprising a gym, a plant area,
a campus canteen, and an energy center. The campus currently generates around €6,260
gross rental income per annum. A masterplan has been prepared whereby the site and the
campus are planned to be converted into a Life Science and Technology campus with a total
of approximately 135,000 sq m. GTC’s investment is protected by customary investor
protection mechanisms in case of certain significant project milestones are not achieved in a
satisfactory manner.
The fair value of non-current financial assets (Innovation Campus) was €117,641. (for more
details please refer to note 18 in consolidated financial statement for the year ended 31
December 2022).
REAL ESTATE INVESTMENTS IN SLOVENIA AND CROATIA
On 28 August 2022, GTC Origine Investments Pltd., a wholly-owned subsidiary of the
Company, acquired 34% of units in Regional Multi Asset Fund Compartment 2 of Trigal
Alternative Investment Fund GP S.á.r.l. (“Fund”) for consideration of €12,600 from an entity
related to the Majority shareholder. The Fund is focus on commercial real estate investments
in Slovenia and Croatia with a total gross asset value of €68,750.
The fund expected maturity is in Q4 2028.
79
The following table lists the Fund’s properties:
Property
City/Country
Type
GTC’s
share
Total gross
rentable
area
Year of
completion
(%)
(sq m)
Feniks Building
Ljubljana
,
Slovenia
Office 34% 14,685 2007
Point Shopping Center
Zagreb,
Croatia
Retail 34% 13,644 2013
Rezidenca Building
(Loma Center)
Ljubljana,
Slovenia
Mixed-use 34% 8,043 2006
Kare A Building
(Krdu Building)
Kranj,
Slovenia
office 34% 4,928 2007
Total 41,300
Non-current financial assets at fair value through profit or loss are carried in the statement of
financial position at fair value with net changes in fair value recognised in the income
statement.
4.7 Overview of the markets on which the Group operates
3
This market commentary was prepared by Jones Lang LaSalle IP, Inc. It is based on material
that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we
cannot offer any warranty that it contains no factual errors. We would like to be told of any such
errors in order to correct them. Please note, the below-presented market commentaries are
based on information available to us as at 8 February 2023.
© 2023 Jones Lang LaSalle IP, Inc. All rights reserved. No part of this publication may be
reproduced or transmitted in any form or by any means without prior written consent of Jones
Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort been
made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors.
We would like to be told of any such errors in order to correct them. Please note, the below
presented market commentaries are based on information available to us as of 8 February
2023. With varying recent and ongoing political and economic events across the region and
the mitigating implications differing by market and sector we provide no assurance that market
conditions will not change unfavorably as a result of future events that are unknown to us.
As at the date of valuation and at the time this report was drafted, there are a number of
negative factors recognized as influencing property markets, exerting downward pressure on
property values and reducing liquidity. These include:
 
80
Ukraine
The full extent of the war in Ukraine and its wider long-term implications, whilst unknown, are
contributing to the volatility in global stock markets, high cost inflation, and supply chain delays,
particularly within Europe. Further, significant sanctions imposed against Russia and the risk
that the war could escalate and directly involve NATO countries are also adversely impacting
activities and sentiment.
Global Economy
The wider global economy is facing several additional negative factors that are contributing to
significant cost inflation and causing interest rates to increase.
Market activity
The property markets can mostly be described as functioning, but there is evidence that both
transaction activity, and the sentiment of buyers and sellers, are changing in a number of
markets and property sectors. There is a general perception of a changing real estate market
and there is a risk that continued volatility, coupled with rising interest rates, will have a material
and direct impact on pricing as yields increase. Evidence is starting to emerge of wider bid
spreads and price renegotiations, with some transactions even being terminated.
This explanatory note has been included to ensure transparency and to provide further insight
as to the market context under which the valuation opinion was prepared. In recognition of the
potential for market conditions to move rapidly, we highlight the critical importance of the
valuation date and advise you to keep the valuation under regular and early review.
4.7.1 Office market
Post-pandemic organizations need to define the new purpose for the office and establish the
metrics and space typologies that need to be included or adapted in order to respond to new
workstyles and the needs of a distributed workforce. The approach to footprint optimization will
largely be determined by an organization’s appetite for implementing the adapted Next Normal
Ways of Working. Embracing hybrid work is key to supporting organizational agility and
workforce flexibility.
Each organization’s hybrid policy and their structure of implementation will impact office usage.
It will differ according to expected peaks in office utilization while supporting work process
requirements, business and community needs. Remote working is enabled by effective
technology, linking spaces equipped with the right tools and a culture that supports hybrid
working. Worker-centric
offices become more social & collaborative, affecting layouts and
designs while supporting key activities required.
Workplace evolution from cellular spaces and open plan offices providing efficiency towards
more flexible spaces offering activity based options for effectiveness has been going on for the
past 10-15 years. The pandemic accelerated this trend and put an emphasis on the workplace
81
experience replying to the diverse needs of teams and individuals. Employees today want more
flexibility, more autonomy and the ability to decide when and where to work – in the office, at
home or a third place and in the virtual spaces.
Agile and further cooperation methodologies also require redesigned workspaces for different
activities both on site and in the virtual space. The overall workplace experience is increasingly
about shared function, wellness, hospitality and adaptivity to the ever-changing business
needs, leading to the fulfillment of ESG principles – offering a holistic view on the work
environment.
As 69% of employers are having difficulties filling jobs, workplace environment became the
number one indicator for attraction and retention of workforce. Prioritizing flexibility and work-
life balance over salary, 45% of office workers want to work from home 2 or more days a week
after the pandemic (also reducing commute time), and 24% feels their wellbeing is best
supported in the office. While the purpose of the office has shifted towards social functions,
collaboration and innovation, it needs to offer a variety of spaces and technology for focused
work more than ever (28% can better focus in the office).
Based on research it seems imperative for businesses to understand how their employees
work in a hybrid environment and explore opportunities to ensure a more relevant and highly
supportive workplace offering that can adaptively respond to fast changing needs of the
business and organization. Workplace transformation is a change process that starts with a
workplace strategy co-created with employees and requires change management throughout
the entire process of assessment, design and delivery.
Taking into account the start of the pandemic in 2020 and the average 5-year office lease
contract, majority of pre-pandemic leases will expire in 2025, therefore companies need to
create a new (post-pandemic, hybrid) workplace strategy and reconsider their office space
during 2023-2024 accordingly.
Budapest
Office market statistics and changing market dynamics still trigger supply-demand imbalances.
However, 2022 had a solid leasing activity, as well as the share of net-take up exceeded the
volume of renewals.
Although tenants are still cautious about their relocation and lease extension decisions, slowly
improving levels of supply and demand can be seen in the office market. The office vacancy
rate has risen further to 11.3%, whilst demand in the 2022 still predicts a progressively
improving office market in Budapest.
The total modern, existing office stock currently adds up to 4.25 million sq m, consisting of
3.475 million sq m of ‘A’ and ‘B’ category speculative office space as well as 775,000 sq m of
owner-occupied space.
Total deliveries in 2022 amount to 267,425 sqm.
Most notable were deliveries in Q3-Q4. For example, the H2O Phase 1 and the owner-
occupied MOL Campus with a total of 75,910 sq m. Three new speculative office buildings
(Millennium Gardens, Budapest One II. & III. phase, Major Udvar) and a new owner-occupied
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building (Bosch Campus II) were delivered to the office market with a total of 82,420 sq m in
Q3.
The lack of new supply seems to have been temporary in the previous year. At the end of the
fourth quarter, the volume of new deliveries being under construction for 2023, 2024 and 2025
stands at 271,600 sq m out of which approximately 97,000 sq m is already pre-leased.
The total demand of 2022 added up to 391,670 sqm, which shows a 7% increase from 2021,
however in Q4 2022, total demand reached 101,480 which was 9% below the same period of
previous year. Lease renewals stood for the largest share of total leasing activity with 42%,
followed by new leases in the existing stock with 38%, expansions of existing premises
reached 9%, pre-leases in new developments reached 7%, while the share of owner-occupied
buildings was 4% of the total demand.
Net absorption has remained positive by the end of the fourth quarter, amounting to 53,480
sqm and reached 158,510 sqm year-to-date.
The strongest occupational activity was recorded in Váci Corridor submarket, attracting 37%
of the total demand. Central Pest submarket reached second place with 21%, followed by the
North Buda with 14%.
The office vacancy rate increased to 11.3%, representing a 0.3 pps increase quarter-on-
quarter and 2.1 pps increase year-on-year. The lowest vacancy was registered in North Buda
with a 4.1% vacancy rate, whereas the highest vacancy rate remained in the Periphery
submarket (31.8%).
In general, we note a trend of increasing rents and service charges due to uncertainty
regarding corporates’ long-term office strategies caused by the effects of the war, the energy
and the construction price increase.
The highest rents (prime rent) are registered in the CBD submarket at 25 €/sq m/month. The
average rents in Budapest for existing Class ‘A’ buildings are between 15.00 up to 18.00 €/sq
m/month and in the case of Class ‘B’ buildings between 12.00 - 15.00 €/sq m/month.
Warsaw
2022 was supposed to bring a long-awaited stabilisation after over two years of turmoil related
to Covid-19. However, the Russian aggression in Ukraine has extended this period of
disruption with the markets entering a new phase of uncertainty. Geopolitical tensions, an
energy crisis and a change in the policies of central banks have triggered recession fears.
Although tenant activity in 2022 in Warsaw returned to pre-pandemic levels, currently, all real
estate market players remain extremely cautious in taking strategic decisions, as they consider
short-term factors (budgetary constraints, new supply gap, inflationary pressure) and long-term
issues (hybrid work, sustainable development).
Total existing modern office stock in Warsaw stood at 6.3 million sq m in Q4 2022, of which
11.6% is immediately available. The supply side over 2023 looks set to record a rather weak
performance. As the upcoming quarters will see only a moderate increase in construction
activity, it is predicted that 2024 will also register a limited number of new investments entering
the market.
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2022 saw delivery of 236,800 sq m of new office space, of which only 8,700 sq m was
completed in Q4. The biggest stock increases were recorded in CBD (99,100 sq m), City
Centre (88,700 sq m) and Mokotów (32,000 sq m). During the year a few flagship projects
were completed, including Varso Tower (63,800 sq m) and Forest Tower (51,500 sq m) both
by HB Reavis, and SkySawa (31,300 sq m) by PHN. In recent years, annual new supply has
stood at record levels of 200,000-300,000 sq m. This trend will be reversed over the next two
years. In line with our forecast, new office buildings planned for delivery in 2023 will account
for 74,000 sq m and 82,000 sq m in 2024.
Despite the market turmoil, leasing activity in 2022 was one of the strongest performances on
record. Full-year take-up amounted to 860,000 sq m, which is similar to the record years of
2018-2019. In 2022, the market witnessed the completions of a few spectacular lease
agreements > 20,000 sq m. Activity was led by companies in the financial sector, namely PKO
BP in SkySawa (pre-let, 31,300 sq m), Pekao S.A. in Forest Tower (pre-let, 30,000 sq m) and
Grupa ING in Plac Unii (renegotiation & expansion, 23,500 sq m).
At the end of December 2022, the vacancy rate stood at 11.6% (10.5% in the central zones
and 12.4% outside the centre), a decrease of 1.1 p.p. y-o-y and 0.6 p.p. on the previous
quarter, respectively. The coming quarters will see a steady decrease in office space
availability in the central zones. The vacancy rate in non-central locations will also experience
a similar trend, albeit at a slower rate.
Q4 2022 recorded no change in rents for prime office properties located in the central zones.
At the end of December, these rents ranged from € 18 to € 26/sq m/month. Rents outside the
city centre remained relatively stable at € 11-17/sq m/month. Upward pressure on prime rents
will persist over the coming months, especially across the central zones. Currently, mainly due
to higher fit-out costs, tenants are predominantly signing longer-term contracts (i.e. for at least
seven years) in new buildings. Shorter contracts (three to five years) can still be concluded in
older office buildings. Currently, the key element of each lease agreement is flexibility in terms
of potential space expansion or reduction. Companies want to ensure that they will be able to
swiftly adjust their office requirements in response to risks related to hybrid work and volatile
economic conditions.
In 2023, both tenants and landlords will have to face increasing costs of space maintenance.
Soaring energy prices and labour costs will translate into much higher service charges across
all asset types. According to a preliminary assessment, the rise in service charges y/y will be
30% on average (though in some cases, it may exceed 60%).
Regional cities Poland
After a gentle slowdown in tenant activity in Q3, the last three months of 2022 again saw a
recovery on the corporate side. As a result, the volume of demand on an annual basis
amounted to more than 623,200 sqm (+6% y-o-y). This shows that there is not year-on-year
decline in office interest. The forecasted total tenant activity for the next few years may remain
at a similar level. The so-called "flight to quality" is evident in both the capital and regional
markets. Demand for offices remains largely generated by tenant relocations to better quality
office buildings. In 2022, more than 50% of the volume of tenant activity was signed in buildings
up to five years old, of which 10% were the pre-lets. The largest deals concluded in 2022 are
the renegotiation of a confidential tenant in Green Day in Wroclaw for 14,800 sqm, the
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relocation of Capgemini in Krakow (pre-let, 13,800 sqm, Fabryczna Office Park) and a new
agreement signed by PWC in Katowice in the KTW II building for 12,900 sqm.
In 2022, new completions in regional markets totaled over 405,300 sqm, of which only 73,800
sqm was delivered in Q4. The most space was delivered in Katowice (127,300 sqm) and
Krakow (100,500 sqm). At the end of Q4 2022, about 600,000 sqm of modern office space
were under construction, which, compared to, for example, 2018 when more than 1 million
sqm were under construction, confirms a significant slowdown on the part of investors. As a
result of this level of developer filings and the current situation, a gap in new supply is expected
in Poland's largest office markets outside of Warsaw starting in 2024.
At the end of 2022, the vacancy rate for the eight major regional markets was 15.3%. The
index remained at a comparable level to the previous quarter but was still 1.2 p.p. higher than
the same period in 2021. In Q4 2022 the highest share of available office space was recorded
in Łódź and Katowice – 21% and 17.1% respectively. With the delivery of new office projects
to the market, the vacancy rate will show an upward trend over the course of 2023, while a
gradual decline may occur with the gap in new supply estimated for 2024.
In 2022, prime assets across the majority of regional markets recorded rental increases of €
0.25-0,50/ sqm/month. In Q4 2022, the highest rates among the main regional markets were
registered in Kraków (€ 14-16 / sqm / month), Wrocław (€ 14-15.5 / sqm / month) and the Tri-
City (€ 13.5-15.5 / sqm / month). The regional cities will face upward pressure on prime rental
rates moving forward due to recovering occupier activity and high fit-out costs.
Belgrade
Belgrade office stock is at the level of 1.12 million sq m of GLA, whereas the speculative office
stock of Class A and Class B buildings equals 825,000 sq m (75%) while the largest share of
modern office supply is situated in New Belgrade’s CBD (74%).
Belgrade office market has noted booming year despite ongoing geopolitical and economic
circumstances, with several deliveries being added to Belgrade office stock.
During 2022, 85,772 sq m of quality office space has been added to the market. Another
195,000 sq m of modern office space is underway, planned for completion in 2023 and 2024.
Among notable openings is the Skyline AFI Tower with 31 floors and LEED Gold certificate. In
New Belgrade, two new office buildings were opened: GTC Office X and Floor Art completed
Bridge Plaza. Class B office building Alco BC 1 has been also opened in New Belgrade.
In 2023 we expect further office building openings, especially in the New Belgrade area and
City Center. Namely A class office building – Revolucija by local developer Granit Invest and
BIGZ. AFI continues with further phase of Airport City and Zmaj office complex along E75
highway. Construction works continue also on the TB 65 office building. GTC is also preparing
new scheme along the Napred area.
The Belgrade office market registered 61 office deals in a total take-up volume of app. 59,000
sq m in Q4 2022. Summarizing the whole year, 2022 annual take-up amounted to a record
230,000 sq m representing a year-on-year growth of 45%. Out of annual demand, 86% is
recorded in Class A office buildings. The average deal size rose close to 1,000 sq m, mostly
due to increased demand for larger premises. Namely, after the easing of COVID-19 related
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restrictions during 2021, when some occupiers downsized their offices, 2022 saw increased
activity in larger deals, recording 69 transactions of 1,000 sq m and more, as compared to 31
large transactions during 2021.
Headline rents are between 14.5 - 17.0 €/sq m/month (up from 16.5 reported in 2021) in Class
A office buildings. Market practice is that buildings are well measure and provisioned with add-
on factor to add value to the landlord.
Amid strong occupier activity and lack of new deliveries, the vacancy rate has continued its
downward trend and decreased from 7.75% to below 5.00% at the end of the 2022, where we
expect the vacancy to stabilize having in mind the pipeline projects that set for completion
during 2023-24.
Zagreb
Zagreb office market is developing and maturing. Most of the office stock is in the Centre of
the city, New Zagreb, and the Business District East and West. The Croatian office rental
market has more office stock than Belgrade which has double the population. The stock of A
and B class offices is approximately 1.5 million sq m.
Zagreb Office market ended the year 2022 with one more new delivery on the market, i.e. the
first phase of City Island project has been completed, which contributed to the total supply of
modern office stock in Zagreb with additional 15,000 sq m of GLA. Summarizing whole 2022,
two office buildings were completed in Zagreb, totaling approx. 20,500 sq m. Hence, the total
supply of modern office stock in Zagreb now stands at approx. 1,552,700 sq m, out of which
share of Class A stock is 38%, while Class B share is 62%. Additionally, several new office
projects are under construction or in preparation phase including Radnicka 75 office building
of 3,300 sq m GLA, which is planned for completion in Q1 2023 as well as Grawe Garden
Centar totaling 2,100 sq m GLA which should be completed in Q3 2023. Furthermore, Matrix
C office building, the third phase of the GTC’s Matrix office park, which construction
commenced in spring 2022.
During the 2022, after a moderate leasing activity in the first quarter 9,800 sq m, leasing activity
picked up in the second quarter, amounting to 20,400 sq m, in the third quarter leasing activity
continued in line with the market practice for summer months, when tenants are less active,
with the results on the similar level as in Q1. However, in the fourth quarter leasing activity
picked up amounting to 22,560 sq m, which resulted with the overall leasing activity in 2022
amounting 62,600 sq m. If we analyze the share per type of business, Consumer sector was
the key performer, followed by Computers & Hi-Tech and Manufacturing sectors.
Office vacancy is currently at a record low of below 4% and is expected to remain stable due
to low levels of upcoming new supply.
Rental levels are currently generally in the range 13.00 - 15.50 €/sq m/month and are unlikely
to move significantly in the short term. However, in certain cases, when it comes to the prime
office space, recently developed and situated at the most attractive locations, asking prices
vary between EUR 16-17 per square meter on a monthly basis.
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Bucharest
Bucharest modern office stock reached 3.32 million sq m at the end of 2022, after the delivery
of 5 buildings with a total gross leasable area of 105,000 sq m until the third quarter of 2022.
Overall, during 2022, 124,500 m² of office buildings were delivered in Bucharest, 49% below
deliveries in 2021.
The Centre-West submarket inaugurated 2 buildings with the highest share of new supply
(45%). Sema Offices London & Oslo, with a total area of 31,500 sq m developed by River
Development, was delivered in Q1, and AFI Tech Park (Phase 2) with a total area of 24,500
sq m developed by AFI Europe, was delivered in Q2.
Center submarket claimed 22%, with 2 delivered buildings: Tandem, developed by Forte
Partners with a total area of 21,000 sq m, in Q1, and, H Tudor Arghezi 21, developed by Hagag
with a total area of 7,000 sq m of GLA, in Q3.
Equilibrium (Phase 2), having a total GLA of 19,500 sq m and developed by Skanska, was
delivered in Q4 in Floreasca-Barbu Vacarescu submarket (represents 16% of 2022 deliveries).
@ EXPO B1 & B2, having a total GLA of 21,000 sq m and developed by Atenor, was delivered
in Q1 in North-West (Expozitiei) submarket (represents 17% of 2022 deliveries).
Total gross transactions volume in Bucharest in Q4 2022 totaled almost 85,000 sq m, 29%
over the previous quarter, but almost the same as Q4 2021.During 2022 overall, a total of
286,100 sq m were rented in Bucharest, a figure similar to the one registered in 2021. However,
net take-up increased by 3% compared with 2021, to 140,500 sq m.
Renewals and renegotiations had the largest share in total transactions volume for 2022.
Most tenants opted for higher-quality office space, approximately 85% of the occupied space
during Q4 being in A-class buildings.
Largest renewal transactions in 2022 were represented by Infineon, a renew & expansion deal
of 10,000 sq m in Novo Park (in Q3) and NXP, which renewed 9,900 sq m in Campus 6.1 (in
Q3).
The vacancy rate throughout 2022 registered a constant decrease, from 14.3% in Q1 to 12.5%
in Q4. This was mainly due to higher net take-up during the period and relatively low deliveries.
Prime office rents in Bucharest have increased in 2022 by circa 8% from 18.5 euro in Q1 to 20
euro per sq m per month in Q4, mainly to absorb the inflationary pressure through indexation.
Sofia
The current modern office stock for rent in Sofia reached 2.11 million sq m at the end of 2022,
out of which 61% are considered class A.
Construction activity in H2 2022 decreased by 9% compared to the first half of the year and
stands at 228,300 sq m. Two small projects with a total of 10,000 sq m broke ground in the
areas of Broad Center and Hladilnika and a 12,000 m² project in CBD resumed construction.
Most of the construction activity is located in Hladilnika (22%) and along Tsarigradsko Shosse
(26%). New construction permits are expected in the areas of Hladilnika and Business Park
Sofia.
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Approximately 42,000 sq m were delivered in Sofia in H2 2022, adding to a total of 65,000 sq
m for the year. This is a steep decrease compared to the volume in 2021 (216,000 sq m). More
than half (55%) of the areas that were delivered in 2022 are already leased.
A strong finish of the year for the office space market in Sofia with net take-up standing at
78,800 sq m for H2 2022. This adds up to a total of 158,100 sq m for the year, which is an 11%
increase compared to the net take-up volume in 2021.
Another positive aspect is the notable increase in net absorption, with 52,700 sq m for the
second half of 2022 and a total of 77,700 sq m for the entire year. This is still below the pre-
pandemic levels but is definitely a breath of fresh air for office space developers as it resulted
in a notable drop in vacancy, away from the twenty percent mark.
However, the market continues to be dominated by “same-size” relocations or slight
contraction of mature companies and a considerable portion of the increase of the net
absorption could be contributed to younger companies that are rapidly expanding in the last
couple of quarters.
Top tier class A office properties continue to be in high demand as companies increasingly bet
on premium working environment to attract talent in an ever so competitive labor market.
Hybrid work continues to be the norm with only a slight increase in attendance levels.
A considerable share of the companies that relocated or regeared their leases in 2022 are
betting long term on a hybrid ratio between 40% and 50%. On the positive note BPO and IT
companies continue to increase the size of their operations in Sofia which counterbalances the
above trend and has resulted in the positive net absorption.
Approximately 83,000 sq m are estimated to be delivered in 2023, out of which circa 18% are
already pre-leased and another 24% are owner occupied, the remaining being speculative.
The vacancy rate in Sofia has decreased to 18.8%, compared to 20.1% at the end of H1 2022.
Vacancy levels have fallen across all submarkets including Tsarigradsko Shosse where the
vacancy now stands at 32%.
Falling vacancy levels, especially in more competitive submarkets, increased transactions
volume and high inflation have put an upward pressure on rental levels resulting in a slight
increase in average asking rents by 1.7%. The disparity between different submarkets
remains, as average asking rates in areas with below market availability, such as Hladilnika,
have increased with 1.8% while rental levels on Tsarigradsko Shosse decreased slightly with
0.5%.
Prime rents have also increased to €15.5 / sq m while class A rents range from €11.5 – 15.5 /
sq m depending on the submarket and building specifications.
4.7.2 Retail market
Poland
Forecasts for the next four years point to Poland outperforming and closing the gap on
countries in the eurozone. The dynamics of catching-up are anticipated to resume along easing
inflation.
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Although the first few months of 2023 may see a continuation of 2022’s challenging market
conditions, short and mid-term economic headwinds are anticipated to ease as the year
progresses.
Whereas the eurozone and Poland are likely to face negative GDP dynamics in 2023, Poland
is anticipated to rebound with an aggregated 9.1% increase between 2023 and 2026,
compared to 5.9% for the Eurozone in the same period (Oxford Economics).
Healthy retail market fundamentals are reflected in the very positive retail sales forecast for
the next two years. The average year on year growth of retail sales in Poland (real prices) is
expected to be 3.6% in 2023-2026 versus 1.4% for the Eurozone. However, such robust
dynamics might be somehow mitigated and postponed by further inflationary pressures
becoming more burdensome for Polish citizens.
Secondly, the COVID-19 pandemic has led to major changes in consumer habits and
influenced unprecedented growth of e-commerce sales due to the introduced lockdowns and
social distancing measures for consumers in Poland. However, with Polish consumers getting
back to brick-and-mortar shopping, total e-commerce sales growth rate is returning to pre-
covid levels (13% y/y forecasted for 2023). Thus, one of the major challenges will be to provide
best-in-class omnichannel solutions for both physical and online clients.
Despite the challenging market conditions, 2022 concluded with a very healthy result for newly
delivered space. Total completions for the year summed up to almost 500,000 sq.m. well above
the 5-year average across all retail formats. Some 52% of this space was delivered within retail
parks, scoring the best annual result in the market history. These were followed by stand-alone
warehouses', which accounted for 21%, convenience schemes (17%) and shopping centres
(9%).
The largest retail schemes that opened in 2022 included the following: Shopping centre
Karuzela in Kołobrzeg (30,000 sq. m. GLA), Retail Park Atut Ruczaj 2 in Kraków
(+25,000 sq. m. GLA), Retail Park Atut Galicyjska in Kraków (20,000 sq. m.), Retail Park
Aniołów Park in Częstochowa (17,500 sq. m. GLA) and stand-alone warehouse Agata Meble
in Radom (17,000 sq m GLA).
At the same time, however, approx. 22,600 sq. m. GLA was withdrawn from the market due to
the closures of a shopping centre and retail park in addition to retail space reduction in the
Supersam shopping centre in Katowice.
As a result, at the end of 2022, the total modern retail stock in Poland, including large-scale
formats and convenience centres, stood at a total of 16.9 million sq. m. GLA. Four hundred
and nine shopping centres account for 9.9 million sq. m. of that space, which equates to a
shopping centre density of 260 sq. m. per 1,000 residents, which is more than the European
average of 255 sq. m. per 1,000 residents but still less than the average for Western Europe
(279 sq. m. per 1,000 residents).
The average vacancy rate for eight major agglomerations in Poland stood at approx. 5.2% in
the first half of 2022 (considering the shopping centre format), noting a 73 bps year-on-year
decrease.
Nonetheless, the pandemic had a limited impact on the vacancy rates in shopping centres in
major agglomerations. The lowest vacancy rate (1.9%) was recorded in the Krakow
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agglomeration, which marks a decrease in the rate compared to the first half of 2021 (2.8%).
On the contrary, the Lodz, Poznan, Szczecin and Tri-city agglomerations observed a slight
increase in the vacancy rate in the range from 0.3% p.p. to 0.7% p.p. compared with the first
half of 2021.
Warsaw agglomeration
The Warsaw agglomeration remains Poland's largest market, with 2.02 million sq. m. in large-
scale retail formats (GLA> 5,000 sq. m.). A shopping centre format dominates market
in Warsaw, with 66% of the stock within big-scale properties.
In terms of the density of shopping centres, Warsaw with 500 sq. m. per 1,000 residents, ranks
in the middle among eight major Polish agglomerations. Poznań and Wrocław lead the ranking
with 717 and 678 sq. m. per 1,000 residents, respectively. At the same time, the purchasing
power of the Warsaw agglomeration reaching €12,525 per capita / year is the highest in the
country (exceeds the national average of €7,893 by 57%).
Approximately 53,000 sq. m. GLA is currently under-construction in the Warsaw
agglomeration, which consists of shopping centre and retail park formats. The largest project
underway is a redevelopment of Nowy Fort Wola by Mayland (28,000 sq. m. GLA).
The average vacancy rate in Warsaw agglomeration remained stable and in August 2022
accounted for 5.3% of total existing stock (considering the shopping centre format), which
places Warsaw at a moderate level compared to major agglomerations, just below Poznań and
Tri-City.
Prime rents in Warsaw, defined as rents for a 100 sq. m. unit for a fashion and accessories
sector tenant noted in the best shopping centres in the market, in the fourth quarter of 2022
stood at the level of 98 – 108 €/ sq. m. / month, which is the highest number recorded
in Poland.
Belgrade
Although fourth quarter remarked the outbreak of new strain of Coronavirus, there were no
new restrictions imposed.
The market become relatively saturated in during 2020 with opening of BEO Shopping Centre
and iBW Galerija.
Total stock in the market amounts to 421,000 sq m representing a density of 254 sq m per
1,000 inhabitants.
Summarizing the whole year, Belgrade retail supply grew by app. 25,000 sq. m, due to
completion of three retail parks, all located in suburban municipalities. Throughout the
previous year, the most active of all retail sectors was the retail park segment, a trend that will
also continue in the forthcoming period. In terms of the future offer, Belgrade retail stock will
be enriched by completion of four retail parks during 2023. Israeli investor AFI announced the
construction of AFI City Zmaj after the acquisition of the location Zmaj on the highway E75.
During 2022, there has been a strong leasing activity across Belgrade. The most preferred
retail scheme for tenants was retail parks followed by shopping centres. Several international
brands entered Serbian market in 2022 within existing and newly opened retail schemes, as
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well as prime high street locations: Elisabetta Franchi, Karl Lagerfeld, Furla, s. Oliver, Colin’s,
DoGo, to name a few.
The pandemic era has led to certain changes in consumer behaviour across the globe and
emerging trends included the development of online grocery platforms, increasing demand for
click & collect, while retailers started to use different omnichannel models, selling on the social
platforms, launching an online store, etc. Customer experience has become essential, and
landlords are trying to follow the global trends and improve offer by providing additional benefits
to the consumers, especially in food and beverage and entertainment segment. Additionally,
operators such as Wolt and Glovo are constantly expanding their offer, from F&B to home
decor and DIY categories, while 2022 saw the opening of their first ship-from-store concept
stores.
Average prime rental rates currently stand at approximately 26.00 - 28.00 €/sq m/month.
Zagreb
In 2022 shopping centers were allowed principally undisturbed operations with no major
restrictions and their operation stabilized at pre pandemic levels.
In the second half of 2022, Zagreb retail market was marked by the opening of the Retail Park
Branimirova, developed by Osijek-based developer M-Nekretnine, totaling 8,000 sq m.
Summarizing the entire year, with this latest addition, total retail stock in Zagreb was increased
to the level of 538,600 sq m of GLA. In terms of the future offer, Zagreb retail stock will be
enriched by completion of two retail parks during 2023, which are currently in development
phase, both set for completion in the second half 2023.
Shopping center density in Zagreb is about 645 sq m per 1,000 inhabitants. In recent years
negotiation strength in the shopping center market in Zagreb has been with occupiers.
However, with the improvement of economic and market conditions, we have noted shopping
centers stabilizing their position in the market and there has been a fundamental shift by
occupiers to the higher quality and better performing schemes.
Regarding newcomers on Zagreb retail market, during 2022, several new brands entered the
market, including Equivalenza, the largest Spanish cosmetic brand that opened its first store
in Zagreb high-street zone in the first half of the year, as well as Canadian shoe brand Aldo
that opened its first outlet store in the second half of the year.
Average prime shopping center rental rates are currently approximately 19.00 - 21.00 €/sq
m/month.
Sofia
The unstable economic situation does not have a negative impact on the development of retail
parks and on the expansion of the number of tenants who decide to enter these schemes.
At the end of 2022, an increase in consumption was observed in the country, which accordingly
affected the growth in the demand for commercial space.
Retail parks gain priority in development, as they have a more efficient distribution of budget
funds and profitability. They occupy a key position in commercial areas. This interest in
development is due to the short construction time, the low costs for tenants to maintain the
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common spaces of the premises and, as a result, a large flow of people due to lower prices for
consumers.
Compared to the first half of 2022, the total modern stock in Bulgaria, including shopping
centers, retail parks and outlet centers, has increased by 70,250 sq m during H2. Currently, it
amounts to over 1,17 million sq m, out of which 542,800 sq m operating in Sofia. With 815,000
sq m stock countrywide, the shopping center segment didn’t see any new completions over
the last few years, and this trend will continue in 2023.
No new shopping centers have been delivered in Sofia in 2022. The same trend will continue
in 2023 and 2024. Developers and retailers focus on retail parks. Moreover, in 2022, not a
single retail park was opened in Sofia.
In the first half of 2022, two retail parks opened: Sevlievo Retail Park and Via Park Sever, in
Plovdiv, with a total gross floor area of 22,000 sq m. However, during the second half of 2022,
several retail parks opened in other parts of the country: Retail Park Pernik Plaza, Sliven Retail
Park, Razlog Retail Park, Smolyan Retail Park, Karlovo Retail Park, Holiday Park Retail Park
- Pazardzhik, Retail Park Haskovo, Retail Park Kardjali, with a total gross floor area of 70,250
m².
The retail park projects planned for Sofia have a total area of 130,000 sq m GLA. The delivery
for some was initially expected for late 2023 and early 2024 but has since shifted for the end
of 2024 or beginning 2025.
The total availability in retail parks in Sofia amounts to 79,000 sq m, including 3 parks, with
99% occupancy.
Consumer demand is aimed at discount chains, drugstores, sports stores, supermarkets, as
well as specialty furniture and home decor stores.
The main driver is fast moving goods, drugstores and sports retailers, which continue their
expansion in Sofia and regional cities. Discount stores and budget clothing brands that have
entered the market in recent years are also adding new stores.
This has stimulated entrepreneurs to develop their businesses and expand actively in smaller
cities, and we believe that this expansion will continue in the next two years.
By the end of 2022, retail parks in Bulgaria have reached an area of 355,500 sq m. Moreover,
a total of almost 187,000 m² are pending delivery.
The Polish discount chain Pepco continued to actively expand its store network. In 2021 the
company opened 39 stores in Bulgaria and in 2022 it opened 31 new stores. At the moment,
they have 134 stores. The company plans to open another 34 stores in 2023.
Polish fast fashion retailer LPP (House, Cropp, Sinsay) is also actively increasing the number
of stores in the country. In 2021 the company opened 7 stores and by the end of 2022 were
opened 28 new stores. The company also announced expansion plan aimed at opening new
stores in Bulgaria for its brands respectively in 2023: Sinsay 18 units, Cropp 3 units, Reserved
+ RE Kid 1 units, House 2 units, Mohito 1 units).
The German discount store chain KiK ended 2021 with 21 stores in Bulgaria. Same happened
in 2022. Having 42 stores at present, their plans are to open 100 stores in Bulgaria, with 10-
15 new locations per year.
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The German discount chain for household needs Tedi which entered the Bulgarian market
recently with the store format between 700 and 800 sqm, plans to open the first 10 stores in
Bulgaria in 2023.
The Danish company JYSK started operations in Bulgaria in 2005. Now JYSK Bulgaria has 49
stores in addition to its e-commerce. The company plans to continue expanding with new
stores on the local market in 2023, as well as kick off delivery operations in Turkey. JYSK
Bulgaria will open at least 6 new stores in Bulgaria in 2023.
In the last months of 2022, the vacancy rate in Sofia rose to 6.6%.
Prime rental rates currently stand at 35 €/sq m/month for shopping centres, 8-10 €/sq m/month
for retail parks and 50 €/sq m/month for high street.
Prime rents relate to a well-located 100 sq m unit shop from the fashion and accessories
category. The unit is part of the leading retail assets in the capital city (for retail parks – 2,000
sq m units).
4.7.3 Investment market
Poland
The Poland investment volumes almost reached the €6 billion threshold during 2022 which
translates into the fourth best full year result on record, however down by 6% on 2021. Despite
this continuing robust activity, performance is divergent across both property sectors and asset
subtypes.
In 2022 the total office investments in Poland reached €2.2 billion, exceeding the full year
volume of the previous year by 26%. The impressive amount of capital allocated in the office
segment was generated by core Warsaw transactions of unprecedented scale. Transactions
concluded in the regional markets accounted for over 50% of 2022 ’s turnover. US & European
capital has dominated overall volumes across all sectors in 2022. European investors have
been represented mainly by Germany, Czech Republic and Sweden.
Rising financing and development costs have caused upward movement in office yields.
However, best in class assets, as was seen during the last year, remain a very attractive
investment product. As of the end of Q 4 the yield for prime Warsaw assets, with five-year
lease agreements, was expected at approx. 5 25%. The prime cap rates in Kraków and
Wrocław which remain the core regional cities, are currently at approx. 6.00%.
The 2022 retail investment volume exceeded €1.4 billion which translates into the highest level
reached since 2019 and a substantial growth compared to results of 2020 and 2021 up 99%
and 40% respectively. Although, there is still no recent transactional evidence in Warsaw, JLL
estimates the prime shopping centre yields at 5.75%. Following compression in Q1 the prime
cap rates for the best retail parks are currently estimated 6.75%.
Hungary
The annual activity resulted in result of just above €900 mill., marking the lowest annual activity
since 2015 in the country. This subdued activity clearly reflects the economic headwinds which
impact real estate all around the world. The rising interest rates in parallel with the worsening
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economic sentiment hinder investment activity and make buyers and financial providers
cautious. Financing terms and conditions are becoming stricter while banks are getting
selective in regards of asset classes, locations, and property fundamentals. Furthermore,
buyers focus on ESG requirements in parallel with peaking scrutiny on energy efficiency and
many older assets struggle to meet these high requirements.
Approximately 80% of the annual volume included income generating transactions, while the
remaining 20% was made up by assets suitable for redevelopment purposes, development
sites and owner occupation. Approx. 24% of the annual volume was generated by a mega-
deal: the sale of a significant part of Tesco’s Hungarian portfolio including 14 assets country-
wide. The transaction is among the top 10 largest deals in the Hungarian market ever. As
usually, domestic purchasers remained the most active buyers on the market generating more
than 60% of the acquisitions. That said, despite of the difficult market environment we recorded
a wide variety of active international buyers from all over the world including China, France,
Canada, UK, USA etc.
The strongest activity was recorded in the office asset class, which generated approx. 35% of
the annual investment volume. It was closely followed by retail (30%), due to the Tesco
disposals. The logistics sector generated 17% of the volumes whereas the remaining 18% was
made up by hotels, re-development opportunities and development sites.
Despite that only a handful of assets were traded, there were some landmark and trophy assets
among them. The French investment fund portfolio manager, Groupama Gan REIM, acquired
two premium assets in Budapest: Freedom Palace and Green Court Offices. Freedom Palace
is a trophy office building in the CBD and was traded with the lowest office yield ever in the
Budapest real estate market. Green Court Offices is a brand new, 18,800 sq m office building
situated at the Váci Corridor submarket and marked the largest office deal in 2022 in terms of
ticket size. After a long marketing process, the disposal of Akadémia Business Center, a
12,700 sq m CBD building, was finalized by the German asset manager, DWS. The asset was
acquired by the Pan-European investment manager, Europa Capital, in partnership with
ConvergenCe. Furthermore, CA Immo finalized the disposal of R70, a first-generation, 19,000
sq m office building situated in downtown Budapest. The property was acquired by Épkar, a
local construction company. During the second half of the year the Hungarian investment
manager, WING, also transacted two of its office buildings: Máriássy Ház Modern & Loft. The
properties were acquired by GRAWE Immo Ag, the real estate subsidy of the Austrian GRAWE
Group.
Over 2022 yields have shifted in every asset class and a visible repricing happened. According
to our views prime yields stand at 5.75% for offices, 6.25% for logistics and 6.50% for shopping
centers.
Looking ahead we expect investment activity to pick up somewhat during 2023 once the pricing
gap between vendors and purchasers closes.
Bucharest
During 2022 overall, investment deals worth over €1.25 bln. were concluded, 39% above 2021.
This is the highest volume recorded since 2007.
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We expect investment volumes in 2023 to reach around €800-900 million. This would be in
line with the last 5-year average.
The Bucharest investment volumes almost reached €874 million in 2022, accounting for
approximately 70% of the total investment volume.
In 2022, the office sector accounted for 63% of total investment volumes, with almost €784
million, followed by retail, with 24% (approximately €305 million), industrial with 8% (€106
million) and hotels with 5% (€58 million).
By far the largest investment deal closed in 2022 was the sale of CA Immo’s office portfolio in
Bucharest, consisting of 7 buildings with a total GLA of 165,000 m², to local investor Paval
Holding, for a reported €377 million.
The second-largest investment deal closed in 2022 was the sale of 60% of a portfolio
consisting of 6 retail parks. Prime Kapital sold its shares to MAS Real Estate, which already
owned the remaining 40%, for approximately €192 million.
In Q4, the office sector accounted for 80% of total investment volumes, with almost €480
million, followed by retail, with 12% (approximately €70 million), hotels, with 5% (€31 million),
while the rest was represented by industrial properties.
By far the largest investment deal closed in Q4 2022 was the sale of CA Immo’s office portfolio
in Bucharest, consisting of 7 buildings with a total GLA of 165,000 m², to local investor Paval
Holding, for a reported €377 million.
The second-largest deal in Q4 was the sale of the first phase of U-Center Campus in
Bucharest, developed by Forte Partners, also to Paval Holding, for an estimated €87 million.
Despite the ongoing war in Ukraine and high inflation (and consequent increase in interest
rates), the market remains fairly liquid.
During Q4 2022, prime office yields increased by 25 bps, to 7.00%, while prime retail and
industrial yields remained the same as in the previous quarter, at 7.25%, respectively 7.50%.
There is upward pressure on yields, that we expect will materialize in the first half of 2023,
followed by a more stable second half. Nevertheless, rent indexation and the increase of prime
rents will limit the impact of the yield increases on capital values.
Despite of the external factors, the appetite for financing the real estate sector remains in place,
especially for prime, income-generating assets. However, hedging requirements and related
costs are making financing more expensive.
Sofia
The investment volume in Bulgaria in H2 2022 reached €190 mil, compared to €95.6 mil in H1
(excluding investment land). The total investment activity of close to €300 mil for the entire
2022 brings the year to the typical market levels before the effects of Covid-19.
The market recorded increased interest in the hotel sector as 8 hotels throughout the country
were sold in H2. Typically for Bulgaria, the major portion of the market activity is represented
by local investors (both sellers and buyers). Continuing the trend from H1, buyers in the office
segment are mostly occupiers.
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Prime yields for all asset classes remained unchanged as in H1 2022 and were 7.5% for office
and shopping centers and 8% for industrial.
As usual, the bulk of all transactions was registered in Sofia. The largest office transaction was
the sale-purchase of Mirastar (M2) (built area 28,000 sqm) to the Bulgarian crypto lender Nexo,
which is going to occupy 100% of the building.
However, the largest transaction on the market was the sale-purchase of Transcapital’s
warehouses on Botevgradsko Blvd. in Sofia, for an estimate €67.5 mil, bought by CTP. The
property includes existing logistics facilities as well as land potential for further development.
CTP stated that they are going to invest an additional €150 mil in the development phase.
Interestingly, the owner of Transcapital also sold another personal investment in the hotel
segment, consisting of a portfolio of 4 hotels under the Lion brand (in Sofia, Sunny Beach,
Borovets and Bansko). The portfolio was acquired by a local investor.
There were 2 notable transactions in the retail sector – Central Market Hall in Sofia was sold
to German retailer Kaufland for €17.5 mil and Retail Park Varna was sold by Bluehouse to a
local investor for €13.5 mil.
The general expectation for 2023 is for an increase in the interest rates and hence a slight
increase in yields as well. We are yet to find out whether such a scenario will actually become
reality as levels of Non-Performing Loans are low for the time being and owners are not pushed
to sell.
Belgrade
Although there have not been any prime asset sales in 2022, we estimate that the prime office
yield would be in region of 7.25% - 7.75%. Belgrade has always been a fairly subdued market
slow but constant office development, unlike Bulgaria at the on-set EU entrance where there
was a massive Boom and Crash of office assets. In comparison, Bulgaria with a similar sized
market has more than double the office space.
The most recent is the transactions occurred in 2021, between NEPI Roskcastle and BIG CEE
in June 2021 for Kragujevac Plaza Shopping Centre (22.300 sq m of GLA) and Krusevac retail
park (8.600 sq m of GLA) for €61 million and Delta City Shopping centar was sold to MPC
Properties for €115 million.
GTC sold eleven office buildings in five office parks (Green Heart, FortyOne, Belgrade
Business Center, 19 Avenue and GTC House), with total area 122,175 sq m to Hungarian
investor Indotek Group for €267.6million. This transaction was completed in Q1 2022. This is
the biggest transaction ever in the Belgrade market in the office sector.
These transactions that have been realised after the COVID 19 pandemic, confirm liquidity of
the Serbian real estate market including retail segment, and the applied yield levels.
Zagreb
Generally, within the region, Croatia has been among the most active markets considering real
estate development and investment volumes. On the economic side, Croatian attractiveness
to investors has been underpinned by the fact that Croatia is EU member, its expected
economy growth, as well as increasing GDP per capita and purchasing power. On the retail
96
development side, this is underpinned by the stabilization of retail market as well as the lowest
yields in the region. Considering relevant assets - shopping centers, such schemes have been
appealing for investors as well, due to the stabilization of market, limited further expansion,
and continuous entrance of new brands to the market.
We have noted solid interest in 2021 (Kaufland buying an office building, Business Building
One (BB1), Wiener Insurance bought an office building in Radnicka Street and the T-com office
building was purchased by the M + Group).
Solid interest in Zagreb office real estate segment has continued (with the transaction carried
out in 2022: Agram Group bought Zagreb office tower from Forten Group. The asset comprises
office premises on 16 floors as well as garage areas amounting to 6,700 square meters overall.
Also, in 2022 GTC Matrix A and B office buildings were traded to strong local RE group,
confirming investors interest and liquidity on the market.
Both prime office and retail yields remain stable, office yield stands at 7.25% and retail yield at
7%.
Source: JLL in collaboration with IPC Partners and Atrium Property Services d.o.o.
4.8 Information on the Company’s policy on sponsorship, charity, and other similar
activities.
As a Group, we set ourselves ambitious business goals that we want to implement in
a sustainable manner. It is a responsible task for our entire team, which is why creating a stable
and motivating work environment is so important to us. All our corporate social responsibility
activities are run in a coordinated manner to support local communities in which the Group
operates. Such support involves:
• Enhancement of local infrastructure, including road and traffic infrastructure.
Throughout the Group, we share the principle of taking responsibility for the space we
create. The infrastructure created in connection with or for the purposes of the
developments constructed is handed over to the local self-government free of charge
to be used by all residents. Moreover, prior to the development of the Group’s projects,
public green areas (such as squares and parks) are placed on undeveloped plots or
plots which will surround future developments following their completion by the Group.
• Local initiatives. The Group takes an active part in a great number of non-profit
activities as a partner, organizer, or sponsor. We often present our projects to local
communities. We actively participate in public meetings dedicated to spatial planning.
The Group’s regional offices know the needs of the local community and the market in
which they operate best, so they decide which social topics form a priority for them.
The Group participates in and supports local initiatives such as:
- help for refugees in Ukraine;
- organization of a free Polish language course for refugees from Ukraine;
- support of Red Cross with providing a place for blood donations;
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- support of charity organizations with providing a place in our shopping malls
and office buildings for promotional activities in attracting sponsors and making
people aware of their initiatives as well as humanitarian associations and
charities;
- promotion of local businesses by continuously providing organic and home-
made products for all visitors,
- organization of artwork competition for local elementary schools;
- free medical examination for women and men;
- organization of family picnics;
- organization of monthly garage sales;
- organization of Christmas gift collection;
- opening free parking at night due to bad weather conditions;
- planting trees in Romanian forests;
- a donation of 100 young tree trees to the city of Belgrade.
Additionally Group supports local institutions:
- KAPTÁR Adult Day-care Center in Budapest (provided the day-care center with
a monthly allowance);
- the Budapest based St. John's Hospital’s preterm intensive care unit (donation);
- Pediatric Hospital in Sofia (sponsoring purchase of body warmer device before
blood infusion).
Additionally, Group conducted several local initiatives with support sports
activities or participated in sponsorship :
● yoga training - promotion of active leisure time activities;
● exercise games for children during holiday;
● city games for families - promotion of outdoor activities;
● volleyball festival - promotion of a healthy lifestyle;
● Beach Volleyball tournament - Cup of Silesia;
● Open 40+ Championship in beach volleyball in Galeria Jurajska;
● the North Bridge Run (“Bieg przez Most”) in Warsaw;
● Charity volleyball – JLL volleyball tournament;
● Mam’s Run (“Białołecki Bieg Mam”) in Warsaw;
● Independence Run (“Bieg Niepodległości”) in Warsaw and
● Love Run race in Zagreb.
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• Embracing environmental certification. Out of focus on the environment, the
investments of the Company and the Group are fully compliant with LEED or BREEAM
guidelines. The Group certified and recertified 17 properties in 2020, 18 in 2021 and
19 in 2022, and is currently in the process of certifying or recertifying 5 other properties
its portfolio with LEED and/or BREEAM with a target of 100%. certification of the
portfolio. As of 31 December 2022, approximately 87% of our properties holds a green
certificate or are under recertification, which proves the sustainability of the properties
that GTC develop and manage.
• Partnership for the protection of biodiversity: With the support of WWF Poland,
GTC educated its employees, tenants and local communities on environmental
protection and encouraged joint ecological activities.
In 2022, the Group had expenses on the support of charity in the total amount of €439,
including: €405 for social organizations, €24 for general donations, €8 for sport related actions
and €2 for sponsorship of culture.
5. Operating and financial review
5.1 General factors affecting operating and financial results
GENERAL FACTORS AFFECTING OPERATING AND FINANCIAL RESULTS
The key factors affecting the Group’s financial and operating results are discussed below. The
Management believes that the following factors and important market trends have significantly
affected the Group’s results of operations since the end of the period covered by the latest
published audited financial statements, and the Group expects that such factors and trends
will continue to have a significant impact on the Group’s results of operations in the future.
ECONOMIC CONDITIONS IN CEE AND SEE
The economic crisis may slow down the general economy in the countries where the Group
operates. The economic downturn in those countries may result in reduced demand for
property, growth of vacancy rates, and increased competition in the real estate market, which
may adversely affect the Group’s ability to sell or let its completed projects at their expected
yields and rates of return.
The reduced demand for property that, on the one hand, may result in a drop in sales dynamics,
and, on the other, an increase in vacancy rates and lower rent revenues from leased space,
may significantly impact the results of operations of the Group. Specifically, the Group may be
a force to change some of its investment plans. Additionally, the Group may not be able to
develop numerous projects in the countries where it operates.
REAL ESTATE MARKET IN CEE AND SEE
The Group derives the majority of its revenue from operations from rental activities, including
rental and service revenue. For the year ended 31 December 2022 and for the year ended 31
99
December 2021, the Group derived 74% and 76%, respectively, of its revenues from
operations as rental revenue, which significantly depends on the rental rates per sq m and
occupancy rates. The amount the Group can charge for rent largely depends on the property’s
location and condition and is influenced by local market trends and the state of local
economies. The Group’s revenue from rent is particularly affected by the delivery of new rent
spaces, changes in vacancy rates, and the Group’s ability to implement rent increases. Rental
income is also dependent upon the time of completion of the Group’s development projects as
well as on its ability to let such completed properties at favourable rent levels. Moreover, for
the year ended 31 December 2022 and for the year ended 31 December 2021, the Group
derived 26% and 24%, respectively, of its revenues from operations as service revenue,
reflecting certain costs the Group passes on to its tenants.
The vast majority of the Group’s lease agreements are concluded in euro and include a clause
that provides for the full indexation of the rent linked to the European Index of Consumer
Prices. When a lease is concluded in another currency, it is typically indexed to euro and linked
to the consumer price index of the relevant country currency.
REAL ESTATE VALUATION
The Group’s results of operations depend heavily on the fluctuation of the value of assets on
the property markets. The Group has its properties valued by external valuers at least twice
a year, every June and December. Any change in the fair value of investment property is
thereafter recognized as a gain or loss in the income statement.
The following three significant factors influence the valuation of the Group’s properties: (i) the
cash flow arising from operational performance, (ii) the expected rental rates, and (iii) the
capitalization rates that result from the interest rates in the market and the risk premiums
applied to the Group’s business.
The cash flow arising from the operational performance is primarily determined by current
gross rental income per square meter, vacancy rate trends, total portfolio size, maintenance
and administrative expenses, and operating expenses. Expected rental values are determined
predominantly by expected development of the macroeconomic indicators like GDP growth,
disposable income, etc., as well as micro conditions such as new developments in the
immediate neighborhood, competition, etc. Capitalization rates are influenced by prevailing
interest rates and risk premiums. In the absence of other changes, when capitalization rates
increase, market value decreases and vice versa. Small changes in one or some of these
factors can have a considerable effect on the fair value of the Group’s investment properties
and on the results of its operations.
Moreover, the valuation of the Group’s landbank additionally depends on, among others, the
building rights and the expected timing of the projects. The value of landbank, assessed using
a comparative method, is determined by referring to the market prices applied in transactions
relating to similar properties.
The Group recognized a net loss from revaluation of €29,422 in the year ended 31 December
2022 and €12,867 net loss from revaluation in the year ended 31 December 2021.
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IMPACT OF INTEREST RATE MOVEMENTS
Increases in interest rates generally increase the Group’s financing costs. However, as of 31
December 2022, 95% of the Group’s borrowings were either based on fixed interest rate or
hedged against interest rate fluctuations, mainly through interest rate swaps and cap
transactions.
In an economic environment in which availability of financing is not scarce, demand for
investment properties generally tends to increase when interest rates are low, leading to higher
valuations of the Group’s existing investment portfolio. Conversely, increased interest rates
generally adversely affect the valuation of the Group’s properties, resulting in recognition of
impairment that could negatively affect the Group’s income.
Historically, EURIBOR rates have remained close to zero or in the negative territory as
presented on the graph below. However due to the inflationary pressure in the last six months
of the year the European Central Bank has decided to increase interest rates and it is expected
that these shall continue to be on the positive territory in the next years to come.
The graph presents EURIBOR for three-month deposits for the period between 2012 – 2023.
IMPACT OF FOREIGN EXCHANGE RATE MOVEMENTS
For year ended 31 December 2022 and 31 December 2021, a vast majority of the Group’s
revenues and costs were incurred or derived in euro. Nonetheless, the exchange rates against
euro of the local currencies of the countries the Group operates in are an essential factor as
the credit facilities obtained may be denominated in either euro or local currencies.
The Group presents its financial statements in euro, its operations, however, are based locally
in Poland, Romania, Hungary, Croatia, Serbia, and Bulgaria. The Group receives the vast
1,34%
0,19%
0,28%
0,08%
-0,13%
-0,32%
-0,33%
-0,31%
-0,38%
-0,55%
-0,57%
-0,53%
-0,34%
0,71%
1,97%
2,48%
2,16%
2,78%
3,05%
EURIBOR for three-month deposits
101
majority of its revenue from rent denominated in euro, however, it receives a certain portion of
its income and incurs most of its costs (including the vast majority of its selling expenses and
administrative expenses) in local currencies, including the Polish zlotys, Bulgarian levas,
Hungarian forints, Romanian leis, and Serbian dinars. In particular, the significant portion of
the financial costs incurred by the Group includes: (i) the interest on the bonds issued by the
Group in Polish zlotys, and (ii) the interest on the bonds issued by the Group in Hungarian
forints. The exchange rates between local currencies and the euro have historically fluctuated.
The Group hedges its foreign exchange exposure.
The income tax expense (both actual and deferred) in the jurisdictions in which the Group
conducts its operations is incurred in such local currencies. Consequently, such income tax
expense was and may continue to be materially affected by foreign exchange rate movements.
Accordingly, the foreign exchange rate movements have a material impact on the Group’s
operations and financial results.
IMPACT OF INFLATION
The COVID-19 outbreak in Europe has led governments to implement rescue packages, as
well as supporting monetary policies by the European Central Bank to moderate the economic
impact of the pandemic which have a direct or indirect impact on household consumption and
thus consumer price indices. Increase of price of energy and services significantly influences
the inflation rate.
The Group’s financial results are linked to the consumer price index as on one hand its rental
revenue is indexed to the European CPI and on the other hand part of its debt is based on
floating interest rate, which also may fluctuate as a result of the inflation. Although as of 31
December 2022, 95% of its debt is based on fixed rate or hedged against interest rate
fluctuations so the exposure to the changes in interest rate is limited.
Additionally, the Group operates shopping malls and part of its rent (approximately 5% of total
revenues from rental activity in 2022) is based on the tenant’s turnover, which in may be
dependent on the inflation. Tenants’ turnover might have an impact on the Group’s operations
and financial results.
According to Eurostat, the Euro area annual inflation was 9.2% in December 2022 and is
expected to further grow. The graph below presents below the Harmonized Index of Consumer
Prices (HICP) in countries which Group’s operate and the Euro area. The main index reference
period currently used is 2015.
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* definition differs (see metadata at https://ec.europa.eu/eurostat/web/hicp/overview)
Source: https://ec.europa.eu/eurostat/web/hicp/overview
AVAILABILITY OF FINANCING
In the CEE and SEE markets, real estate development companies, including the companies
of the Group, usually finance their real estate projects with proceeds from the issue of the
bonds, proceeds from bank loans, loans extended by their holding companies. The availability
and cost of procuring financing are of material importance to the implementation of the Group’s
projects and for the Group’s development prospects, as well as its ability to repay existing debt.
The unstable geopolitical situation may have negative impact on the cost and availability of the
financing. Finally, the availability and cost of financing may impact the Group’s development
dynamics and the Group’s net profit.
IMPACT OF THE SITUATION IN UKRAINE ON GTC GROUP
Since the start of the war in Ukraine on 24 February 2022, even though the Group does not
conduct any activities in the territory of Ukraine, Russia or Belarus, it cannot be ruled out that
the current geopolitical situation in Europe triggered by this war, which has resulted in a
number of macroeconomic consequences for Poland and other European countries, may also
have an impact on the Group’s operations. The continuation of the war, its scale and further
course of military operations may cause an extension of the set of economic sanctions imposed
thus far, further disruption in supply chains, limited availability of subcontractors and a general
increase in the prices of materials resulting from, among others, rising energy prices, which in
turn may translate into significant costs of the implementation of investments carried out by the
Group. A significantly higher and volatile costs of energy (severe energy crunch because of
steep cuts in natural gas supplies from Russia following the outbreak of the Russia-Ukraine
conflict) and general uncertainties related to the impact of the war in Ukraine on both global
and the SEE/CEE economy and the deterioration of the global and regional economies may
adversely impact the economic situation of the Group.
-1%
4%
9%
14%
19%
24%
29%
Inflation rates (%) measured by the HICP
Euro area - 19 countries ( 2015-2022); 20 countries (from 2023)
Bulgaria
Croatia
Hungary
  
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As at the date of this Report, the impact of the war in Ukraine on the Group’s operations is not
material. However, it is not possible to estimate the scale of such impact in the future and due
to high volatility, the Company monitors the situation on an ongoing basis and analyses its
potential impact both from the perspective of individual projects and the entire Group and its
long-term investment plans.
5.2 Specific factors affecting financial and operating results
CORPORATE EVENTS
On 10-11 January 2022, the Group recorded proceeds from issue of share capital (net of
issuance costs) in amount of €120,400.
On 18 October 2022, dividend to shareholders was paid in the amount of €33,200.
ACQUISITIONS AND DEVELOPMENTS
During the year 2022 Group acquired:
• 100% holding of G-Zeta DBRNT Kft. ("GTC DBRNT Projekt Kft”) for a consideration of
€7,700;
• 100% holding of G-Epsilon PSZTSZR Kft. (“GTC PSZTSZR Projekt Kft”) for a consideration
of €9,900;
• land plot of 19,537 sqm in Belgrade for a consideration of €33,800;
• land plot in CBD in Budapest for a consideration of €6,550;
• a minority of 25% of notes (debt instruments) in innovation park in County Kildare, Ireland
The Transaction involves an initial investment of approximately €115,000;
• 34% of units in Regional Multi Asset Fund Compartment 2 of Trigal Alternative Investment
Fund GP S.á.r.l. (“Fund”) for consideration of €12,600.
In 2022, the Group has completed:
• a Class A office building in Budapest, Hungary – Pillar;
• a Class A office building in Belgrade, Serbia – GTC X; and
• a Class A office building in Sofia, Bulgaria – Sofia Tower 2.
In March 2022, the Group commenced the development of the third building within the Matrix
Office Park in Zagreb – Matrix C.
104
DISPOSAL OF SUBSIDIARIES
During the year 2022 Group have sold:
• the entire share capital of Serbian subsidiaries: Atlas Centar d.o.o. Beograd, Demo Invest
d.o.o. Novi Beograd, GTC BBC d.o.o., GTC Business Park d.o.o. Beograd, GTC
Medjunarodni Razvoj Nekretnina d.o.o. Beograd and Commercial and Residential
Ventures d.o.o. Beograd and Hungarian company Office Planet Kft. (which has 70% in
shares of sold Serbian entities) Net proceeds from sale of Serbian completed office
portfolio were €125,112 (net of cash in disposed assets of €10,475).
• Cascade Building S.R.L., owning Cascade Office Building in Bucharest (4,211 sqm). Net
proceeds from sale of subsidiary were €9,600.
• GTC Matrix d.o.o., owning a portfolio of two A-class office buildings in Zagreb – Matrix A
and B. Net proceeds from sale of GTC Matrix d.o.o. were €51,300.
• Forest Office Debrecen, office building in Debrecen. The selling price under the agreement
is HUF 19.1 billion (an equivalent of €47,700 as at 31 December 2022). The transaction
was closed on 30 January 2023.
REPAYMENT OF BONDS, BANK LOAN REFINANCING AND OTHER CHANGES
TO BANK LOAN AGREEMENTS
During the year 2022 Group
• repaid all bonds issued under ISIN code PLGTC0000292 (full redemption). The original
nominal value was €9,440.
• increased revolving credit facility to €94,000. As of balance sheet date, credit facility was
not used.
• extended final repayment date to 31 August 2025 of the existing facility with Santander
Bank Polska and the outstanding balance of the loan in the amount of €13,500 will be paid
as a balloon payment on the maturity date.
• prepaid of €6,100 from loan in Berlin Hyp AG (UBP project) . The outstanding balance of
the loan will be paid as the balloon payment on the maturity date.
• repaid partially bonds issued under ISIN code PLGTC0000318 (one-third of total issue) in
the amount of €17,100 (PLN 73,333) – including hedge component.
5.3 Presentation of differences between achieved financial results and published
forecasts
The Group did not publish forecasts for 2022.
105
5.4 Statement of financial position
5.4.1 Key items of the statement of financial position
INVESTMENT PROPERTY
Investment properties that are owned by the Group comprise office and commercial space,
including property under construction. Investment property can be split up into (i) completed
investment property; (ii) investment property under construction; (iii) investment property land
plots, and (iv) right of use.
RESIDENTIAL LANDBANK
The Group classifies its residential inventory as current or non-current assets based on their
development stage within the business operating cycle. The normal operating cycle, in most
cases, falls within a period of one to five years. The Group classifies residential inventory, the
development of which is planned to be commenced at least one year after the balance sheet
date as residential landbank, which is part of its non-current assets.
INVESTMENT IN ASSOCIATES AND JOINT VENTURES
Investment in associates and joint ventures is accounted for pursuant to the equity method.
Such investment is carried in the statement of financial position at cost plus post-acquisition
changes in the Group’s share of the net assets of the associate and joint ventures.
ASSETS HELD FOR SALE
Assets held for sale comprise office or retail space and land plots that are designated for sale.
BLOCKED DEPOSITS
Short-term blocked, and long-term blocked deposits are restricted and can be used only for
certain operating activities as determined by underlying contractual undertakings.
NON-CURRENT FINANCIAL ASSETS (RELATED TO INVESTMENT PROPERTY)
MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS
Non-current financial assets at fair value through profit or loss are carried in the statement of
financial position at fair value with net changes in fair value recognised in the income
statement.
DERIVATIVES
Derivatives include hedge instruments held by the Group that mitigate the risk of interest and
currency rate fluctuations. In relation to the instruments qualified as cash flow hedges, the
portion of gain or loss on the hedging instrument that is determined to be an effective hedge is
recognized directly in other comprehensive income, and the ineffective portion (if any) is
106
recognized in net profit or loss. The classification of hedges in the statement of the financial
position depends on their maturity. For derivatives that do not qualify for hedge accounting,
any gains or losses arising from changes in fair value are recorded directly in net profit and
loss for the year. The fair value of interest rate swap contracts is determined by calculating the
present value of cash flows of each leg of the transaction, taking into account several risk
statistics.
5.4.2 Financial position as of 31 December 2022 compared to 31 December 2021
ASSETS
Total assets decreased by €173,867 (6%) to €2,669,882 as of 31 December 2022 from
€2,843,749 as of 31 December 2021.
The value of investment property increased by €3,003 to €2,243,663 as of 31 December 2022
from €2,240,660 as of 31 December 2021, mainly due to investment of €92,192 mostly into
assets under construction and €58,519 mostly into the acquisition of a new landbank in Serbia
and three assets in Hungary. This increase was partially offset mainly by a reclassification of
office building – Forest Office Debrecen and a land in Poland in the amount of €52,296 to
assets held for sale, sale of Cascade office building, Matrix A and B for the amount of €61,392,
sale of land plots in Poland for the amount of €8,887 and adjustment to fair value of €27,002
loss.
The value of assets held for sale decreased by €240,366 (82%) to €51,635 as of 31 December
2022 from €292,001 as of 31 December 2021, mainly as a result of the completion of the sale
of Serbian entities (incl. real estate assets, cash and deposits, and other assets) partially offset
by the reclassification of Forest Office Debrecen (€47,700) to assets held for sale.
The value of derivatives increased by €24,021 to €24,847 as of 31 December 2022 from €826
as of 31 December 2021, mainly attributable to the positive valuation of IRS instruments related
to secured bank loans.
The value of non-current financial assets (related to investment property) measured at fair
value through profit or loss increased by €130,341 as of 31 December 2022 from €0 as of 31
December 2021, mainly due to an initial investment into the Kildare Innovation Campus, Ireland
in the amount of €115,000 through the issuance of notes and acquisition of units in Regional
Multi Asset Fund Compartment 2 of Trigal Alternative Investment Fund GP S.á.r.l. in the
amount of €12,600.
The value of receivables from shareholders decreased to €0 as of 31 December 2022 from
€123,425 as of 31 December 2021, following the registration of capital increase by the National
Court Register and recording proceeds in January 2022.
The value of prepayments, deferred expenses and other receivables decreased by €3,776
(33%) to €7,739 as of 31 December 2022 from €11,515 as of 31 December 2021, mainly as a
result of a decreased on the advances to constructors related to the completion of Pillar office
building in Hungary.
107
The value of
VAT and other tax receivables increased to €5,305 as of 31 December 2022 from
€2,957 as of 31 December 2021, mainly as a result of purchase of assets and due to
development activity.
The value of cash and cash equivalents increased by €27,611 (32%) to €115,079 as of 31
December 2022 from €87,468 as of 31 December 2021, mainly as a result of the disposal of
activity in Belgrade, Bucharest and Zagreb on the office sector (net of cash in disposed entities)
of €186,163 combined with capital increase in the amount of €120,386, partially offset by the
purchase of non-current financial assets (related to investment property) measured at fair
value through profit or loss in the amount of €130,341, purchase of completed assets and land
in the total amount of €58,113 and expenditures on investment property of €85,359.
LIABILITIES
The value of loans and bonds decreased by €61,596 (5%) to €1,237,855 as of 31 December
2022 as compared to €1,299,451 as of 31 December 2021 mainly due to repayment of bonds
and loans in the amount of €52,125, foreign exchange gain on bonds in PLN and HUF of
€12,025 and conversion of loan from non-controlling interest to equity of €5,887. The decrease
was offset mainly by drawdown of a top up loan related to the completion of the Pillar project
of €6,173.
The value of liabilities held for sale decreased to €0 as of 31 December 2022 from 154,831 as
of 31 December 2021 following the disposal of office properties in Serbia.
The value of lease liabilities (incl. current portion of lease liabilities) increased by €2,906 (7%)
to €41,871 as of 31 December 2022 from €38,965 as of 31 December 2021, mainly due to the
recognition of lease liabilities in the amount of €4,815.
The value of derivatives increased by €7,554 (18%) to €48,978 as of 31 December 2022 from
€41,424 as of 31 December 2021 mainly due changes in fair value in relation to the cross
currency interest swaps on the Hungarian bonds.
The value of trade payables and provisions increased by €10,116 (33%) to €41,208 as of 31
December 2022 from €31,092 as of 31 December 2021, mainly due to liabilities related to
development activity.
The value of income tax payable increased by €2,571 to €3,571 as of 31 December 2022 from
€1,000 as of 31 December 2021, mainly due to the income tax payable on the sale of Serbian
office portfolio.
EQUITY
The value of unregistered share capital decreased to €0 as of 31 December 2022 from
€120,295 as at 31 December 2021, following registration of the capital increase by National
Court Register (Krajowy Rejestr Sądowy).
108
The value of share capital increased by €1,913 (17%) to €12,920 as of 31 December 2022
from €11,007 as at 31 December 2021, following reclassification of unregistered share capital
after share capital increase was registered.
The value of share premium increased by €118,382 (22%) to €668,904 as of 31 December
2022 from €550,522 as at 31 December 2021, following the share capital increase at a price
above the nominal value.
The value of accumulated profit decreased by €11,172 (2%) to €490,532 as of 31 December
2022 from €501,704 as of 31 December 2021, following distribution of 2021 profit in the form
of dividend in the amount of €34,583 partially offset by recognition of profit for the period, in
the amount of €23,411.
The value of hedge reserve decreased by €23,388 (76%) to €7,515 as of 31 December 2022
from €30,903 as of 31 December 2021, mainly due to the positive revaluation of the IRS
instruments related to secured bank loans, which resulted mainly from an increase in market
interest rates.
The value of equity increased by €18,598 (2%) to €1,135,587 as of 31 December 2022 from
€1,116,989 as of 31 December 2021 mainly due to recognition of profit of €24,761 and
a positive change in the value of hedge reserve by €23,388. Increase was partially offset by
distribution of 2021 profit in the form of dividend in the amount of €34,583.
5.5 Consolidated income statement
5.5.1 Key items of the consolidated income statement
REVENUES FROM OPERATIONS
Revenues from operations consist of:
• rental income, which consists of monthly rental payments paid by tenants of the
Group’s investment properties for the office or retail space rented by such tenants.
Rental income is recognized as income over the lease term;
• service income, which comprises fees paid by the tenants of the Group’s investment
properties to cover the costs of the services provided by the Group in relation to their
leases.
COST OF OPERATIONS
Costs of operations consist of:
• service costs, which consist of all the costs related to the management services
provided to the individual tenants within the Group’s properties — service costs
should be covered by service income.
109
GROSS MARGIN FROM OPERATIONS
Gross margin from operations is equal to the revenues from operations less the cost of
operations.
SELLING EXPENSES
Selling expenses include:
• brokerage and similar fees incurred to originate the lease or sale of space;
• marketing and advertising costs; and
• payroll and related expenses directly related to leasing or sales personnel.
ADMINISTRATION EXPENSES
Administration expenses include:
• payroll, management fees, and other expenses that include the salaries of all
employees that are not directly involved in sales or rental activities;
• provisions made to account for the share-based incentive program that was granted to
key personnel;
• costs of an audit, legal and other advisors;
• office expenses;
• depreciation and amortization expenses include depreciation and amortization of the
Group’s property, plant, and equipment; and
• others.
PROFIT / (LOSS) FROM THE REVALUATION/IMPAIRMENT OF ASSETS
Net valuation gains (loss) on investment property and investment properties under
development reflect the change in the fair value of investment properties and investment
property under development.
FINANCIAL INCOME / (EXPENSE), NET
Financial income includes interest on loans granted to associate companies and interest on
bank deposits.
Financial expenses include interest on borrowings and deferred debt rising expenses.
Borrowing costs are expensed in the period in which they are incurred, except for those that
are directly attributable to construction. In such a case, borrowing costs are capitalized as part
of the cost of the asset. Borrowing costs include interest and foreign exchange differences.
Additionally, financial income or expenses include settlement of financial assets and gains or
110
losses arising from changes in the fair value of derivatives that do not qualify for hedge
accounting.
TAXATION
Income tax on profit or loss for the year comprises current and deferred tax. Current tax is the
expected tax payable on the taxable income for the year using tax rates enacted or
substantially enacted as of the balance sheet date and any adjustments to tax payable in
respect of previous years. Generally, the Group disposes of property holding companies rather
than the real estate itself, in part because, in certain jurisdictions, the sale and disposal of real
estate are generally subject to real estate transfer tax and/or VAT.
5.5.2 Comparison of financial results for the year ended 31 December 2022 with
the result for the corresponding period of 2021
REVENUES FROM RENTAL ACTIVITY
Rental and service revenues decreased by €5,388 (3%) to €166,563 in the year ended 31
December 2022 compared to €171,951 in the year ended 31 December 2021. The Group
recognized a decrease in rental revenues of €25,200 following the sale of Serbian office
portfolio in the first quarter of 2022 and Cascade office building in the third quarter of 2022
Additionally, the Group observed a decline in average occupancy rate of the office portfolio in
Poland and Romania which had a negative impact on revenues.
The decrease was partially compensated by an increase in rental revenues following
acquisition of income generating properties and the completion of Pillar in Budapest and GTC
X in Belgrade in the amount of €15,300 and an increase in rental revenues from the retail
portfolio in the amount of €11,100 as a result of the end of the Covid-19 related discounts and
measures taken to help the retail tenants. The Group observed also an increase in an average
rental rate following the indexation of its rental rates to the European CPI.
COST OF RENTAL ACTIVITY
Service cost increased by €3,009 (7%) to €47,365 in the year ended 31 December 2022 as
compared to €44,356 in the year ended 31 December 2021. The Group recognized an
increase in service costs following acquisition of income generating properties and completion
of Pillar and GTC X of €4,850 and an increase in service of €3,500 coming from inflation
increase of operational costs. The increase was partially offset by a decrease in the service
costs due to the sale of Serbian office portfolio in the first quarter of 2022 and Cascade office
building in the third quarter of 2022 of €5,350.
GROSS MARGIN FROM OPERATIONS
Gross margin (profit) from operations decreased by €8,397 (7%) to €119,198 in the year ended
31 December 2022 as compared to €127,595 in the year ended 31 December 2021, mainly
due to an increase in the service charge cost due to inflation, decline in an average occupancy
111
rate in Poland and Romania combined with a loss in rental and service revenues due to the
sale of Serbian office portfolio.
The gross margin on rental activities in the year ended 31 December 2022 was 72% compared
to 74% in the year ended 31 December 2021.
ADMINISTRATION EXPENSES
Administration expenses (before provision for the share-based program) increased by €1,979
(14%) to €15,692 in the year ended 31 December 2022 from €13,713 in the year ended 31
December 2021 mainly due to an increase in audit, IT services and other advisory expenses.
Mark-to-market of the share-based program resulted in a reversal of share-based provision of
€652 in the year ended 31 December 2022 compared to the provision of €432 recognized in
the year ended 31 December 2021. The above factors resulted in a increase of administration
expenses of €895 (6%) to €15,040 in the year ended 31 December 2022 from €14,145 in the
year ended 31 December 2021.
LOSS FROM THE REVALUATION OF INVESTMENT PROPERTY AND RESIDENTIAL
LANDBANK
Net loss from the revaluation of the assets amounted to €29,422 in the year ended 31
December 2022, compared to a net loss of €12,867 in the year ended 31 December 2021. Net
loss from the revaluation of the investment properties is driven mainly by a decrease in
occupancy and an increase in market yields and was partially offset by an increase in value of
Matrix C in Zagreb and Pillar in Budapest.
FOREIGN EXCHANGE GAIN (LOSS), NET
Foreign exchange loss amounted to €2,238 in the year ended 31 December 2022, compared
to a foreign exchange gain of €196 in the year ended 31 December 2021.
FINANCE INCOME
Finance income amounted to €1,412 in the year ended 31 December 2022 as compared to
€304 in the year ended 31 December 2021.
FINANCE COSTS
Finance cost decreased by €10,173 (24%) to €33,108 in the year ended 31 December 2022
as compared to €43,281 in the year ended 31 December 2021 mainly due to change of the
financing strategy and shift to non-secured financing. The weighted average interest rate
(including hedges) as of 31 December 2022 was 2.21%.
112
PROFIT / (LOSS) BEFORE TAX
Profit before tax was €37,522 in the year ended 31 December 2022, compared to a profit
before tax of €56,520 in the year ended 31 December 2021. The decrease mainly resulted
from lower gross margin from operations, higher loss from revaluation and foreign exchange
loss, partially offset by lower finance cost.
TAXATION
Tax amounted to €12,761 in the year ended 31 December 2022, compared to a tax of €13,784
in the year ended 31 December 2021. Taxation consists mainly of €12,621 current tax
expenses and €140 of deferred tax expenses.
NET PROFIT / (LOSS)
Net profit decreased by €17,975 (42%) to €24,761 in the year ended 31 December 2022,
compared to a net profit of €42,736 in the year ended 31 December 2021. The decrease mainly
resulted lower profit before tax.
SEGMENTAL ANALYSIS
The chart below presents rental income by sector in the year ended 31 December 2022:
Office sector
60%
Retail sector
40%
Year ended
31 December 2022
Year ended
31 December 2021
Rental income from office sector 75,064 90,876
Service charge revenue from office sector 24,720 26,439
Rental income from retail sector 48,492 39,413
Service charge revenue from retail sector 18,287 15,223
Total
166,563 171,951
113
The operating segments are aggregated into reportable segments, taking into consideration
the nature of the business, operating markets, and other factors. GTC operates in six core
markets: Poland, Hungary, Bucharest, Belgrade, Sofia and Zagreb.
Operating segments are divided into geographical zones, which have common characteristics
and reflect the nature of management reporting structure:
a. Poland
b. Belgrade
c. Hungary
d. Bucharest
e. Zagreb
f. Sofia
g. Other
Segment analysis of rental income and costs for the year ended 31 December 2022 and
31 December 2021 is presented below:
Year ended
31 December 2022
Portfolio
Rental
revenue
Service charge
revenue
Service charge
costs
Gross margin
from
operations
Poland
49,922
18,291
(19,087)
49,126
Belgrade
7,899
2,543
(2,967)
7,475
Hungary
34,455
12,801
(13,438)
33,818
Bucharest
8,465
2,346
(3,399)
7,412
Zagreb
10,635
4,024
(4,434)
10,225
Sofia
12,180
3,002
(4,040)
11,142
Total
123,556
43,007
(47,365)
119,198
Year ended
31 December 2021
Portfolio
Rental
revenue
Service charge
revenue
Service charge
costs
Gross margin
from
operations
Poland
47,043
16,775
(17,959)
45,859
Belgrade
25,923
7,632
(8,139)
25,416
Hungary
25,898
7,793
(7,762)
25,929
Bucharest
12,022
2,997
(3,100)
11,919
Zagreb
9,519
3,706
(4,209)
9,016
Sofia
9,884
2,759
(3,187)
9,456
Total
130,289
41,662
(44,356)
127,595
The chart below presents gross margin by country in the year ended 31 December 2022:
114
Segment analysis of assets and liabilities as of 31 December 2022 is presented below:
Real estate
(**)
Cash and
deposits
Other
Total
assets
Loans,
bonds and
leases
Deferred
tax
liabilities
Other
Total
liabilities
Poland 874,148 28,348 20,895 923,391 277,675 61,293 14,678 353,646
Belgrade 175,662 4,824 2,372 182,858 815 3,085 8,039 11,939
Hungary 746,985 17,159 24,834 788,978 269,596 19,427 15,355 304,378
Bucharest 179,310 6,454 1,626 187,390 9,389 11,957 2,818 24,164
Zagreb 125,117 5,598 11,960 142,675 43,680 16,352 5,554 65,586
Sofia 199,360 4,571 1,185 205,116 71 8,716 6,883 15,670
Other 30,648 410 456 31,514 2,345 - 13 2,358
Non allocated (*) - 72,688 135,272 207,960 684,252 20,346 51,956 756,554
Total 2,331,230 140,052 198,600 2,669,882 1,287,823 141,176 105,296 1,534,295
(*) Loans, bonds and leases comprise mainly of bonds issued by GTC S.A., GTC Hungary and GTC Aurora Luxembourg S.A.
Other liabilities comprise mainly of derivatives payable in the amount of €46,798, related to bonds in HUF.
Other assets represent mainly non-current financial assets in Ireland (€117.7 million) and in Luxembourg (€12.6 million).
(**) Real estate comprise of investment property, residential landbank, assets held for sale and value of buildings and related
improvements presented within property, plant and equipment (including right of use).
Poland
41%
Belgrade
6%
Hungary
29%
Bucharest
6%
Zagreb
9%
Sofia
9%
115
The chart below presents real estate by country in the year ended 31 December 2022:
Segment analysis of assets and liabilities as of 31 December 2021 is presented below:
Real estate
(**)
Cash
and
deposits
Other
Total
assets
Loans,
bonds and
leases
Deferred
tax
liabilities
Other
Total
liabilities
Poland 898,827 43,450 7,456 949,733 299,946 59,706 15,244 374,896
Belgrade 381,875 18,702 3,861 404,438 146,093 3,000 9,156 158,249
Hungary 699,036 28,207 15,302 742,545 267,243 20,057 11,269 298,569
Bucharest 187,047 10,745 1,249 199,041 15,406 13,062 3,925 32,393
Zagreb 163,020 6,243 11,385 180,648 43,704 16,992 4,271 64,967
Sofia 190,516 4,477 1,589 196,582 31 8,528 3,147 11,706
Other 29,835 464 - 30,299 - - - -
Non allocated
(*)
- 15,700 124,763 140,463 722,410 21,800 41,770 785,980
Total 2,550,156 127,988 165,605 2,843,749 1,494,833 143,145 88,782 1,726,760
(*) In other assets are presented receivables from shareholders in the amount of €123,425. Loans, bonds and leases comprise
mainly of bonds issued by GTC S.A., GTC Hungary and GTC Aurora Luxembourg S.A.
(**) Real estate comprise of investment property, residential landbank and value of buildings and related improvements presented
within property, plant and equipment.
Financial data prepared for the purposes of management reporting, on which segment
reporting is based, are based on the same accounting principles that are used in the
preparation of the consolidated financial statements of the Group.
Poland
37%
Belgrade
8%
Hungary
32%
Bucharest
8%
Zagreb
5%
Sofia
9%
Other
1%
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5.6 Consolidated cash flow statement
5.6.1 Key items from consolidated cash flow statement
NET CASH FROM (USED IN) OPERATING ACTIVITIES
The operating cash flow is the cash that the Group generates through running its business and
comprises cash inflows from rental activities.
NET CASH FROM (USED IN) INVESTING ACTIVITIES
The investing cash flow is the aggregate change in the Group’s cash position resulting from
any gains (or losses) from investments in the financial markets, investment properties, and
operating subsidiaries, as well as changes resulting from amounts spent on investments in
capital assets, such as property, plant, and equipment.
NET CASH FROM (USED IN) FINANCING ACTIVITIES
The cash flow from (used in) financing activities accounts for, inter alia, the payment of cash
dividends, receiving proceeds from loans or bonds, and issuing stock.
CASH AND CASH EQUIVALENTS
Cash balance consists of cash in banks. Cash in banks may earn interest at floating rates
based on daily bank deposit rates if those are positive. Short-term deposits are made for
varying periods of between one day and three months, depending on the immediate cash
requirements of the Group, and earn interest at the respective short-term deposit rates if those
are positive. All cash is deposited in banks. All cash and cash equivalents are available for use
by the Group.
117
5.6.2 Cash flow analysis
The table below presents an extract of the cash flow for the period of year ended on 31
December 2022 and 2021:
FY ended 31 December
2022
2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash from operating activities
88,088
106,427
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures on investment property and property, plant and
equipment
(85,359) (92,784)
Purchase of completed assets and land, residential landbank
and minority
(58,113) (276,237)
Sale of landbank and residential landbank or subsidiary, net of
cash in disposed assets
197,345 595
Purchase of non-current financial assets
(130,341)
-
Decrease in short term deposits designated for investment
-
1,150
Advances received for assets held for sale
-
1,210
VAT/tax on purchase/sale of investment property
(2,376)
(614)
Interest received
1,104
28
Net cash used in investing activities
(77,740)
(366,652)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings
6,173
706,070
Repayment of long-term borrowings
(52,125)
(585,323)
Interest paid and other financing breaking fees
(28,666)
(32,786)
Proceeds from issue of share capital, net of issuance costs
120,386
-
Dividend paid to shareholders
(33,210)
-
Repayment of lease liabilities
(642)
(516)
Loans origination payment
(236)
(8,147)
Dividend paid to non-controlling interest
(753)
(300)
Decrease/(increase) in short term deposits
(130)
5,908
Net cash from financing activities
10,797
84,906
Net foreign exchange difference related to cash and cash
equivalents
(2,699) (44)
Net increase/ (decrease) in cash and cash equivalents
18,446
(175,363)
Cash and cash equivalents at the beginning of
the period
96,633 271,996
Cash at banks and on hand
115,079
87,468
Cash at banks related to assets held for sale
-
9,165
Cash and cash equivalents at the end of the period
115,079
96,633
118
Net cash flow from operating activities decreased to €88,088 in the year ended 31 December
2022 from €106,427 in the year ended 31 December 2021. The decrease resulted from the
tax paid and income loss due to the sale of office portfolio in Serbia partially offset by the
completion and acquisition of the income generated properties in Hungary.
Net cash flow used in investing activities amounted to €77,740 in the year ended 31 December
2022 compared to €366,652 in the year ended 31 December 2021. Cash flow used in investing
activities is mainly composed of purchase of non-current financial assets of €130,341,
expenditure on investment properties and property, plant and equipment of €85,359, and
purchase of completed assets and land of €58,113, partially offset by sale of landbank, Serbian
Croatian and Romanian subsidiaries (net of cash in disposed entities) of €186,163.
Net cash flow from financing activities amounted to €10,797 in the year ended 31 December
2022, compared to €84,906 of cash flow from financing activities in the year ended 31
December 2021. Cash flow from financing activities is mainly composed of (i) proceeds from
issue of share capital, net of issuance costs of €120,386; (ii) repayment of long-term
borrowings of €52,125; (iii) dividend paid to shareholders in the amount of €33,210 and (iv)
interest paid and other financing breaking fees in the amount of €28,666.
Cash and cash equivalents as of 31 December 2022 amounted to €115,079 compared to
€96,633 as of 31 December 2021. The Group keeps its cash in the form of current accounts
and bank deposits.
5.7 Future liquidity and capital resources
As of 31 December 2022, the Group believes that its cash balances, cash generated from
disposal of properties, cash generated from leasing activities of its investment properties, and
cash available under its existing and future loan facilities as well as revolving credit facility will
fund its needs.
The Group endeavors to manage all its liabilities efficiently and is constantly reviewing its
funding plans related to (i) the development and acquisition of commercial properties, (ii) debt
servicing of its existing assets portfolio, and (iii) CAPEX. Such funding is sourced through
available cash, operating income, and refinancing.
As of 31 December 2022, the Group’s non-current liabilities amounted to €1,433,841
compared to €1,487,683 as of 31 December 2021.
The Group’s total debt from long and short-term loans and borrowings as of 31 December
2022 amounted to €1,237,855, as compared to €1,441,403, including loans related to assets
held for sale of €141,952 (net of deferred issuance debt expenses) as of 31 December 2021.
The weighted average interest rate (including hedges) as of 31 December 2022 was 2.21%.
119
The Group’s loans and borrowings are mainly denominated in euro. Debt in other currencies
includes bonds (series maturing in 2022-2023) in PLN and green bonds issued by Hungarian
subsidiary in HUF (series maturing in 2027-2031), which are hedged through cross currency
interest rate swaps following the hedging policy of the Group.
The Group’s net loan-to-value ratio amounted to 45.6% (LTV adjusted for disposal of Forrest
Offices Debrecen, concluded on 30 January 2023, is 44.5%) as of 31 December 2022,
compared to 52.5% as of 31 December 2021. The Group’s long-term strategy is to keep its
loan-to-value ratio at a level of 40%; however, in case of acquisitions, the Company may
deviate temporarily.
As of 31 December 2022, 95% of the Group’s loans (by value) were based on the fixed interest
rate or hedged against interest fluctuations, mainly through interest rate swaps and cap
transactions.
AVAILABILITY OF FINANCING
In the CEE and SEE markets, real estate development companies, including the companies
of the Group, usually finance their real estate projects with proceeds from the issue of the
bonds, proceeds from bank loans, loans extended by their holding companies. The availability
and cost of procuring financing are of material importance to the implementation of the Group’s
projects and for the Group’s development prospects and its ability to repay existing debt.
Finally, the availability and cost of financing may impact the Group’s development dynamics
and the Group’s cash flow and net profit.
Traditionally, the principal sources of financing for the Group’s core business included rental
revenues, bank loans, proceeds from projects, proceeds from bonds issued by the Company,
and proceeds from asset disposals.
The Management has prepared and analyzed the cash flow budget based on certain
hypothetical defensive assumptions to assess the reasonableness of the going concern
assumption given the current developments on the market. This analysis assumed certain loan
repayment acceleration, negative impact on NOI, as well as other offsetting measures, which
the Management may take to mitigate the risks, including deferring the development activity
and dividend pay-out.
Based on Management’s analysis, the current cash liquidity of the Company, and the budget
assumptions, Management concluded that there is no material uncertainty as to the
Company’s ability to continue as a going concern in the foreseeable future i.e., at least in the
next 12 months. Management notes that it is difficult to predict the ultimate short, medium, and
long-term impact of the macroeconomic conditions on the financial markets and the
Company’s activities, but the expected impact may be significant. Accordingly, Management
conclusions will be updated and may change from time to time.
120
6. Information on the use of proceeds from the issuance of shares and bonds
In December 2021, the Company increased its capital in the way of issuance of 88,700,000
ordinary O series shares. Net proceeds in the amount of €120,386 from the issuance of the
above mentioned shares were received in January 2022 and were allocated in strengthen
Group’s balance sheet.
7. Information on loans granted with a particular emphasis on related entities
As of 31 December 2022, the Group does not have any long-term loans granted to its
associates or joint ventures.
8. Information on granted and received guarantees with a particular emphasis on
guarantees granted to related entities
During the year ended 31 December 2022, the Group did not grant guarantees where the total
value is material.
As of 31 December 2022 and 31 December 2021, there were no guarantees given to third
parties. As at 31 December 2022, the guarantees granted amounted to €0.
Additionally, the Company gave typical warranties in connection with the sale of its assets
under the sale agreements and construction completion and cost-overruns guarantee to
secure construction loans. The risk involved in the above warranties and guarantees is very
low.
In the normal course of business activities, the Group receives guarantees from the majority
of its tenants to secure the rental payments on the leased space.
9. Off balance liabilities
COMMITMENTS
As of 31 December 2022 (and as at 31 December 2021), the Group had commitments
contracted for in relation to future capital expenditures on investment properties without
specified date, amounting to
€116,500 (€29,700 as at 31 December 2021). These
commitments are expected to be financed from available cash and current financing facilities,
other external financing or future instalments under already contracted sale agreements and
yet to be contracted sale agreements.
121
GUARANTEES
As of 31 December 2022 and 31 December 2021 there were no guarantees given to third
parties.
Additionally, the Company gave typical warranties in connection with the sale of its assets
under the sale agreements and construction completion and cost-overruns guarantee to
secure construction loans. The risk involved in the above warranties and guarantees is very
low.
CROATIA
In relation to the Marlera Golf project in Croatia, part of the land is held on a lease basis from
the State. There is furthermore a Consortium agreement with the Ministry of Tourism of Croatia
(Ministry) which includes a deadline for the completion of a golf course that has expired in
2014. If the deadline is not met, then the Ministry has the right to terminate the Consortium
agreement which might automatically trigger the termination of the Land Acquisition
Agreements, as well as collateral activation and damages claims. Prior to 2014, the Company
has taken active steps to achieve an extension of the period for completing the project. In
February 2014, the Company received a draft amendment from the Ministry expressing its
good faith and intentions to prolong the abovementioned timeline however, the amendment
was not formalized since then. Since formalization of the amendment is not at the sole
discretion of the Group, the Management has decided to revalue the freehold asset in
assuming no development of the golf course project. Furthermore, as a prudential measure,
the Management has also written off the related collateral in the amount of
€1,000 provided to
the Ministry as a guarantee for completing the golf course. As of 31 December 2022 the book
value of the investment in Marlera Golf project was assessed by an independent valuer at
€6,800.
10. Major investments, local and foreign (securities, financial instruments,
intangible assets, real estate), including capital investments outside the Group
and its financing method
The Group does not have any major local or foreign investments other than direct investments
in real estate properties designated for development or through companies that hold such real
estate.
11. Information on risk management
The Group’s principal financial instruments comprise bank and shareholders’ loans, bonds,
hedging instruments, trade payables, and other long-term financial liabilities. The main
purpose of these financial instruments is to finance the Group’s operations. The Group has
various financial assets such as trade receivables, loans granted, derivatives, cash and short-
term deposits.
122
The main risks arising from the Group’s financial instruments are cash flow interest risk,
liquidity risk, foreign currency risk and credit risk.
INTEREST RATE RISK
The Group exposure to changes in interest rates that are not offset by hedge relates primarily
to the Group’s long-term debt obligations and loans granted. No other financial instruments,
which are subject for interest rate risk.
The Group’s policy is to obtain finance bearing variable interest rates. To manage the interest
rate risk in a cost-efficient manner, the Group enters into interest rate swaps, swap currency
or cap transactions.
The Group’s loans are nominated or swapped into euro.
As at 31 December 2022, 95% of the Group’s long-term loans and bonds is hedged (as at 31
December 2021 – 94%).
For 2022 year, a 50bp increase in EURIBOR rate would lead to €343 change in result before
tax (2021: €486 change in result before tax).
On 7 July 2022 the Act on crowdfunding for business and support for borrowers was adopted
which provides the basis for changing the WIBOR and WIBID benchmarks in Poland. As a
follow up of legislative changes, in September 2022 the Steering Committee of the National
Working Group for benchmark reform accepted the Roadmap for the replacement of WIBOR
and WIBID benchmarks with WIRON index. The details regarding the replacement will be
published in 2023, in the form of the Regulation of the Minister of Finance which will define the
adjustment spread and the date from which the replacement applies. According to the
Roadmap, the publication of old WIBOR/WIBID rates will cease in 2025.
FOREIGN CURRENCY RISK
The Group enters into transactions in currencies other than the functional currency of the
Group’s subsidiaries. Therefore, it hedges the currency risk by either matching the currency of
the inflow, outflow and cash and cash equivalent with that of the expenditures. It is element of
hedge accounting policy of the Group.
Exchange rates as of 31 December 2022 and 2021 were as following:
31 December 2022 31 December 2021
PLN/EUR 4.6899 4.5994
HUF/EUR 400.23 369.01
123
The table below presents the sensitivity of profit (loss) before tax due to changes in foreign
exchange rates:
2022
2021
PLN/EUR
PLN/EUR
Rate/Percentage of
change
5.1589
(+10%)
4.9244
(+5%)
4.4554
(-5%)
4.2209
(-10%)
5.0593
(+10%)
4.8294
(+5%)
4.3694
(-5%)
4.1395
(-10%)
Cash and blocked
deposits
(3,895) (1,948) 1,948 3,895 (3,709) (1,855) 1,855 3,709
Trade and other
receivables
(314) (157) 157 314 (1,006) (503) 503 1,006
Trade and other
payables
1,289 644 (644) (1,289) 1,608 804 (804) (1,608)
Land leases 3,042 1,521 (1,521) (3,042) 3,107 1,553 (1,553) (3,107)
Total 122 60 (60) (122) - (1) 1 -
The Group does not see any currency risk related to bonds denominated in PLN and HUF as
they are hedged. Exposure to other currencies and other positions in the statement of financial
position is not material.
The potential theoretical impact on the currency exposure whether the Group would have not
hedged the PLN bonds and the HUF Bonds is as following:
Percentage of
change in FX rate
(-10%) (+10%)
Bonds in PLN (3,150) 3,150
Bonds in HUF (14,900) 14,900
CREDIT RISK
Credit risk is the risk that a party to a financial instrument will fail to discharge an obligation.
To manage this risk, the Group periodically assesses the financial viability of its customers.
The Group does not expect any counter parties to fail in meeting their obligations. The Group
has no significant concentration of credit risk with any single counterparty or Group
counterparties.
With respect to trade receivables and other receivables that are neither impaired nor past due,
there are no indications as of the reporting date that those will not meet their payment
obligations. As of reporting date we don’t have material impaired receivables.
With respect to loan granted to non-controlling interest it was assessed in Stage 1 as defined
by IFRS 9 Financial instruments.
With respect to credit risk arising from the other financial assets of the Group, which comprise
cash and cash equivalents, and blocked deposits, the Group’s exposure to credit risk equals
the carrying amount of these instruments.
124
The maximum exposure to credit risk as of the reporting date is the full amount presented.
There are no material financial assets as of the reporting dates, which are overdue and not
impaired. There are no significant financial assets impaired.
LIQUIDITY RISK
As at 31 December 2022, the Group holds cash and cash equivalents (as defined in IFRS) in
the amount of approximately €115 million. As described above, the Group attempts to
efficiently manage all its liabilities and is currently reviewing its funding plans related to: (i) debt
servicing of its existing assets portfolio; (ii) capex; and (iii) development of commercial
properties. Such funding will be sourced through available cash, operating income, sales of
assets and refinancing. The Management Board believes that based on its current
assumptions, the Group will be able to settle all its liabilities for at least the next twelve months.
Repayments of long-term debt and interest are scheduled as follows (million EUR)
(the amounts are not discounted):
31 December
2022
31 December
2021
First year
(*) 76 127
(**)
Second year
65 148
Third year
149 99
Fourth year
774 144
Fifth year
76 821
Thereafter
206 236
Total
1,346 1,575
(*) Repaid during 12 months from reporting date.
(**) Including €54m liabilities related to assets held for sale
The above table does not contain payments relating to the market value of derivative
instruments. The Group hedges significant parts of the interest risk related to floating interests
rate with derivative instruments. Management plans to refinance some of the repayment
amounts.
Repayments of long-term derivatives are scheduled as follows (million EUR) (the amounts are
not discounted):
31 December
2022
31 December
2021
1
– 4 years
- -
Fifth year
3 -
Thereafter
44 39
Total
47 39
All derivative instruments mature within 1-10 years from the balance sheet date.
125
Long term finance lease represents lease payments for land subject to perpetual usufruct
payments with maturity of 33 – 87 years. The Group pays an annual amount of €2,056 (€2,120
in 2021) as lease payment (principal and interest) for lands under perpetual usufruct.
Maturity dates of current financial liabilities as of 31 December 2022 were as following:
Total
Overdue
Up to a
month
1-3 months
3 months –
1 year
Trade payables and
provisions
41,208 308 9,600 18,427 12,873
Current portion of long-
term borrowing
48,571 - 140 2,966 45,465
Deposits from tenants
1,639
-
177
136
1,326
Current portion of lease
liabilities
388 - 279 56 53
Derivatives
2,180
-
-
-
2,180
Total
93,986
308
10,196
21,585
61,897
Maturity dates of current financial liabilities as of 31 December 2021 were as following:
Total
Overdue
Up to a
month
1-3 months
3 months –
1 year
Trade payables and
provisions
31,092 521 6,476 17,386 6,709
Current portion of long-
term borrowing
44,337 - - 3,825 40,512
Deposits from tenants
1,932
-
161
483
1,288
Current portion of lease
liabilities
198 - 21 127 50
Derivatives
2,681
-
-
654
2,027
Total
80,240 521 6,658 22,475 50,586
FAIR VALUE
As of 31 December 2022, 78% of all bank loans bears floating interest rate (79% as of 31
December 2021). However, as of 31 December 2022, 87% of these loans are hedged (81%
as of 31 December 2021).
As of 31 December 2022, 5% of all bonds bears floating interest rate (7% as of 31 December
2021). However, as of 31 December 2022, 100% of these bonds are hedged (100% as of 31
December 2021).
For information related to loans granted/received from non-controlling interest please refer to
note 28 of the consolidated financial statements for the year ended 31 December 2022.
Due to the recent significant increase of an interest rates where the Group operates, the fair
value of the HUF Bonds significantly differs from its carrying value. It is due to the fact that all
the HUF bonds as of the 31 December 2022 bear a fixed interest rate until maturity, however
these bonds are hedged with cross-currency interest rate swaps.
126
Market value and fair value of bonds as of 31 December 2022 is presented below:
Fair value of all other financial assets/liabilities is close to the carrying value.
For the fair value of investment property, please refer to note 17 of the consolidated financial
statements for the year ended 31 December 2022.
FAIR VALUE HIERARCHY
As at 31 December 2022 and 2021, the Group held several derivatives carried at fair value in
the statement of financial position.
The Group uses the following hierarchy for determining and disclosing the fair value of financial
instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities,
Level 2: other techniques for which all inputs which have a significant effect on the recorded
fair value are observable, either directly or indirectly,
Level 3: techniques that use inputs that have a significant effect on the recorded fair value that
are not based on observable market data.
Valuations of derivatives are considered as level 2 fair value measurements. During the year
ended 31 December 2022 and 31 December 2021, there were no transfers among Level 1,
Level 2 and Level 3 fair value measurements in respect to financial instruments.
PRICE RISK
The Group is exposed to fluctuations in the real estate markets in which it operates. These can
have an effect on the Group’s results (due to changes in the market rent rates and in occupancy
of the leased properties).
Further risks are described in Item 3 Key risk factors of this report.
4
https://gpwcatalyst.pl/notowania-obligacji-obligacje-korporacyjne
5
Fair value at level 2 was calculated based on assumption of market interest rate of 15%.
6
https://www.boerse-frankfurt.de/bond/xs2356039268-gtc-aurora-luxembourg-s-a-2-25-21-26
Series of bonds
Market value and
fair value
(in million EUR)
Bonds mature in 2023 (Poland) (PLGTC0000318)
4
31.6
Green bonds mature in 2027-2030 (HU0000360102)
5
45.1
Green bonds mature in 2028-2031 (HU0000360284)⁵ 21.3
Green bonds mature in 2026 (XS2356039268)
6
367.0
     
127
CAPITAL MANAGEMENT
The primary objective of the Group’s capital management is to provide for operational and
value growth while prudently managing the capital and maintaining healthy capital ratios in
order to support its business and maximise shareholder value.
The Group manages its capital structure and adjusts it to dynamic economic conditions. While
observing the capital structure, the Group decides on leverage policy, loans raising and
repayments, investment or divestment of assets, dividend policy, and capital raise, if needed.
No changes were made in the objectives, policies, or processes during the years ended
31 December 2022 and 31 December 2021.
The Group monitors its gearing ratio, which is Gross Project and Corporate Debt less Cash &
Deposits, divided by its real estate investment value. The Group’s long-term strategy is to keep
its loan-to-value ratio (“LTV”) at a level of 40 per cent, however in case of acquisitions the
Company may deviate temporarily. As of 31 December 2022, LTV was 45.6% (LTV adjusted
for disposal of Forrest Offices Debrecen, concluded on 30 January 2023, is 44.5%).
12. Remuneration policy and human resources management
12.1 Remuneration policy
On 14 June 2022, the general meeting decided to revoke the existing wording of the
Remuneration Policy of the Company, adopted on 27 August 2020. The Remuneration Policy
governs the remuneration of the management and supervisory board members.
REMUNERATION OF THE MANAGEMENT BOARD
In accordance with the Remuneration Policy, the remuneration of the members of the
management board is determined by the supervisory board and is set at a level appropriate to
the roles assigned to individual persons and related responsibilities and takes into account the
performance of any additional functions, qualifications and professional experience, the current
market and economic situation, as well as the Company’s financial and operational situation
and needs.
Members of the management board are entitled to the following components of remuneration:
(i) fixed remuneration; (ii) variable remuneration and related payouts; (iii) Phantom shares or
other incentive programs either based on the Company’s shares or the movement of prices of
these shares to be established in the future by the general meeting or the supervisory board;
(iv) compensation for compliance with the non-compete clause; and (v) a severance payment
related to the termination of the legal relationship with the Company.
With respect to the variable components of remuneration, as defined in the Remuneration
Policy, it is designed to be motivational and to reward the members of the management board
for fulfilling their roles, discharging their responsibilities and delivering superior results.
Variable remuneration targets and the related payouts reflect a range of expected levels of
128
performance. Members of the management board may be entitled to Annual Performance
Bonus if they achieve the minimum level of the set targets in the given financial year. The
Annual Performance Bonus should amount to a particular percentage or part of the maximum
bonus amount, as specified in the contract with a particular member of the management board,
depending on the level of achievement of the set targets. The Annual Performance Bonus
awarded to members of the management board is determined by the supervisory board.
The Annual Performance Bonus is paid after the approval of the annual financial statements
by the supervisory board of the Company. As of the date of this Report, the Annual
Performance Bonus for 2022 has not yet been paid.
The Company determines the remuneration system so that the total share of the variable
remuneration is between 30% (thirty per cent) and 300% (three hundred per cent) of the annual
fixed remuneration for a particular member of the Management Board. The value of the
Phantom Share Programme is not taken into account in the calculation of the above proportion
between the fixed and variable parts of the remuneration.
Moreover, the management board members may receive and have received in 2022 additional
benefits, such as: (i) private medical care, including for family members; and (ii) the use of
company cars, company telephones and other electronic devices for private purposes and the
covering of their costs.
The members of the management board may also receive compensation for compliance with
the non-compete clause following the end of an engagement; however, the Company has
exercised its right to withdraw from such non-compete obligations and such compensation has
not been paid to the former members of the management board.
In 2022, there were changes in the composition of the management board During the 2022
financial year, and in line with the Company’s approved Policy regarding the remuneration of
the management board members, management board members received a base fixed
remuneration as well as variable elements of the remuneration in accordance with the relevant
contract concluded with the Company or other entity from the Company’s capital group. The
establishment of a link between the management board member's remuneration in a form of
Phantom Shares and the increase in the Company's share prices aligns such members’
personal interest with the interests of the shareholders. The implementation of the Company’s
strategy and commitment to long-term interests should have a positive impact on the
Company’s share prices, which in turn should translate into higher remuneration of the
management board members. In addition, it also increases the motivation of management
board members and facilitates in the Company retaining them and, as such, contributes to the
stability of the Company.
REMUNERATION OF THE SUPERVISORY BOARD
Members of the supervisory board are entitled only to monthly fixed remuneration for
performing their functions, or if performing additional functions in a separate committee(s), they
are entitled to additional monthly fixed remuneration. The amount of the above-mentioned
remuneration is determined by the general meeting. There are no performance-based variable
components of remuneration or financial or non-financial benefits awarded to members of the
supervisory board.
129
In 2022, there were changes in the composition of the supervisory board. The remuneration
paid to the supervisory board members was granted and paid in compliance with the
Remuneration Policy as the supervisory board members were granted only fixed remuneration
for holding a position on the board and, in some cases, additional remuneration for performing
additional functions in a separate committee(s) of the supervisory board.
The remuneration of supervisory board is approved by general meeting of shareholders.
12.2 Incentive system
The Company has a remuneration and incentive system that consists of a bonus for meeting
specific goals or objectives set by the management board or supervisory board (as the case
may be) or achieving special achievements. The Company’s management board members,
certain key managers are also incentivized by participation in Phantom Shares program,
according to which a certain number of phantom shares is vested to the employee once a year.
The Phantom Shares grant to the entitled persons a right for a settlement from the Group in
the amount equal to the difference between the average closing price for the Company’s
shares on the Warsaw Stock Exchange during the 30-day period prior to the date of delivery
to the Company of the exercise notice, and settlement price (“strike”) amount per share
(adjustable for dividend). The Phantom Shares are not securities convertible or exchangeable
into shares in the Company, in particular, they are not options on such shares. The Phantom
Shares are merely a means of calculation of deferred variable compensation of the entitled
persons, which depends on the future market price of the shares on the regulated market.
The company uses binomial model to evaluate the fair value of the phantom shares. The input
data includes the date of valuation, strike price, and expiry date.
The Phantom shares (as presented in below mentioned table) have been accounted for based
on future cash settlement.
As at December 31, 2022, the Group's share based payment liabilities amounted to €758 (as
at 31 December 2021 €1,410). The gain recognized in the income statement amounted to
€652 (in 2021: loss of €432).
As at 31 December 2022, phantom shares issued were as follows:
Strike (PLN)
Granted
Vested
Total
5.75 - 5.95
946,500
2,531,600
3,478,100
6.03 – 6.31
-
468,000
468,000
6.42 – 6.69
1,850,000
175,000
2,025,000
Total
2,796,500
3,174,600
5,971,100
130
As at 31 December 2021, phantom shares issued were as follows:
Strike (PLN)
Granted
Vested
Total
6.03
-
827,416
827,416
6.11
-
100,000
100,000
6.23
2,891,000
1,292,100
4,183,100
6.31
-
250,000
250,000
Total
2,891,000
2,469,516
5,360,516
The Phantom shares (as presented in above table) have been provided for assuming cash
payments will be materialized, as the Company assesses that it is to be settled in cash.
Last year of exercise date
Number of phantom shares
2023
2,205,600
2025
1,875,000
Other*
1,890,500
Total 5,971,100
* From one to twelve months after agreement termination.
The number of phantom shares were changed as follows:
Number of phantom shares as of 1 January 2022 5,360,516
Granted during the period*
2,742,000
Expired
(1,599,000)
Exercised during the period
(532,416)
Number of phantom shares as of 31 December 2022 5,971,100
*In 2022 new phantom share program was introduced for management and key personnel.
12.2.1 Phantom Shares program control system
Granting Phantom Shares to members of the management board and setting their condition is
reviewed and approved by the Remuneration Committee and the supervisory board and is in
accordance with the Remuneration Policy.
Remuneration to other key personnel is set by the management board.
12.3 Agreements concluded between GTC and management board members
The Company has concluded agreements with its members of the board, providing for their
basic compensation, performance-related bonus, participation in the Phantom Share program,
severance payment in the case of their dismissal. Furthermore, the agreements contain a non-
competition clause and confidentiality clause.
131
12.4 Evaluation of the remuneration policy for the realization of its objectives
The remuneration policy is consistent with the shareholders' target to have a long-term
increase in shareholder value. Furthermore, it aims to provide stability in managing the
Company and carrying out its policies by attracting and retaining highly skilled employees
across the organization and operation countries of the Company. Such goals guarantee
motivation for quality work and the good attitude of employees, stable financial results, in the
long run, sound and effective risk management, supporting the implementation of the business
strategy, and the reduction of conflict of interest.
12.5 Remuneration of the Members of the management board and supervisory
board
MANAGEMENT BOARD
The following table presents the remuneration of the members of the management board
as of 31 December 2022 for the 12 months ended 31 December 2022:
Name
Periods
Fixed
remuneration¹
(€)
(not in thousand)
Variable
remuneration¹
(€)
(not in
thousand)
Vested
Phantom
Shares
(not in
thousand)
Zoltán Fekete 17 March-
31 December 2022
233,887
-
-
Ariel Ferstman 1 January -
31 December 2022
283,435
290,000
177,000
János Gárdai 1 February -
31 December 2022
206,537
-
-
Pedja Petronijevic 15 January –
15 July 2022
75,573
126,555
-
Gyula Nagy 1 January –
28 February 2022
9,000
-
-
Yovav Carmi 1 January –
14 January 2022
37,500
592,169²
-
¹ Remuneration (or fees to entities in which the holder is key personnel) consists of payment for 2022 and
success fee amounts paid for present and the past year in addition to Group’s Phantom Shares program
exercised during 2022, as detailed in Item 12.2. Phantom shares. Fixed remuneration includes fringe benefits.
²
Related to severance payment following the mutually agreed termination and to
exercised phantom shares.
During 2022, the following changes in the composition of the management board took place:
• on 13 December 2021, the supervisory board of the Company appointed Mr. Pedja
Petronijevic to the management board of the Company (Chief Development Officer)
effective as of 15 January 2022 and Mr. János Gárdai to the management board of the
132
Company (Chief Operating Officer) effective as of 1 February 2022. (see current report
no 18/2021).
• on 14 January 2022, GTC entered into a mutual employment contract termination
agreement with Mr. Yovav Carmi former President of the management board.
Subsequently Mr. Carmi resigned from his seat on the management board of the
Company and other subsidiaries The resignation is effective immediately (see current
report no 7/2022);
• on 28 January 2022, Mr. Gyula Nagy resigned from his seat on the management board
of the Company. The resignation is effective immediately (see current report no
11/2022);
• on 17 March 2022, the supervisory board of the Company appointed Mr. Zoltán Fekete
to the management board of the Company as the President of the management board
(see current report no 21/2022);
• on 5 July 2022, Mr. Pedja Petronijevic resigned from his seat on the management board
of the Company. The resignation is effective on 15 July 2022 (see current report no
35/2022).
SUPERVISORY BOARD
The following table presents the remuneration of the members of the supervisory board as
of 31 December 2022 for the 12 months ended 31 December 2022:
Name
Periods
Remuneration
(€)
(not in thousand)
Zoltán Fekete 1 January – 11 March 2022 4,838
János Péter Bartha 1 January - 31 December 2022 39,643
Lóránt Dudás 1 January - 31 December 2022 23,800
Balázs Figura 1 January - 31 December 2022 23,800
Mariusz Grendowicz
1 January – 14 June 2022
2 September -31 December 2022
20,410
Artur Kozieja 14 June - 31 December 2022 19,452
Marcin Murawski 1 January - 31 December 2022 33,210
Gyula Nagy 11 March - 31 December 2022 19,780
Daniel Obajtek 1 January – 15 November 2022 20,581
Bálint Szécsényi 1 January - 31 December 2022 23,791
Bruno Vannini 22 April - 31 December 2022 17,495
133
During 2022, the following changes in the composition of the supervisory board took place:
• on 11 March 2022, Mr. Zoltán Fekete resigned from his seat on the supervisory board
of the Company. The resignation is effective immediately (see current report no
20/2022);
• on 11 March 2022, GTC Dutch Holdings B.V. appoints Mr. Gyula Nagy as member of
the supervisory board of the Company, effective immediately (see current report no
20/2022);
• on 22 April 2022, Icona Securitization Opportunities Group S.à r.l. appointed Mr. Bruno
Vannini as a member of the supervisory board of the Company, effective immediately
(see current report no 24/2022);
• on 1 June 2022, AVIVA Otwarty Fundusz Emerytalny Aviva Santander. reappointed
Mr. Marcin Murawski as a member of the supervisory board of the Company, effective
14 June 2022 (see current report no 29/2022);
• on 14 June 2022, the term of office of Mariusz Grendowicz as an independent member
of the supervisory board of the Company has expired (see current report no 34/2022);
• on 14 June 2022, the Annual General Meeting with its resolution no 20 appointed Artur
Kozieja as an independent member of the supervisory board for a period of three years
(see current report no 34/2022);
• on 2 September 2022 GTC Dutch Holdings B.V. appoints Mr. Mariusz Grendowicz as
member of the Supervisory Board of the Company, effective as of 2 September 2022
(see current report no 39/2022);
• on 15 November 2022, Mr. Daniel Obajtek resigned from his seat on the supervisory
board of the Company, effective immediately (see current report no 48/2022).
Additionally on 2 January 2023 Otwarty Fundusz Emerytalny PZU “Złota Jesień” appoints Mr.
Sławomir Niemierka as member of the supervisory board of the Company, effective as of 2
January 2023.
12.6 Number of employees
As of 31 December 2022 and 2021, the number of full time equivalent working employees
in the Group companies was 223 and 211, respectively.
12.7 Training policy
The Company offers its employees various forms to raise professional qualifications. The key
strategic training and workshops are conducted by external companies. Such training
opportunities focus mainly on market and product knowledge, marketing, processes, and IT
134
applications competencies, asset management, legal, tax, and accounting. The Company
believes that such training is increasing the employee’s commitment to the performance of
business tasks, improving his/her skills, and maintaining high customer service quality.
12.8 Information on any liabilities arising from pension and similar benefits for
former members of the management board and the supervisory board
There are no liabilities arising from pension and similar benefits for former members of the
management board and the supervisory board.
13. Shares in GTC held by members of the management board and the supervisory
board
SHARES HELD BY MEMBERS OF THE MANAGEMENT BOARD
The following table presents shares owned directly or indirectly by members of the Company’s
management board of the date of publication of this annual report, and changes in their
holdings since the date of publication of the Group’s last financial report (interim report for the
three and nine-month period ended 30 September 2022) on 16 November 2022.
The information included in the table is based on information received from members of the
management board.
Management board member
Balance as of
24 April 2023
(not in
thousand)
The nominal
value of shares
in PLN
(not in
thousand)
Change since
16 November
2022
(not in
thousand)
Zoltán Fekete 0 0 No change
Ariel Ferstman 5,240 524 No change
János Gárdai 0 0 No change
Total
5,240
524
SHARES OF GTC HELD BY MEMBERS OF THE SUPERVISORY BOARD
The following table presents shares owned directly or indirectly by members of the Company’s
supervisory board of the date of publication of this annual report, and changes in their holdings
since the date of publication of the Group’s last financial report (interim report for the three and
nine-month period ended 30 September 2022) on 16 November 2022.
135
The information included in the table is based on information received from members of the
supervisory board.
Members of supervisory board
Balance as of
24 April 2023
(not in
thousand)
The nominal
value of shares
in PLN
(not in thousand)
Change since
16 November
2022
János Péter Bartha
0 0 No change
Lóránt Dudás
0 0 No change
Balázs Figura
0 0 No change
Mariusz Grendowicz
13,348 1,335 No change
Artur Kozieja
0 0 No change
Marcin Murawski
0 0 No change
Gyula Nagy
0 0 No change
Bálint Szécsényi
0 0 No change
Bruno Vannini
0 0 No change
Sławomir Niemierka
¹
0 0 No change
Total 13,348 1,335
¹ Change since 2 January 2023 r.
14. Transactions with related parties concluded on terms other than market terms
The Group presents information on the material transactions that the Company, or its
subsidiaries, concluded with a related party in the consolidated financial statements for the
financial year ended 31 December 2022 in Note 36 Related Party Transactions.
In 2022 the Group did not conduct any material transactions with the related parties that are
not based on arm’s length basis.
In 2022 Group acquired several assets for the total consideration of €30,200 from companies
related to the majority shareholder of the Company. All transactions were concluded on market
terms. For further details please see Item 4.2 Main events of 2022.
15. Information on signed and terminated loan agreements within a given year
On 13 May 2022, GTC SA signed an amendment agreement to revolving facility agreement
dated 29 October 2021 with a club of four different banks. As a result, the available amount of
unsecured revolving credit facility was increased to €94,000. As of balance sheet date, credit
facility was not used.
136
On 18 May 2022, the Group signed a prolongation of the existing facility with Santander Bank
Polska. Final repayment date was extended to 31 August 2025 and the outstanding balance
of the loan in the amount of €13,500 will be paid as a balloon payment on the maturity date.
On 28 June 2022, the Group signed with Berlin Hyp AG amendment agreement to bank loan
agreement, according to which a prepayment of €6,100 was made at the beginning of July
2022. The outstanding balance of the loan will be paid as the balloon payment on the maturity
date. The loan will expire on 30 June 2026.
On 18 April 2022, GTC SA repaid all bonds issued under ISIN code PLGTC0000292 (full
redemption). The original nominal value was €9,440.
On 4 November 2022, GTC SA prepaid 1/3 of the nominal value of its amortized bonds issued
under ISIN code PLGTC0000318 in the amount of €17,100 (PLN 73,333).
All signed in year 2022 loan agreements are denominated in euro and interest is based on
margin plus Euribor. The Group pays interest on its long term debt and bonds on weighted
average 2.21% p.a.
16. Information on contracts of which the Company is aware of (including those
concluded after the balance sheet date) which could result in a change in the
shareholding structure in the future
On 19 February 2022, the Company received notification from GTC Dutch Holdings B.V. with
its registered office in Amsterdam, the Netherlands (the “Seller”, “GTC Dutch”) and Icona
Securitization Opportunities Group S.à r.l. acting on behalf of its compartment Central
European Investments with its registered office in Luxembourg, Grand Duchy of Luxembourg
(the “Buyer”. “Icona”) that the Seller and the Buyer entered into a preliminary share purchase
agreement relating to the acquisition by the Buyer from the Seller of 15.7% of the shares in the
Company. However, pursuant to the notification, the Buyer and the Seller agreed that the
shareholders’ agreement will constitute an acting in concert agreement within the meaning of
Articles 87(1)(5) and 87(1)(6) in connection with Article 87(3) of the Act of 29 July 2005 on
Public Offerings and the Conditions for the Introduction of Financial Instruments to the
Organised Trading System and Public Companies (the “Act on Public Offering”) on joint policy
towards the Company and exercising of voting rights on selected matters in an agreed manner.
Also, pursuant to the assignment agreement, the Buyer will, among others, transfer to the
Seller its voting rights attached to the Shares and grant the power of attorney to exercise voting
rights attached to the shares. The assignment agreement expires in case either call or put
option under the call and put option agreement is exercised and/or in case of a material default
under the transaction documentation (“Transation”). On 1 March 2022, the company received
notification that the Transaction was completed, and the Buyer acquired 15.7% of the shares
in the Company.
As a result of execution of the Transaction, Icona holds 90,176,000 ordinary bearer shares in
the Company which constitute 15.7% of total votes at GTC's general meeting, with reservations
that (i) all the Buyer’s Voting Rights (as defined below) were transferred to the Seller and that
(ii) Buyer granted the Power of Attorney to Icona Voting Rights to the Seller.
137
As a result of execution of the Transaction GTC Holding Zártkörüen Müködö Részvénytársaság
(“GTC Holding Zrt”) holds jointly 269,352,880 shares of the Company, entitling to 269,352,880
votes in the Company, representing 46.9% of the share capital of the Company and carrying
the right to 46.9% of the total number of votes in the Company, including:
• directly holds 21,891,289 shares of the Company, entitling to 21,891,289 votes in the
Company, representing 3.8% of the share capital of the Company and carrying the right
to 3.8% of the total number of votes in the Company; and
• indirectly (i.e. through GTC Dutch) holds 247,461,591 shares of the Company, entitling
to 247,461,591 votes in the Company, representing 43.1% of the share capital of the
Company and carrying the right to 43.1% of the total number of votes in the Company.
In addition, GTC Holding Zrt also holds indirectly, through GTC Dutch, the Icona’s Voting
Rights, i.e. the right to exercise 90,176,000 votes in the Company, entitling to 15.7% of the
total number of votes in the Company.
Since 1 March 2022, GTC Holding Zrt, GTC Dutch and Icona are acting in concert based on
the agreement concerning joint policy towards the Company and exercising of voting rights on
selected matters at the general meeting of the Company in an agreed.
17. Proceedings before a court or public authority involving Globe Trade Centre SA
or its subsidiaries the total value of the liabilities or claims is material
There are no individual proceeding or group of proceedings before a court or public authority
involving Globe Trade Centre SA or its subsidiaries, with the total value of liabilities or claims is
material.
18. Material contracts signed during the year, including insurance contracts and co-
operation contracts
On 21 May 2021, Group
.signed a sale and purchase agreement, concerning the sale of the
entire share capital of Serbian subsidiaries. On 12 January 2022, GTC Group finalized sale of
the entire share capital of Serbian subsidiaries: Atlas Centar d.o.o. Beograd, Demo Invest
d.o.o. Novi Beograd, GTC BBC d.o.o., GTC Business Park d.o.o. Beograd, GTC Medjunarodni
Razvoj Nekretnina d.o.o. Beograd and Commercial and Residential Ventures d.o.o. Beograd
and Hungarian company Office Planet Kft. ( which has 70% in shares of sold Serbian entities),
following the satisfaction of customary conditions precedent. For details please refer to note
33 of the consolidated financial statements for year ended 31 December 2022.
As part of the newly re-oriented strategy, on 9 August 2022 the Group entered into an
agreement concerning a transaction (the “Transaction”) involving a joint venture investment
into an innovation park in Kildare, Ireland (the “Transaction”). The Transaction involves an
initial investment of approximately €115,000 into the project described in current report no
138
36/2022. The project involves other international professional investors acting through a
Luxemburg partnership advised by Icona Capital, an entity from the same group as GTC’s
minority partner.
19. Agreements with an entity certified to execute an audit of the financial
statements
In February 2022, the Company entered into an agreement with PricewaterhouseCoopers
Polska spółka z ograniczoną odpowiedzialnością Audyt sp.k., with headquarters located in
Warsaw, („PwC”), for performance of the audit of the standalone financial statements of Globe
Trade Centre S.A. and the consolidated financial statements of Globe Trade Centre Group for
the financial years ended 31 December 2022-2024. Additionally to that agreement, the Group
entered into various agreements with PwC in the countries of the relevant Group’s subsidiaries.
The independent external auditor was selected by the resolution of the Company's supervisory
board dated 9 February 2022.
The following summary presents a list of services provided by PwC and BDO Sp. z o.o. Sp.k.
as well as remuneration for the services in the periods of 12 months ended on 31 December
2022 and 31 December 2021.
For year ended
31 December
2022
31 December
2021
€ €
Fee for audit and review of financial statements 769 440
Assessment of the remuneration report of the management
board and the supervisory board, and other assurance and
related services
35 41
Total
804
481
20. Statement on the application of the principles of corporate governance for the
financial year ended 31 December 2022
1
Globe Trade Centre S.A.
STATEMENT ON APPLICATION OF THE PRINCIPLES OF
CORPORATE GOVERNANCE
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022
2
TABLE OF CONTENTS
1. The principles of corporate governance to which the issuer is subject and the location
where the set of principles is publicly available..……………………………………….3
2. The principles of corporate governance that the issuer has waived, including the
reasons for such waiver……………………………...……………………………………3
3. The principal characteristics of the internal control and risk management systems used
with respect to the procedure of preparing financial statements and consolidated
financial statements…………………………………………….………………………..5
4. Shareholders who, directly or indirectly, have substantial shareholding, including the
number of shares held by them, the percentage share in the share capital, and the
number of votes attached to their shares in the overall number of votes at the general
meeting…………………………………………………………………………....………7
5. Holders of any securities that grant special rights of control, including a description of
such rights………………………………………………………………………………….10
6. Restrictions concerning the exercise of voting rights, such as restriction of the exercise
of voting rights by holders of any specific part or number of votes, time restrictions
concerning the exercise of voting rights or regulations whereunder, with the
co-operation of the Company, the equity rights related to the securities are separate
from holding securities………………………………..………………………………….10
7. Restrictions concerning the transfer of the ownership title to securities in Globe Trade
Centre S.A……………………………………………………………………….…………10
8. Rules concerning the appointment and dismissal of management and the rights thereof,
specifically the right to make decisions concerning the issuance and redemption of
shares………………………………………………………………………………….…..10
9. Overview of the procedure of amending the Company’s articles of
association……………………………………………………………………………..….11
10. The bylaws of the general meeting and its principal rights and description of rights of
shareholders and their exercise, in particular the rules resulting from the bylaws of the
general meeting, unless information on that scope results directly from the provisions
of law………………………………………………………………………………………11
11. Personnel composition and changes in the previous business year and description of
the functioning of the management, supervisory, or administrative bodies of the
Company and its committees………………………………….………………………..13
12. Audit partner………………………………………………………………………………20
13. Diversity policy in terms of the management, supervisory, or administrative bodies
of the Company.…………………………………..……………………………………..22
                                   
3
1. The principles of corporate governance to which the issuer is subject and the
location where the set of principles is publicly available
In July 2007, the Council of the Warsaw Stock Exchange adopted a set of principles for the
corporate governance for joint-stock companies issuing shares, convertible bonds, or senior
bonds that are admitted to trading on the stock exchange (the “WSE Best Practices”). The
WSE Best Practices have been amended several times since then and were brought in line with
recent legislative amendments, current international corporate governance trends, and the
expectations of market participants. The last amendment took place on 29 March 2021, when
the Warsaw Stock Exchange supervisory board adopted a resolution approving a new code of
corporate governance, “Best Practice of GPW Listed Companies 2021” which came to force as
of 1 July 2021 and is a base for this report on the application of the principles of corporate
governance for the financial year ended 31 December 2022.
The content of the WSE Best Practices is publicly available on the website of the Warsaw
Stock Exchange dedicated to those issues at https://www.gpw.pl/best-practice2021
2. The principles of corporate governance that the issuer has waived, including the
reasons for such waiver
We strive to make every possible effort to employ the corporate governance principles set out
in the WSE Best Practices, and try to follow, in all areas of the Company’s business, all the
recommendations regarding best practices of Warsaw Stock Exchange Listed Companies and
all the recommendations directed to management boards, supervisory boards and
shareholders.
Additionally, to implement a transparent and effective information
policy, the Company provides fast and safe access to information
for shareholders, analysts and investors, employing both
traditional and modern technologies of publishing information
about the Company to the greatest extent possible.
In 2022,
the Company does not apply with three principles as informed in its statement of
compliance with the Best Practice
of GPW Listed Companies 2021, including:
We strive to make every
possible effort to employ
all corporate governance
principles
4
Section Principle Comments of the company:
1. Disclosure
policy, investor
communication
1.4.2
To ensure
quality communications with
stakeholders, as a part of the business
strategy, companies publish on their
website information concerning the
framework of the strategy, measurable
goals, including in particular long-term
goals, planned activities and their status,
defined by measures, both financial and
non-financial. ESG information
concerning the strategy should among
others:
present the equal pay index for
employees, defined as the percentage
difference between the average monthly
pay (including bonuses, awards and other
benefits) of women and men in the last
year, and
present information about
actions taken to eliminate any pay gaps,
including a presentation of related
risks and the time horizon of the equality
target.
The current strategy of the
GTC Group does not contain
the elements indicated in
this rule. Still, the Company
will consider the possibility
of including them in the new
strategy being developed by
the Company in the future.
2. Management
board,
supervisory
board
2.1
Companies should ha
ve in place a
diversity policy applicable to the
management board and the supervisory
board, approved by the supervisory board
and the general meeting, respectively.
The diversity policy defines diversity goals
and criteria, among others including
gender,
education, expertise, age,
professional experience, and specifies the
target dates and the monitoring systems
for such goals. With regard to gender
diversity of corporate bodies, the
participation of the minority group in each
body should be at least 30%.
The company does not plan
to formally adopt
a diversity
policy towards the
management board and the
supervisory b
oard as the
main criteria in selecting its
members are knowledge,
experience, personality
traits and
education, and
not, for example, age or
gender.
5
2. Management
board,
supervisory
board
2.2
Decisions to elect members of the
management board or the supervisory
board of companies should ensure that
the composition of those bodies is diverse
by appointing persons ensuring diversity,
among others in order to achieve
the target minimum participation of the
minority group of at least 30% according
to the goals of the established
diversity policy referred to in principle 2.1.
The company does not plan
to formally adopt
a diversity
policy towar
ds the
management board and the
supervisory b
oard as the
main criteria in selecting its
members are knowledge,
experience, personality
traits and
education, and
not, for example, age or
gender.
3. The principal characteristics of the internal control and risk management
systems used with respect to the procedure of preparing financial statements
and consolidated financial statements
The management board is responsible for the Company’s internal control system and its
effectiveness in the process of preparing financial statements and interim reports prepared and
published in accordance with the provisions of the Decree of the Finance Minister of 29 March
2018 on current and interim information provided by issuers of securities and the conditions
for accepting, as equivalent, information required by the provisions of a country not being
a member state.
The Company draws on its employees’ extensive experience in the identification,
documentation, recording, and controlling of economic operations, including numerous control
procedures supported by modern information technologies used for the recording, processing,
and presentation of operational and financial data.
In order to ensure the accuracy and reliability of the accounts of the parent and subsidiary
companies, the Company applies a series of internal procedures in the area of transactional
control systems and processes resulting from the activities of the Company and the capital
group.
An important element of risk management, in relation to the financial reporting process, is
ongoing internal controls exercised by main accountants on the holding and subsidiaries level.
6
The budgetary control system is based on quarterly and annual financial and operational
reporting. Financial results are monitored regularly.
One of the basic elements of control in the preparation of financial statements of the
Company and the Group is verification carried out by independent auditors. An auditor is
chosen from a group o
f reputable firms which guarantee a high standard of service and
independence. The supervisory board approves the choice of the auditor. The tasks of the
independent auditor include, in particular: a review of semi-annual stand-
alone and
consolidated financial statements and an audit of annual stand-
alone and consolidated
financial statements.
An auditor’s independence is fundamental to ensuring the accuracy of an audit of books. An
audit committee, appointed to the Company’s supervisory board, supervises the financial
reporting process in the Company, in co-operation with the independent auditor, who
participates in the audit committee meetings. The audit committee oversees the financial
reporting process in order to ensure sustainability, transparency, and integrity of financial
information. The audit committee includes one member of the supervisory board who meets
the independence criteria set out in the Best Practices of WSE Listed Companies. The audit
committee reports to the supervisory board.
Moreover, under Article 4a of the Act of 29 September 1994 on accounting, the duties of the
supervisory board include ensuring that the financial statements and the report of the
Company’s operations meet the requirements of the law, and the supervisory board carries
out this duty, using the powers under the law and the articles of association of the Company.
This is yet another level of control exercised by an independent body to ensure the accuracy
and reliability of the information presented in the separate and consolidated financial
statements.
7
4. Shareholders who, directly or indirectly, have substantial shareholding,
including the number of shares held by them, the percentage share in the share
capital, and the number of votes attached to their shares in the overall number
of votes at the general meeting
The following table presents the Company’s shareholders, who had no less than 5% of votes
at the general meeting of GTC S.A. shareholders, as of the date of 31 December 2022.
In December 2021, the Company increased its capital in the way of issuance of 88,700,000
ordinary O series shares. The registration of those shares by Krajowy Depozyt Papierów
Wartościowych S.A. (i.e. the Polish National Depository for Securities) took place on 26
January 2022 and resulted in change in the shareholding structure of GTC SA.
Additionally, on 19 February 2022, the Company received notification from GTC Dutch
Holdings B.V. with its registered office in Amsterdam, the Netherlands (the “Seller”) and Icona
Securitization Opportunities Group S.à r.l. acting on behalf of its compartment Central
European Investments with its registered office in Luxembourg, Grand Duchy of Luxembourg
(the “Buyer”, “Icona”) that the Seller and the Buyer entered into a preliminary share purchase
agreement relating to the acquisition by the Buyer from the Seller of 15.7% of the shares in the
Company. However, pursuant to the notification, the Buyer and the Seller agreed that the
sharholders’ agreement will constitute an acting in concert agreement within the meaning of
Articles 87(1)(5) and 87(1)(6) in connection with Article 87(3) of the Act of 29 July 2005 on
Public Offerings and the Conditions for the Introduction of Financial Instruments to the
Organised Trading System and Public Companies (the “Act on Public Offering”) on joint policy
towards the Company and exercising of voting rights on selected matters in an agreed manner.
Also, pursuant to the assignment agreement, the Buyer will, among others, transfer to the
Seller its voting rights attached to the Shares and grant the power of attorney to exercise voting
rights attached to the shares. The assignment agreement expires in case either call or put
option under the call and put option agreement is exercised and/or in case of a material default
under the transaction documentation. (“Transaction”). On 1 March 2022, the Company
8
received notification that the Transaction was completed, and the Buyer acquired 15.7% of the
shares in the Company (see current reports no 13/2022 and 15/2022).
As a result of execution of the Transaction, Buyer holds 90,176,000 ordinary bearer shares in
the Company which constitute 15.7% of total votes at GTC's general meeting, with reservations
that (i) all the Icona Voting Rights (as defined below) were transferred to the Seller and that (ii)
Icona granted the Power of Attorney to Buyer’s Voting Rights to the Seller.
As a result of execution of the Transaction GTC Holding Zrt holds jointly 269,352,880 shares
of the Company, entitling to 269,352,880 votes in the Company, representing 46.9% of the
share capital of the Company and carrying the right to 46.9% of the total number of votes in
the Company, including:
• directly holds 21,891,289 shares of the Company, entitling to 21,891,289 votes in the
Company, representing 3.8% of the share capital of the Company and carrying the right
to 3.8% of the total number of votes in the Company; and
• indirectly (i.e. through GTC Dutch) holds 247,461,591 shares of the Company, entitling
to 247,461,591 votes in the Company, representing 43.1% of the share capital of the
Company and carrying the right to 43.1% of the total number of votes in the Company.
In addition, GTC Holding Zrt also holds indirectly, through GTC Dutch, the Buyer’s Voting
Rights, i.e. the right to exercise 90,176,000 votes in the Company, entitling to 15.7% of the
total number of votes in the Company. (see current report no 17/2022 and 18/2022)
Since 1 March 2022, GTC Holding Zrt, GTC Dutch and Icona are acting in concert based on
the agreement concerning joint policy towards the Company and exercising of voting rights on
selected matters at the general meeting of the Company in an agreed manner. (see current
report no 19/2022)
On 30 December 2022, as a result of the merger Allianz OFE with Aviva Powszechne
Towarzystwo Emerytalne Aviva Santander Spółka Akcyjna managing the Drugi Allianz Polska
Otwarty Fundusz Emerytalny, in total, the balance on the accounts of Allianz OFE, Allianz DFE
and Drugi Allianz OFE increased to 62,368,390 shares, constituting 10.86% of the company's
share capital. (see current report no 2/2023).
   
9
The table is prepared based on information received directly from the shareholders or
subscription information, and presents shareholder structure as of 31 December 2022 and as
of the date of this report:
Shareholder
Number of
shares and
rights to the
shares held
(not in
thousand)
% of
share
capital
Number of
votes
(not in
thousand)
% of
votes
Change in
number of
shares since
30 September
2022
(not in
thousand)
GTC Dutch
Holdings B.V.
247,461,591 43.10% 337,637,591 58.80% No change
Icona
Securitization
Opportunities
Group S.A R.L.²
90,176,000 15.70% 0 0% No change
GTC Holding
Zártkörüen
Müködö
Részvénytársaság¹
21,891,289 3.81% 21,891,289 3.81% No change
PTE Allianz ³ 62,368,390 10.86% 62,368,390 10.86%
The merger
Allianz OFE with
Aviva PTE Aviva
Santander SA
Increase by
15,004,390³
OFE PZU
Złota Jesień
54,443,976 9.48% 54,443,976 9.48%
Increase by
943,976
Other
shareholders
97 913 876 17.05% 97 913 876 17.05%
Decrease by
15,948,366
Total 574,255,122 100.00% 574,255,122 100.00%
No change
¹ directly holds 21,891,289 shares and indirectly through GTC Dutch Holdings B.V. (100% subsidiary of GTC
Holding Zártkörüen Müködö Részvénytársaság) holds 337,637,591
shares.
² Icona Securitization Opportunities Group S.A R.L. holds directly 15.70% of the share capital of the Company
with reservations that all its voting rights were transferred to GTC Dutch Holdings B.V. and that Icona granted
the power of attorney to its voting rights to GTC Dutch Holdings B.V.
³ Before merger - in total, 15,004,159 shares were registered on the accounts of Allianz OFE and Allianz DFE,
constituting 2.61% of the share capital of the company. On the account of Drugi Allianz OFE (managing by Aviva
PTE Aviva Santander SA), 47,364,231 shares were registered, constituting 8.25% of the company's share
capital.In previous report Company presented only Aviva OFE Aviva Santander shares in amount of 47,364,000
shares constituting 8.25% of the company's share capital.
10
5. Holders of any securities that grant special rights of control, including a
description of such rights
There are no special rights of control that would be attached to any securities in Globe Trade
Centre S.A.
6. Restrictions concerning the exercise of voting rights, such as restriction of the
exercise of voting rights by holders of any specific part or number of votes, time
restrictions concerning the exercise of voting rights or regulations whereunder,
with the co-operation of the Company, the equity rights related to the securities
are separate from holding securities
There are no restrictions applicable to the exercise of voting rights such as restriction of the
exercise of voting rights by holders of any specific part or number of shares, any time
restrictions applicable to the exercise of voting rights or regulations whereunder, with the co-
operation of Globe Trade Centre S.A., the equity rights related to securities would be separate
from holding securities.
7. Restrictions concerning the transfer of the ownership title to securities in Globe
Trade Centre S.A.
There are no limitations of transfer of ownership title to securities, except for those limitations
that are resulting from the general provisions of the law, in particular contractual limitations
regarding the transfer of the ownership rights to the securities issued by the Company.
8. Rules concerning the appointment and dismissal of management and the rights
thereof, specifically the right to make decisions concerning the issuance and
redemption of shares.
Pursuant to Art. 12, the Company’s statute the management board consists of one to seven
members, appointed by the supervisory board for a three-year term.
Additionally, the supervisory board designates the president of the management board (CEO)
and may designate deputy thereof.
The management board of the Company is responsible for the Company’s day-to-day
management and for its representation in dealing with third parties. All issues related to the
Company’s operations are in the scope of activities of the management board unless they are
specified as the competence of the supervisory board or the general meeting by the provisions
of applicable law or the articles of association.
11
Members of the management board participate, in particular, in general meetings and
provide answers
to questions asked during general meetings. Moreover, members of the
management board invited to a supervisory board meeting by the chairman of the
supervisory board participate in such meeting, with a right to voice their opinion on issues
on the agenda.
The general meeting takes decisions regarding the issuance or buying back of shares in the
Company. The competencies of the management board in the scope are limited to execution
of any resolutions adopted by the general meeting.
9. Overview of the procedure of amending the Company’s articles of association
A change to the Company’s articles of association requires a resolution of the general meeting
and an entry into the Court register. The general provisions of law and the articles of
association govern the procedure of adopting resolutions regarding changes to the articles of
association.
10. The bylaws of the general meeting and its principal rights and description of
rights of shareholders and their exercise, in particular the rules resulting from
the bylaws of the general meeting, unless information on that scope results
directly from the provisions of law
The general meeting acts pursuant to the provisions of the Polish Commercial Companies
Code and the articles of association.
The general meeting adopts resolutions regarding, in particular, the following issues:
a) discussion and approval of reports of the management board and the financial
statements for the previous year,
b) decision about allocation of profits or covering of debts,
c) signing off for the performance of duties for the supervisory board and the
management board,
d) determination of the supervisory board remuneration,
e) changes to the articles of association of the Company,
g) increase or decrease in the share capital,
h) merger or transformation of the Company,
i) dissolution or liquidation of the Company,
12
j) issuance of convertible or priority bonds,
k) sale or lease of the Company and the establishment of a right of use or sale of
the Company’s enterprise,
l) all decisions regarding claims for damages upon the establishment of the
Company, or the performance of management or supervision.
A general meeting can be attended by persons who are shareholders of the Company sixteen
days before the date of the general meeting (the day of registration for participation in the
general meeting).
A shareholder who is a natural person is entitled to participate in general meetings and execute
voting rights in person or through a proxy. A shareholder, which is a legal entity, is entitled to
participate in general meetings and execute voting rights through a person authorized to
forward statements of will on their behalf or through a proxy.
A power of attorney to attend a general meeting and exercise voting rights must be in written
or electronic form. For the purposes of identification of the shareholder who granted a power
of attorney, a notice on the granting of such power of attorney electronically should contain:
- if the shareholder is an individual, a copy of an identity card, passport or any other
official identification document confirming the identity of the shareholder; or
- if the shareholder is not an individual, a copy of an extract from a relevant register
or any other document confirming the authorization of the individual(s) to represent
the shareholder at the general meeting (e.g., an uninterrupted cha
in of powers of
attorney).
The general meeting may be attended by members of the management board and supervisory
board (in a composition which allows for substantive answers to the questions asked during
the general meeting) and by the auditor of the Company, if the general meeting is held to
discuss financial matters.
At the general meeting each participant is entitled to be elected the chairman of the general
meeting, and also nominate one person as a candidate for the position of chairman of the
general meeting. Until the election of the chairman, the general meeting may not take any
decisions.
The chairman of the general meeting directs proceedings in accordance with the agreed
agenda, provisions of law, the articles of association, and, in particular: gives the floor to
speakers, orders votes and announces the results thereof. The chairman ensures efficient
proceedings and respecting of the rights and interests of all shareholders.
After the creation and signing of the attendance list, the chairman confirms that the general
meeting has been called in the correct manner and is authorized to pass resolutions.
The chairman of the general meeting closes the general meeting upon the exhausting of its
agenda.
13
11. Personnel composition and changes in the previous business year and
description of the functioning of the management, supervisory, or administrative
bodies of the Company and its committees.
THE MANAGEMENT BOARD
Composition of the management board
Currently, the management board is composed of three members. The following table presents
the names, surnames, functions, dates of appointment, and dates of expiry of the current term
of the members of the management board as of 31 December 2022:
Name and
surname
Function
Year of the
first
appointment
Year of
appointment for
the current term
Year of
expiry
of term
Zoltán Fekete
President of the
management board
2022 2022 2025
János Gárdai
Member of the management
board and COO
2022 2022 2025
Ariel Ferstman
Member of the management
board and CFO
2020 2020 2023
During 2022, the following changes in the composition of the management board took place:
• on 13 December 2021, the supervisory board of the Company appointed Mr. Pedja
Petronijevic to the management board of the Company (Chief Development Officer)
effective as of 15 January 2022 and Mr. János Gárdai to the management board of the
Company (Chief Operating Officer) effective as of 1 February 2022. (see current report
no 18/2021).
• on 14 January 2022, GTC entered into a mutual employment contract termination
agreement with Mr. Yovav Carmi former President of the management board.
Subsequently Mr. Carmi resigned from his seat on the management board of the
Company and other subsidiaries The resignation is effective immediately (see current
report no 7/2022);
• on 28 January 2022, Mr. Gyula Nagy resigned from his seat on the management board
of the Company. The resignation is effective immediately (see current report no
11/2022);
14
• on 17 March 2022, the supervisory board of the Company appointed Mr. Zoltán Fekete
to the management board of the Company as the President of the management board
(see current report no 21/2022);
• on 5 July 2022, Mr. Pedja Petronijevic resigned from his seat on the management board
of the Company. The resignation is effective on 15 July 2022 (see current report no
35/2022).
Description of operations of the management board
The management board runs the Company’s business in a transparent and efficient way
pursuant to the provisions of applicable law, its internal provisions, and the “Best Practices of
WSE Listed Companies”. When making decisions related to the Company’s business, the
members of the management board act within limits of justified business risk.
The President of the Management Board (CEO) jointly with any other member of the
Management Board, or the two members of the management board acting jointly are entitled
to make representations on the Company’s behalf.
All issues related to the management of the Company which are not specified by the provisions
of applicable law or the articles of association as competencies of the supervisory board or the
general meeting are within the scope of competence of the management board.
Members of the management board participate in sessions of the general meeting and provide
substantive answers to questions asked during the general meeting. Members of the
management board invited to a meeting of the supervisory board by the chairman of the
supervisory board participate in such meeting with the right to take the floor regarding issues
on the agenda. Members of the management board are required to, within their scope of
competence and the scope necessary to settle issues discussed by the supervisory board,
submit explanations and information regarding the Company’s business to the participants of
a meeting of the supervisory board.
The management board makes any decisions considered (by the management board) to be
important for the Company by passing resolutions at meetings thereof. Such resolutions are
passed by a simple majority.
Moreover, the management board may adopt resolutions in writing or via a manner enabling
instantaneous communication between the members of the management board by means of
audio-video communication (e.g. teleconferencing, videoconferencing, etc.).
15
THE SUPERVISORY BOARD
The composition of the supervisory board
As of 31 December 2022, the supervisory board comprised of nine members. The following
table presents the names, surnames, functions, dates of appointment, and dates of expiry of
the current term of the members of the supervisory board:
Name and
surname
Function
Year of the
first
appointment
Year of
appointment for
the current term
Year of
expiry of
term
János Péter
Bartha¹
Chairman of the
supervisory board
2020 2020 2023
Lóránt Dudás
Member of the
supervisory board
2020 2020 2023
Balázs Figura
Member of the
supervisory board
2020 2020 2023
Mariusz
Grendowicz
Member of the
supervisory board
2000 2022 2025
Marcin
Murawski¹
Independent
member of the
supervisory board
2013 2022 2025
Artur Kozieja¹ ²
Independent
member of the
supervisory board
2022 2022 2025
Gyula Nagy
Member of the
supervisory board
2022 2022 2025
Bálint Szécsényi
Member of the
supervisory board
2020 2020 2023
Bruno Vannini
Member of the
supervisory board
2022 2022 2025
¹ conforms with the independence criteria listed in the Best Practices of WSE Listed Companies.
² conforms with the independence criteria listed in the articles of association of the Company
During 2022, the following changes in the composition of the supervisory board took place:
• on 11 March 2022, Mr. Zoltán Fekete resigned from his seat on the supervisory board
of the Company. The resignation is effective immediately (see current report no
20/2022);
• on 11 March 2022, GTC Dutch Holdings B.V. appoints Mr. Gyula Nagy as member of
the supervisory board of the Company, effective immediately (see current report no
20/2022);
• on 22 April 2022, Icona Securitization Opportunities Group S.à r.l. appointed Mr. Bruno
Vannini as a member of the supervisory board of the Company, effective immediately
(see current report no 24/2022);
16
• on 1 June 2022, AVIVA Otwarty Fundusz Emerytalny Aviva Santander. reappointed
Mr. Marcin Murawski as a member of the supervisory board of the Company, effective
14 June 2022 (see current report no 29/2022);
• on 14 June 2022, the term of office of Mr. Mariusz Grendowicz as an independent
member of the supervisory board of the Company has expired (see current report no
34/2022);
• on 14 June 2022, the Annual General Meeting with its resolution no 20 appointed Mr.
Artur Kozieja as an independent member of the supervisory board for a period of three
years (see current report no 34/2022);
• on 2 September 2022 GTC Dutch Holdings B.V. appoints Mr. Mariusz Grendowicz as
member of the Supervisory Board of the Company, effective as of 2 September 2022
(see current report no 39/2022);
• on 15 November 2022, Mr. Daniel Obajtek resigned from his seat on the supervisory
board of the Company, effective immediately (see current report no 48/2022).
Description of the operations of the supervisory board
The supervisory board acts pursuant to the Polish Commercial Companies Code and also
pursuant to the articles of association of the Company and the supervisory board regulations
dated 16 May 2017.
Pursuant to the Polish Commercial Companies Code, the supervisory board performs constant
supervision over activities of the enterprise. Within the scope of its supervisory activities, the
supervisory board may demand any information and documents regarding the Company’s
business from the management board.
Members of the supervisory board are required to take necessary steps to receive regular
and full information from the management board regarding material matters concerning the
Company’s business and risks involved in the business and the strategies of risk
management. The supervisory board may (while not infringing the competencies of other
bodies of the Company) express their opinion on all the issues related to the Company’s
business, including forwarding motions and proposals to the management board.
In addition to the matters defined in the Polish Commercial Companies Code or other
applicable laws the following are the competencies of the supervisory board:
a) the determination of remuneration (including commissions) for the members of the
Company's Management Board and representing the Company when executing
agreements with Management Board members and in any disputes with Management
Board members
b) granting consent to the Company or an entity controlled by it for entering into a related-
party transaction, in each case other than any intra-group transactions i.e. transactions
between the Company or an entity controlled by it with another entity controlled by the
17
Company (the term “control” and “related-party transaction” shall be understood as
provided in International Accounting Standard 24 (Related party disclosures))
c) granting consent for the Company or an entity controlled by it to execute a transaction
(in the form of a single legal act or a number of legal acts) resulting in the acquisition
or disposal of assets, or the creation of a liability, in excess of EUR 30 million, except
for (i) scheduled or early debt repayment; and (ii) hedging transactions in relation to
such debt that have been approved by the Supervisory Board under this point; for the
avoidance of doubt, prior to entering into any of the transactions referred above in this
point c), in addition to the consent of the Supervisory Board, the consent of the
respective management bodies of the entity controlled by the Company or the consent
of the Management Board of the Company itself shall also be required, as the case
may be, in each case to the extent required by (a) the constitutional documents of the
entity controlled by the Company or this statute and (b) the respective legislation..
The supervisory board consists of five to twenty members, including the Chairman of the
supervisory board. Each shareholder who holds individually more than 5% of shares in the
Company’s share capital (the “Initial Threshold”) is entitled to appoint one supervisory board
member. Shareholders are further entitled to appoint one additional supervisory board member
for each block of held shares constituting 5% of the Company’s share capital above the Initial
Threshold. Supervisory board members are appointed by a written notice of entitled
shareholders given to the chairman of the general meeting at the general meeting or outside
the general meeting delivered to the management board along with a written statement from
the selected person that he/she agrees to be appointed to the supervisory board.
The number of supervisory board members is equal to the number of members appointed
by the entitled shareholders, increased by one shareholder meeting delegate,, provided that
in each case such number may not be lower than five.
Under the Company’s articles of association, the supervisory board should consist of at least
two members meeting the criteria of an independent member of the supervisory board as set
out in the corporate governance regulations included in the Best Practices of Warsaw Stock
Exchange listed Companies.
The chairman of the supervisory board calls meetings of the supervisory board. The chairman
calls meetings of the supervisory board at his or her own initiative or upon the request of a
member of the management board or a member of the supervisory board therefore. A meeting
of the supervisory board must take place within two weeks but no earlier than on the 3 (third)
business day after the receipt of such request by the Chairman of the Supervisory Board
Within the limits defined by law, the supervisory board may convene meetings both within the
territory of the Republic of Poland and abroad. Resolutions of the Supervisory Board shall be
adopted at Supervisory Board meetings, which may be held with the use of electronic
communication to the fullest extent permitted by applicable laws. Resolutions of the
Supervisory Board may be adopted in writing or by circulation to the fullest extent permitted by
applicable laws, provided that all members are notified about the content of such a resolution
by electronic mail to the addresses provided by the Supervisory Board members.
18
Unless the articles of association provide otherwise, resolutions of the supervisory board are
adopted by absolute majority of votes cast in the presence of at least five supervisory board
members. In the event of a tie, the Chairman has a casting vote.
Members of the supervisory board execute their rights and perform their duties in person.
Members of the supervisory board may participate in general meetings.
Moreover, within the performance of their duties, the supervisory board is required to:
a) once a year prepare and present to the general meeting a concise evaluation of the
situation of the Company, taking into account the evaluation of the internal control
system and the management system of risks that are important for the Company,
b) once a year prepare and present to the annual general meeting an evaluation of its
own performance,
c) discuss and issue opinions on matters which are to be subject of the resolutions of the
general meeting.
COMMITTEES OF THE SUPERVISORY BOARD
The supervisory board may appoint committees to investigate certain issues which are in the
competence of the supervisory board or to act as advisory and opinion bodies to the
supervisory board.
AUDIT COMMITTEE
The supervisory board has appointed the Audit Committee, whose principal task is to make
administrative reviews, to exercise financial control, and to oversee financial reporting as well
as internal and external audit procedures at the Company and at the companies in its group.
In 2022, the Audit Committee meet 5 times in total.
19
The following table presents the details on the Audit Committee members as of 31 December
2022:
Member
Function
Conforms
with
independence
criteria
Knowledge and skills
in the field of
accounting or auditing
of financial statements
Knowledge
and skills
in the real
estate
Artur Kozieja
Member of the
audit
committee
Yes Yes ¹ Yes ¹
Marcin
Murawski
Chairman of
the audit
committee
Yes Yes ² No
János Péter
Bartha
Member of the
audit
committee
Yes Yes³ No
¹ Artur Kozieja holds an MBA from the Wharton School of the University of Pennsylvania (USA)
and is a graduate of the Diplomatic Academy in Beijing (China). Artur Kozieja, the founder of
the Europlan group, is an experienced investor and investment banker who, between 1995
and 2017, worked as a senior executive at Credit Suisse, Morgan Stanley and Barclays Capital
in London, where he was responsible for M&A transactions and the raising of capital for
corporations, banks and countries in Central and Eastern Europe. In addition, as a partner in
a family hotel business started in 1983, he also developed hotel projects in Lower Silesia in
Poland. Since 2017, as part of the Europlan group, he has been carrying out hotel investments
in Poland, where he has opened, among other things, the Lake Hill Resort & Spa hotel complex
in the Karkonosze Mountains and the Metropolo by Golden Tulip hotel in Cracow, and is
currently preparing several hotel projects in cooperation with international hotel chains.
² Marcin Murawski graduated from the Faculty of Management of Warsaw University in 1997.
He has also the following certificates: ACCA, ACCA Practicing Certificate, KIBR entitlement,
CIA. Since 2012 he has been a member of the supervisory board of CCC S.A. Between 2005
and 2012 Mr. Murawski was a director of the internal audit and inspection department at
WARTA Group and secretary of the audit committee at TUIR WARTA S.A. and TUNŻ WARTA
S.A. Between 1997 and 2005 he worked at PricewaterhouseCoopers Sp. z o.o., as manager
of the audit department (2002-2005), senior assistant in the audit department (1999-2001),
assistant in the audit department (1997-1999).
³ János Péter Bartha is a seasoned investment banker with 18-year experience in private
equity investments, especially extensive experience in privatisation, management of IPOs and
M&A. Mr. Bartha started his banking carrier at the National Bank of Hungary in 1986, became
CEO of Credit Suisse First Boston in 1990, and Head of Credit Suisse First Boston in Central
and Eastern Europe in 1994.
20
REMUNERATION COMMITTEE
The supervisory board has appointed the Remuneration Committee of the supervisory board,
which has no decision-making authority and which is responsible for making recommendations
to the supervisory board with respect to the remuneration of the members of the management
board and the policies for setting such remuneration.
In 2022, the Remuneration Committee meet 3 times in total.
The following table presents the details on the Remuneration Committee members as of 31
December 2022:
Member
Function
Conforms
with
independence
criteria
Knowledge and skills
in the field of
accounting or auditing
of financial statements
Knowledge
and skills
in the real
estate
Janos Peter
Bartha
Chairman of the
remuneration
committee
Yes Yes No
Artur Kozieja
Member of the
remuneration
committee
Yes Yes Yes
Marcin
Murawski
Chairman of the
remuneration
committee
Yes Yes No
12. Audit partner
The recommendation to select the audit firm to audit the financial statements met all the biding
legal conditions required in the procedure for selection of the audit firm to audit the financial
statements.
The audit firm selected to audit financial statements provide also other services for the
Company in 2022, including review of the remuneration report and review of the prospectus.
RULES FOR SELECTION OF AN INDEPENDENT AUDITOR WITHIN AN AUDIT FIRM TO
AUDIT GTC S.A.’S FINANCIAL STATEMENTS, AS WELL AS THE RULES FOR
CONDUCTING AUTHORISED NON-AUDIT SERVICES BY THE AUDIT FIRM.
On 15 November 2022, the supervisory board of GTC approved the rules for the selection of
an independent auditor according to the Act on Registered Auditors which were adopted by
the Audit Committee of the Company on 15 November 2022.
21
The selection of an audit firm to audit and review the financial statements of the Company is
the responsibility of the supervisory board. Decisions are taken in the form of an official
resolution of the supervisory board, taking into account the prior recommendations of the Audit
Committee.
The Audit Committee assesses the independence of the statutory auditor and consents to
the provision of authorised non-audit services to the Company. The consent can be
expressed after the assessment of the independence of the statutory auditor and after
obtaining from the statutory auditor a confirmation that the provision of authorised non-audit
services will be carried out in accordance with the independence requirements laid down for
such services in the rules of professional ethics and standards of performing such services.
Main assumptions of the policy for selecting an audit firm for the purpose of conducting an
audit:
1. the Company's supervisory board selects an audit firm to audit the financial
statements. based on the prior recommendation of the Audit Committee of the
supervisory board. The selection decision is taken in the form of a resolution of the
supervisory board.
2. the Audit Committee, in its recommendation, shall:
• recommend a preferred audit firm along with a justification of the preference of
the Audit Committee;
• state that the recommendation is free from third-party influence;
• state that the Company has not entered into any agreements containing clauses
that restrict the ability of the supervisory board to select an audit firm for the
purposes of the audit of the Company's financial statements to certain
categories or lists of audit firms; and
• indicate the proposed remuneration for conducting the audit.
3. in the event that the selection conducted by the Audit Committee does not refer to
the prolongation of the agreement for the purpose of the audit of the Company’s
financial statements, the recommendation of the Audit Committee must contain at
least two options for the selection of an audit firm, along with justifications as well
as an explanation of the reasons of the Audit Committee’s preferred option.
4. the Audit Committee shall cooperate with the Company’s management board in
obtaining, analysing and evaluating the audit offers, and will be assisted by the
management board in drafting the respective recommendation.
5. in the course of the selection procedure, the supervisory board and the Audit
Committee shall consider:
22
• the principles of impartiality and independence of the audit firm. This shall
include an analysis of other work carried out by the audit firm in the Company
that extends beyond the scope of the auditing of the financial statements in
order to avoid any conflict of interest;
• the experience and track record of the audit team in auditing financial
statements of similar companies, its competencies and financial criteria;
• the maximum allowed duration of continuous engagements of statutory audits
carried out by the same audit firm under any applicable law;
• the proposed remuneration for the audit;
• the assessment of the relation between the criteria specified in points 2 and 3
above and
• the assessment of the findings and conclusions of the annual report of the
Polish Audit Supervision Agency (PANA).
13. Diversity policy in terms of the management, supervisory, or administrative
bodies of the Company.
The strategic objective of our diversity policy is to recruit and retain such workforce as to
ensure delivery of the GTC Group’s business objectives. The priority of diversity policy is to
build a sense of trust between the management and other employees, and to treat everyone
fairly regardless of their position.
The Company’s diversity policy is centered on respecting the employees as an element of
diversity-oriented culture regardless of gender, age, education and cultural heritage. It includes
integrating employees in their workplace and ensuring that all employees are treated equally
at work. The Company supports various social initiatives, which promote equal opportunities.
Additionally, the Company joins charitable activities initiated by the employees. The principles
of equal treatment at the workplace have been reflected in the company’s bylaws, which are
available to all employees. The Company values its enriched diversity policy in pursuing its
goals.
GTC believes that people from different backgrounds can bring fresh ideas, thinking and
approaches which make the way work is undertaken more effective and efficient.
GTC does not tolerate direct or indirect discrimination against any person on grounds of age,
disability, gender, gender reassignment, marriage, civil partnership, pregnancy, maternity,
race, religion or belief, or sexual orientation whether in the field of recruitment, terms and
conditions of employment, remuneration, career progression, training, transfer or dismissal.
23
We provide equal opportunity to all who apply for vacancies through open competition and
select candidates only on the basis of their ability, qualifications and suitability for the work, by
using a clear and open process.
1
MANAGEMENT BOARD'S REPRESENTATIONS
Pursuant to the requirements of the Regulation of the Council of Ministers of 29 March 2018
on ongoing and periodical information reported by issuers of securities and conditions of
recognizing as equivalent information required by the law of a country not being a member
state the Management Board of Globe Trade Centre S.A. represented by:
Zoltán Fekete, President of the Management Board
Ariel Alejandro Ferstman, Member of the Management Board
János Gárdai, Member of the Management Board
hereby represents that:
- to the best of its knowledge the consolidated financial statements for twelve months ended
31 December 2022 and the comparable data were prepared in accordance with the prevailing
accounting principles, and they truly, reliably, and clearly reflect the asset and financial
standing of the Group and its financial result in all material respects, and the annual
Management Board’s activity report contains a true image of the Group’s development and
achievements and its standing, including the description of basic risks and threats;
- the entity authorized to audit the financial statements, which has audited the consolidated
financial statements, was selected in accordance with the regulations of law. That entity as
well as the auditor who has carried out the audit fulfilled the conditions for expressing an
unbiased and independent opinion about the audit pursuant to relevant provisions of the
national law and industry norms.
Warsaw, 24 April 2023
Zoltán Fekete, Ariel Alejandro Ferstman
President of the Management Board Member of the Board
János Gárdai
Member of the Board
1
INFORMATION OF THE GLOBE TRADE CENTRE S.A. PREPARED ON THE BASIS OF
THE SUPERVISORY BOARD’S STATEMENT ON APPOINTMENT OF THE AUDIT
COMPANY FOR THE AUDIT OF THE YEARLY FINANCIAL STATEMENTS
(pursuant with § 70 section 1 item 7 and § 71 section 1 item 7 of the Regulation of the
Ministry of Finance dated 29
th
March 2018 in respect of the current and periodical information
given by the securities issuers and the conditions of recognizing as equal the information
demanded by the national lawful regulation of a country which does not hold the membership
in European Union)
The Management Board of the Globe Trade Centre S.A. („Company”), on the basis of
statement of the Supervisory Board of the Company on appointment of the audit company for
audit of the yearly financial statements dated 9 February 2022 hereby informs that the selection
of an auditor to audit yearly consolidated and standalone financial statements for the year 2022
was performed due to the binding laws and within the relevant internal regulations of Globe
Trade Centre S.A. related to the selection policy of the audit company.
The Management Board informs that:
─ audit company and members of the audit team performing audit of yearly consolidated and
standalone financial statements for the financial year ended 31 December 2022 have met the
criteria to prepare impartial and independent report on the yearly financial statements
assessment due to the binding laws, standards of profession and professional ethics;
─ the Company conforms with the rules of binding law regarding rotation of the audit company
and key chartered auditor and obligatory grace periods;
─ the Company has the policy for selecting an audit company for the purpose of conducting
an audit and the policy for conducting authorised non-audit services for the benefit of the
security issues by the audit company, entity connected with this audit company or member of
its affiliate conducting non-audit services including services conditionally dismissed from the
prohibition of performing services by the audit company.
Warsaw, 24 April 2023
Zoltán Fekete, Ariel Alejandro Ferstman
President of the Management Board Member of the Board
János Gárdai
Member of the Board
1
STATEMENT OF THE SUPERVISORY BOARD OF GLOBE TRADE CENTRE S.A. IN THE
MATTER OF APPOINTMENT, COMPOSITION AND FUNCTIONING
OF AUDIT COMMITTEE
(pursuant with the § 70 section 1 item 8 and § 71 section 1 item 8 of the Regulation of the
Ministry of Finance dated 29
th
March 2018 in respect of the current and periodical information
given by the securities issuers and the conditions of recognizing as equal the information
demanded by the national lawful regulation of a country which does not hold the membership
in European Union)
The Supervisory Board states that within Globe Trade Centre S.A.:
a) the rules on appointment, composition and functioning of audit committee are fulfilled,
including meeting criteria of independence by its members and standards of having
sufficient knowledge and skills in area of industry of operations of the issuer and
accounting standards and the rules for audit of financial statements,
b) audit committee has acted in accordance with the binding provisions of law reserved
for audit committee.
Warsaw, 24 April 2023
János Péter Bartha
Chairman of the Supervisory Board
1
STATEMENT OF THE SUPERVISORY BOARD
OF GLOBE TRADE CENTRE S.A. IN THE MATTER OF ASSESSMENT OF THE REPORT
ON ACTIVITIES OF THE ISSUER AND FINANCIAL STATEMENTS AND ITS
COMPLIANCE WITH THE BOOKS, DOCUMENTS AND STATE OF FACTS
(pursuant with the § 70 section 1 item 14 and § 71 section 1 item 12 of the Regulation of the
Ministry of Finance dated 29
th
March 2018 in respect of the current and periodical information
given by the securities issuers and the conditions of recognizing as equal the information
demanded by the national lawful regulation of a country which does not hold the membership
in European Union)
The Supervisory Board, as the supervising body of Globe Trade Centre S.A. (“Company” or
“GTC”) has made assessment of the report on activities of the issuer and financial statements
of the issuer in the aspect of its compliance with the books, documents and state of facts. In
particular the Supervisory Board has verified:
- report on issuer’s activity for year 2022,
- standalone financial statements of the issues for year 2022,
- consolidated financial statements of the capital group of the issuer for the year 2022.
The Supervisory Board in the effect of the performed assessment has stated that report on the
Company’s activities and report on activities of the Company’s capital group for the year 2022
remains compliant in all material aspects with article 49 and 55 section 2a of Accounting Act
and in the Regulation of the Ministry of Finance dated 29
th
March 2018 in respect of the current
and periodical information given by the securities issuers and the conditions of recognizing as
equal the information demanded by the national lawful regulation of a country which does not
hold the membership in European Union and the information contained therein remains in
compliance with the audited by certified auditor standalone and consolidated financial
statements of the Company and the Company’s capital group for the year 2022.
The Supervisory Board assesses that the presented by the Management Board of the
Company standalone and consolidated financial statements of the Company and the
Company’s capital group for the year 2022 and report on activities of the Company and the
Company’s capital group for the year 2022 illustrates genuinely and clearly all the information
inevitable and significant for the assessment of the financial standing of the Company and the
Company’s capital group prepared as at 31 December 2022, as well as it remains in
compliance with the books, documents and state of facts.
The Supervisory Board has made a positive assessment of the standalone financial
statements for the financial year 2022 and the report on activities of the Company and the
Company’s capital group for the year 2022 based on:
- content of the above statements, submitted by the Company’s Management Board;
- report of the independent certified auditor i.e. PricewaterhouseCoopers Polska spółka z
ograniczoną odpowiedzialnością Audyt sp.k., with its registered office in Warsaw made upon
audit of the standalone financial statements of the Company and consolidated financial
statements of the Company’s capital group prepared as at 31st December 2021 as well as an
additional report prepared for Audit Committee on the basis of article 11 Regulation (EU) No
2
537/2014 of the European Parliament and of the Council of 16 April 2014 on specific
requirements regarding statutory audit of public-interest entities, derogating the EU
Commission Decision no. 2005/909 and according to the rules of Act of 11 May 2017 on
Statutory Auditors, Audit Firms and Public Supervision;
- meetings with the audit firm representatives, including the key certified auditor;
- information from Audit Committee regarding the process, effects and meaning of an audit for
the clarity of financial reporting in the Company and also the role of the Committee in the
process of audit of financial statements;
- results of other verifying activities in selected operational and financial areas.
Warsaw, 24 April 2023
János Péter Bartha
Chairman of the Supervisory Board