DGAP-News: CPI PROPERTY GROUP reports record financial results for the 2018 financial year

Press Release

Luxembourg, 29 March 2019

CPI PROPERTY GROUP reports record financial results for the 2018 financial year

CPI PROPERTY GROUP (hereinafter "CPIPG" the "Company" or together with its subsidiaries the "Group"), the largest owner of income-generating real estate in the Czech Republic, Berlin and the CEE region, hereby publishes its results for the financial year ended 31 December 2018.

"2018 was an extraordinary year for CPI Property Group. Our core markets of the Czech Republic, Berlin and the CEE region are among the strongest economies in Europe, and demand for real estate remains vibrant," said Martin Nemecek, CEO. "Our asset management teams achieved higher levels of occupancy and rents, leading to record income for the Group. The Group's capital structure was transformed through refinancing, accelerating the process which began in 2017, and our reputation as a leader on the international capital markets is now firmly established. By every measure, CPIPG is doing better than ever."

Highlights for the 2018 financial year include:

- Total assets of EUR8.3 billion, an increase of EUR0.7 billion from 2017, driven by higher property portfolio valuations primarily in Berlin and the Czech Republic and acquisitions of EUR290 million.

- Total revenues of EUR604 million (up 17% versus 2017), reflecting the combined effects of acquisitions in 2017 and 2018 and 4.9% like-for-like growth in rental income.

- Substantially improved occupancy to 94.5% at year-end (up 1.7 p.p. versus 2017).

- Funds from operations of EUR164 million (up 29% versus 2017).

- EPRA NAV rose by 14% to EUR4.5 billion.

- Net Loan to Value (LTV) reached a record low of 36.7%.

- Strengthened credit ratings: a new "BBB" rating from S&P, Moody's upgrade to "Baa2" and a new "A-" rating from Japan Credit Rating Agency.

- Successful issuance of EUR550 million of undated subordinated "hybrid" notes under our EMTN programme in May 2018.

- Issuance of EUR840 million of senior unsecured bonds under our EMTN programme in Euros, Swiss Francs and Japanese Yen during 4Q 2018.

- Repayment of about EUR1.5 billion of subsidiary bonds and secured loans leading to a streamlined funding structure and improved credit metrics.

- Record 65% of unencumbered assets at the end of 2018, relative to 43% at the end of 2017.

- Reduction of secured debt from 59% at the end of 2017 to 37% at the end of 2018.

- Significant improvement of Net Interest Coverage Ratio to 4.2x for 2018, which only partially reflects the effect of early repayment of high-coupon subsidiary bonds.

- CPIPG enhanced financial flexibility in 2018 by signing EUR230 million of 2-year revolving credit facilities; in March 2019 the facilities were replaced by a new EUR510 million 3-year revolving credit facility.

- In Q1 2019, the Group further expanded its active presence on the international capital markets through the issuance of senior unsecured bonds in Hong Kong Dollars and US Dollars under the EMTN programme, and the placement of senior unsecured schuldschein (assignable loans). The issuance of bonds and schuldschein, alongside the new revolving credit facility signed in March, meant that the Group had more than EUR1 billion of available liquidity at the end of Q1 2019.

"While we are proud of our success, CPIPG is not standing still. The Group will continue focusing on the long-term performance of our properties and the satisfaction of our tenants and communities," said Martin Nemecek. "Most importantly, we will continue investing in the heart of our business: our local teams, who bring their enthusiasm to work every day. Working together, I am certain that CPIPG will enjoy a successful 2019."

FINANCIAL HIGHLIGHTS

STATEMENT OF COMPREHENSIVE INCOME

The income statement for the 12 months period ended on 31 December 2018 and 31 December 2017 is as follows:

* Adjusted comparative information 2017, refer to note 2.4 of Consolidated Financial Statements as at 31-Dec 2018.

Net rental income

Net rental income increased by 17% to EUR272 million compared to EUR232 million in 2017, driven by a significant increase in gross rental income reflecting strong like-for-like growth and the extension of our portfolio during the year, as well as the full year impact of properties acquired in 2017.

Net valuation gain

The gain on revaluation of the property portfolio totals EUR579 million and is based on the valuation reports prepared by independent and reputable appraisers.

The revaluation gain reflects the strong efforts of the Group's asset management teams and improved market conditions in our core markets. Czech Republic and Berlin represent 82% (EUR476 million) of the total revaluation gain.

The Group reclassified the effect of FX changes on properties from Other net financial result to Net valuation gain/loss. In 2018, due to a slight depreciation of CZK against EUR, the Group recognized an unrealised (non-cash) FX gain of EUR34 million on Euro denominated assets in the Czech Republic.

Administrative expenses

Administrative expenses amounted to EUR49 million in 2018, an increase of EUR7 million compared to 2017. The increase was primarily associated with additional staff costs due to the higher headcount necessary to support our acquisitions.

Interest expense

Interest expense amounted to EUR78 million in 2018 compared to EUR99 million in 2017. The Group continuously takes advantage of its strong financial position and credit profile to source low-cost funds, and was able to reduce its average cost of debt from 2.6% in 2017 to 1.6% in 2018.

Other net financial result

In 2018 other net financial result increased by almost EUR49 million. The difference relates primarily to early repayment of subsidiary bonds. The Group also reclassified the effect of FX changes on properties from Other net financial result to Net valuation gain/loss.

BALANCE SHEET

Total assets and total liabilities

Total assets increased by EUR730 million (10%) to EUR8,259 million as at 31 December 2018. The predominant driver of this growth was the expansion of Group's property portfolio which rose by EUR833 million (12%) to EUR7,555 million. Acquisitions totalling EUR290 million, positive asset management efforts to improve rents and occupancy, and a strong market environment were the primary drivers of growth.

Non-current and current liabilities totalled EUR3,897 million as at 31 December 2018 which represents a decrease of EUR317 million (7.5%) compared to 31 December 2017. Repayment of subsidiary bonds and secured bank loans from the proceeds of hybrid issuance was the primary driver of this decline. Net LTV dropped to a record low of 36.7%.

Bonds issued and financial debts

During 2018, the Group issued about EUR840 million of senior unsecured bonds and used the proceeds (together with hybrid proceeds and cash) to repay about EUR1.5 billion of subsidiary bonds and secured loans. At year-end, the Group had EUR1,819 million of unsecured debt, which represented 63% of total debt (versus 41% at the end of 2017).

NAV AND EPRA NAV

Total equity increased by 32%, from EUR3,315 million as at 31 December 2017 to EUR4,362 million as at 31 December 2018. The main elements impacting equity were:

- Robust profit of EUR631 million

- Issuance of new hybrid notes of EUR550 million

- Share buy-back of EUR145 million

- New shares issued of EUR50 million

EPRA NAV was EUR4,480 million as at 31 December 2018, an increase of 14% relative to 2017. The main positive effect, aside from the positive equity elements described above, was an increase in deffered tax liability from positive revaluation of the Group's property portfolio.

For disclosures regarding Alternative Performance Measures used in this press release please refer to our Annual Management Report 2018, chapters Glossary and EPRA Performance; accessible at http://cpipg.com/reports-presentations-en.

Audited documents will be available tonight on:
http://www.cpipg.com/reports-presentations-en

Full Year 2018 audited financial report
Full Year 2018 audited management report

CPIPG will host a webcast in relation to its financial results for the 2018. The webcast will be held on 9 April 2019 at 11:00am CET. CPIPG will publish participation details at the beginning of April 2019.

Investor Contact:

David Greenbaum
Chief Financial Officer
CPI Property Group
d.greenbaum@cpipg.com

Media / PR Contact:

Kirchhoff Consult AG
Andreas Friedemann
Borselstraße 20
22765 Hamburg
T +49 40 60 91 86 50
F +49 40 60 91 86 16
E andreas.friedemann@kirchhoff.de