• Revenues increased 55% YoY to EUR 114m in 2008
• Total equity reached EUR 1.2bn
• Q4 2008 profit was EUR 53m

Globe Trade Centre S.A. (GTC) published 2008 results. Profit for the year amounted to EUR 189m, while Q4 2008 profit was EUR 53m. Total assets reached EUR 2.6bn., while total equity amounted to EUR 1.2bn at the end 2008. The investment property was valued at EUR 1.8bn.

In 2008 operating revenues increased 55% YoY to EUR 114m. The improvement in the top line resulted both from 38% growth in rental income (to EUR 72.1m) as well as 100% increase in recognition of residential sales revenues (to EUR 42.5m).

The successful completion of 9 new office projects contributed the most to the increase in rental income. In Poland the Nothus and Zephirus office buildings in the Okęcie Business Park, two buildings in the Platinium Business Park and the Nefryt office building were delivered in Warsaw. The Globis office building in Wrocław, and in Cracow – the office part of Galeria Kazimierz and the Edison building were completed. In Serbia, the GTC Square building in Belgrade was handed over. In 2008 the first GTC’s mall in Romania – Galleria Buzău was opened. Throughout the year GTC delivered a total of 115 000 sq m of net office and retail space.
The increased occupancy and higher rental rates (through indexation and turnover rent) resulted in income growth in existing commercial properties completed prior to 2008.

In 2008 the Company recognised revenues from sales of residential projects in Bucharest (Rose Garden) and in Belgrade (Park Apartments) – in total 274 apartments were handed over to the purchasers (117 and 157 units respectively). The sale and hand over of luxury houses in Osiedle Konstancja in Warsaw contributed EUR 6m in revenues.

The average operating margin on rental revenues in 2008 was 74% (vs 79% in 2007). The fall of residential markets in the region adversely affected the gross margin on housing sales, which decreased to 22% (from 41% in 2007).

The operating profit reached EUR 283.9m in 2008 (vs. EUR 323.1m in 2007), while the net profit for the year was EUR 189m (vs. EUR 261.4m a year ago).

During the period the Polish zloty significantly weakened against euro. As a result the tax liability increased, boosting the average tax rate in 2008 to 29.4% (from 12.6% in 2007).

Despite turbulent times GTC managed to achieve solid results in Q4 2008: operating revenues were EUR 43.6m, while net profit reached EUR 53m.

In 2008 the IASB (International Accounting Standards Board) has approved changes that brought investment property under construction into the scope of IAS 40 (Investment Property). Accordingly, entities reporting under IFRS will be required to re-classify investment property under construction (‘IPUC’) to investment property, hence presenting them at their market value. The new accounting standard is applicable from January 1st, 2009 with possibility of early adoption from Q4 2008.
Following those amendments, in Q4 2008 the Company changed its accounting policy regarding Construction in progress in order to increase transparency and reduce the profit volatility arising from profit recognition under IAS 40. The company also believes that such policy gives better understanding of its implied Net Asset Value (NAV).

According to GTC’s policy, the market value of IPUC would apply only to those projects for which a substantial part of the development risks have been eliminated. Such projects are those, which qualify for the following 3 incremental conditions: (i) obtained a building permit; (ii) have signed agreement with the general contractor and (iii) there are signed lease agreements or head of terms for more than 20% of the total rentable space of the building

The result of revaluation of IPUC in Q4 2008 financial statements was EUR 125m. The following projects were subject to revaluation: Galeria Jurajska in Częstochowa, Kazimierz Office Centre in Kraków, the third building in Platinium Business Park in Warsaw, Metro office building in Budapest, the Citygate office building in Bucharest, 3 shopping centres in Romania (Piatra Neamt, Suceava, Arad) and 2 in Bulgaria (Varna, Stara Zagora). The valuations of those projects were conducted by reputable independent valuers. The yields used in the valuation of IPUC ranged from 7.9% in Poland to 8.1% in other countries.

The valuation of the completed investment property in Q4 2008 resulted in a write-off of EUR 35m. Such result reflects an increase in exit yields recorded in the last months of 2008. In the Q4 2008 valuation of completed property the valuers applied 6.9% exit yield in Poland and 7.7% on average in other countries.
Despite turbulent times GTC’s completed properties are preserving its value relatively well due to its attractive location, long-term unbreakable leases signed with reputable tenants and high quality of the property management.

In 2008, GTC Management implemented serious measures in order to adopt the Company’s operations to deteriorating economic environment. Strict cost controls were imposed and a wide range of cost cutting actions resulted in savings estimated at EUR35m.

The management has continued to focus on maintaining high financial liquidity of the Company. At the end of 2008, GTC had EUR 200m in cash. The leverage (long term debt/total assets) stood at 45%, while more than 70% of long term debt expires in 2013 or later. The average interest rate was approx. 6.4% p.a.

The interest on 63% of the long term debt is hedged for 5 years. GTC has been using various hedging instruments only to hedge its FX and interest rate exposure related to existing debt. Interest rate swaps (IRS) have been used to fix interest rate on project finance loans in euro and dollars, while Cross currency IRS have been used to hedge the FX exposure to the bonds issued in Polish zloty and to fix the interest rate.

The Management Board of the Company will actively manage risks, adjusting the pace of development to trends on the real estate and financial markets and redefining its investment strategy.