I believe we are greatly positioned to step up on our journey to be a trendsetter in workplace solutions in Europe. Please join us on that exciting journey!
Pavel Trenka, CEO
2016
03 Our people
Headcount 2016 by profession
Headcount 2016 by country
Team members
Years with the company
Building the future
At HB Reavis, we believe we are both visionary and pragmatic. That is why our ‘Building the Future’ activities are both far-sighted and focused.
The program comprises a series of events created initially and specifically for leaders, important professionals and decision-makers in the organization. The idea is to show them the potential of our envisaged culture, how it can be achieved and what it means for each person’s role and responsibilities.
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04 Our vision & strategy
In 2014, we set ourselves a vision of where we want to be in five years, Vision 2019.
Last year, we were in the middle of our journey to achieve it and, overall, we believe we are on the right track. Our Strategy to deliver our Vision was broadened with a few strategic initiatives and we accelerated progress on others, going deeper into implementation. Despite the long delivery cycle of our projects, each of our pillars has already achieved something tangible in 2016.
read moreBeing a trendsetter in workspace solutions
Being the most attractive employer for industry professionals
Being a leading pan-European player with global ambitions
Beyond core business strategy to be uniquely competitive and deliver on our Vision, we also include in our strategic thinking our acquisition strategy and financial framework for a completeness.
01
Core Business Strategy
We are ambitious. We aim to become the trendsetter in workspace solutions and to provide the best value proposition for existing and potential staff. To achieve both ambitions, we need to continually improve our delivery business model.
What we achieved in 2016
- Strategic activities to become trendsetter in workplace solutions
- Strategic activities to become the most attractive employer in the industry
02
Building Attractive and Sustainable Pipeline
In Central Europe, we focus on building our office project pipeline in strategically selected business districts to ensure continuity of the Group’s high quality workspace offering aiming to bring remarkable experience to people. We develop product that has the potential to differentiate our offering from the competition and secure projects earlier in the development chain so that we move up the permitting risk curve in search of greater value add
What we achieved in 2016
During 2016, we worked specifically on reinforcing pipelines in Prague and London and on our optimal entry to Germany. We also analysed every reasonable opportunity in Budapest, Warsaw and Bratislava.
03
Financial Framework
First, our long-term aim is to achieve and keep a 50:50 share of development and income producing assets and consequently to keep the right balance on the risk/return curve. Since 2010, we have increased the share of development from 33% to 51% at year-end 2016. During last year, we decided to use a positive situation on the investment market and sold our matured assets in future gross development value of almost €1 billion. That fact will allow us to be better prepared for further international expansion and construction of a robust pipeline.
05 Key projects
Market value upon completion by country
Market value upon completion by segment
Commited development and pipeline
06 How we performed
In 2016, our financial performance slowed down markedly. This was due specifically to foreign-exchange (FX) losses and to some delays in permitting of some of our key projects.
However, as a Group, we still generated net profit of €107.5 million (€239.4 million in 2015). This translates into a 6.9% return on shareholders’ equity (29.3% in 2015). Our balance sheet grew to €2.11 billion and Net Asset Value reached €1.22 billion at the end of 2016. At 17.4%, Group Net debt leverage remained below targeted levels mainly as a result of robust disposal of assets with gross development value of around €1 billion. In contrast, the business performed very well. We signed leasing contracts with 208 clients. This represents 141,300 m² of GLA.
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Acquisitions
- acquisition of the plot on the Radlicka Street in Prague’s Smichov district
- acquisition of another office project in Budapest - The Bem Palace
Leasing
- 23,300 m² GLA leased to tenants
- the biggest new tenants: Alza (Bratislava), Phillip Morris (Warsaw), SAP (Bratislava)
Financing
- bond issue listed on Prague’s Stock Exchange raised CZK 700 million (app. €25.9 million).
- new financing secured for Twin City C in the amount of €44.5 million
- re-financed a €19.8 million loan for Aupark Piestany
Divestment
- Vaci Corner Offices divested to Zeus Capital Management for €49.1 million
Building the future
- at a special kick-off event in June we brought together all our managers, the idea was to tell them about our journey so far and about our vision for the future
Acquisitions
- new acquisition in London at 61 Southwark Street
Leasing
- 42,300 m² GLA leased to tenants
- the biggest new tenants: AC Nielsen (Warsaw), Coface (Warsaw), Yanfeng (Bratislava)
Financing
- second tranche of our bond issue attracted CZK 1.25 billion (€46.2 million)
Completions
- occupancy permits for Twin City B (Bratislava) and Gdanski Business Center D (Warsaw)
Construction starts
- construction of Twin City Tower started
Divestment
- portfolio of logistics centres in the Czech Republic and Slovakia was sold to the Macquarie Group for €74.9 million
Leasing activity
- 47,400 m² GLA leased to tenants
- the largest of the new tenants is GE (Warsaw)
Financing
- €44.6 million facility agreement signed for West Station I
Completions
- occupancy permit for West Station I in Warsaw
- occupancy permit for Twin City C in Bratislava
- completion of refurbishment of Centrum Bottova in Bratislava
Construction starts
- refurbishment of office project in London, Cooper & Southwark at 61 Southwark Street
Divestments
- entered into forward sale agreement with Wells Fargo for a disposal of 33 Central (London)
- sale of Konstruktorska Business Center (Warsaw) to the Golden Star Estate
- sale of Aupark in Piestany (Slovakia) for €39.5 million to New Europe Property Investments (NEPI)
HB Reavis Major EU Developer
According to Property EU (September 2016) HB Reavis was ranked third among the leading European office real estate developers, based on size of completed office space in the period 2013-2015 (273,000 m² of GLA).
Building the future
- special workshops were organized for all managers and people leaders so they can continue to communicate and discuss our “MVMS” (mission, vision, mindset, strategy) with our people
Acquisitions
- acquisition of Mercuria located in Prague 7 (Czechia) for €10.7 million
- acquisition of Ryba plot in Bratislava (Slovakia)
Leasing activity
- 28,300 m² GLA leased to tenants
- the biggest new tenants: Fundacja Rozwoju Systemu Edukacji (Warsaw), HubHub (Warsaw)
Financing
- €12.0 million of new bank financing
- launch of 2 new bond programmes: Poland (PLN 500 million = approximately €116 million), Slovakia (€100 million)
Completions
- construction of Aupark Shopping Centre in Hradec Kralove (Czech Republic)
Construction starts
- construction permit for Varso project in the centre of Warsaw
Valid zoning permit
- zoning permits for Nivy Mall and Nivy Tower, our landmark project in Bratislava, have been received
Divestments
- Gdanski Business Center I (Warsaw) was sold to a global pension fund investor advised by Savills Investment Management for €183 million
- divestments completion of the sale of Twin City A (Bratislava) to IAD Investments at a transaction yield of 6.5%
- the sale of River Garden II-III to Aviva Investors and LaSalle Investment Management for €83.9 million
- the sale of Aupark Shopping Centre in Hradec Kralove to HB Reavis CE REIF a value of €88.8 million
Financial highlights
Investment in land/property and construction (€m)
07 Business review
Real estate development is a very complex business, especially if you are an integrated developer. As one of Europe’s very few fully integrated developers, this means our business is just as complex. And we make life even tougher for ourselves because our mission is to bring remarkable experiences to people through our real estate solutions. We aim to set trends in office space solutions.
read moreChanges in Group development property value (€m)
The European real estate market remained strong in 2016, in spite of political uncertainties. Moreover, Central European markets are now playing an everincreasing role. Investment in European commercial properties was just as strong as last year; investors sought safe and stable returns in the low-interest rate environment. High demand for good quality real estate products resulted in yield compression across European markets. Although investment activity was 8% lower compared to the record levels seen in 2015, if we exclude the UK then transaction volumes increased by 7%.
read moreTotal office stock (thousand m² GLA)
Figures based on external expert valuations and management report.
Leasing activity by country 2016
Leasing activity
International expansion and a primary focus on the office segment are shaping our portfolio in terms of geographical and segment structure.
Geographically, the structure of our whole development portfolio is shifting, with the UK and Poland clearly increasing in weight. At year-end 2016, the share of UK assets represented 15% of the whole portfolio; Poland 27%; Czech Republic 10%; Slovakia 35%; and Hungary 13%, all based on the expected gross development value.
read more| HB Reavis development total | GLA (m²) | ERV | GDV | Value change | Investments |
|---|---|---|---|---|---|
| Office | 1,006,407 | 214.0 | 3,562.0 | 339.0 | 169.8 |
| Retail | 157,270 | 35.2 | 592.3 | 58.2 | 33.7 |
| Total development 2016 | 1,163,677 | 249.2 | 4,154.3 | 397.2 | 203.5 |
| Additions to porfolio 2016 | 66,133 | 16.6 | 288.5 | 73.3 | 87.5 |
| Completions 2016 | 130,495 | 26.9 | 423.0 | 148.2 | 102.6 |
| Office | 964,784 | 209.3 | 3,514.7 | 238.9 | 185.8 |
| Retail | 134,531 | 29.6 | 505.1 | 10.1 | 2.7 |
| Total pipeline for 2017 | 1,099,315 | 238.9 | 4,019.8 | 249.0 | 188.5 |
Figures based on external expert valuations and management report.
All figures in €m, except GLA.
United Kingdom
| €19.3m operating profit |
| €337.3m in investment property |
| 35,981 m² GLA under preparation |
42 professionals
Slovakia
| €41.7m operating profit |
| €528.6m in investment property |
| 602,323 m² GLA developed |
| 486,746 m² GLA under preparation |
303 professionals including HQ based
Czechia
| €46.7m operating profit |
| €232.6m in investment property |
| 160,942 m² GLA developed |
| 152,280 m² GLA under preparation |
53 professionals
Poland
| €131.0m operating profit |
| €546.6m in investment property |
| 214,946 m² GLA developed |
| 260,046 m² GLA under preparation |
129 professionals
Germany
1 professional
Hungary
| €0.2m operating profit |
| €49.1m in investment property |
| 21,603 m² GLA developed |
| 164,262 m² GLA under preparation |
21 professionals
Turkey
2 professionals
Luxembourg
3 professionals
08 Group at glance
1 million
m² GLA developed
1.1 million
m² GLA under preparation
235.3 million
Operating profit
554
professionals
Market value upon completion by country
09
There is no way round Brexit – the referendum vote in June 2016 that determined the UK would exit the European Union. Any review of economic trends in the second half of the reporting year is all about the UK’s commitment to leave. There is significant uncertainty about that process. Will the UK remain in the single market? What will the ‘divorce’ settlement look like? How will it impact the City? Will UK-based financial institutions retain ‘EU passporting rights’ allowing them to sell products throughout the Union? And what will all this mean for the prospects for real estate in the square mile?
read moreChanges in UK development property value (€m)
Central London
33 Central, London
It was once and forever an exceptional milestone in HB Reavis’ history. The acquisition of an existing office building at 33 King William Street in the City. The views of the River Thames, St. Paul’s Cathedral and the Shard and a location only meters away from the Bank of England and right on London Bridge – this was supposed to become one of our landmark projects. And that is exactly what has happened. Demolition of the original building started in July 2014, construction itself one year later. In 2015, we decided on a ‘rebranding’ to 33 Central (21,105 m² of GLA).
read more20 Farringdon Street, London
The existing office building at 20 Farringdon Street was acquired in October 2014 for GBP 29 million. The building already had valid planning consent in place for the redevelopment of 6,800 m² of new office GLA. The project has an excellent location in London’s mid-town, just a short walk from the headquarters of international companies such as Mizuho, Deloitte, Amazon and Goldman Sachs. After the acquisition, we decided to optimise the project’s concept and design in order to increase size and quality of floor space. Ultimately, we managed to achieve 7,743 m² of GLA, some 14% more than originally permitted size. We started the demolition of the original building in June 2015. The construction is progressing with some delays and we aim to complete the project in March of 2018.
read moreCooper & Southwark, London
In April 2016, we acquired Cooper & Southwark, our first refurbishment project in London. The project’s location on the Southbank perfectly complements our existing Central London portfolio. The Southbank attracts tenants from various business segments such as accountancy, professional services and tenants preferring the location as a more economical alternative to the West End. With the acquisition, we secured development of 7,133 m² of office GLA. The cost of the acquisition was GBP 44 million. We aim to deliver the project to its tenants at year-end 2017.
read morePoland’s economy lost some of its momentum in 2016. Estimates released by the government Central Statistical Office (GUS) at the start of this year indicate that Gross Domestic Product (GDP) grew at its slowest pace since 2013. This in spite of buoyant and even robust household spending (3.6%) on the back of an improving labour market, low inflation (although this was at its highest rate in four years) and government stimulus packages. Unemployment is down to 8.3% and indications show it is set to decline further. Consumers are taking full advantage of relatively low oil prices and strong credit growth. Exports are healthy. However, as in the rest of Europe, fixed investment has contracted due to reduced EU development funds, concerns over Brexit and uncertainties related to the heavy electoral year ahead in the region.
read moreChanges in Polish development property value (€m)
Warsaw
Gdanski Business Center D, Warsaw
We started construction of the last phase of our successful Gdanski Business Center – the 'D' building (29,800 m² of GLA) in June 2014 and it progressed according to our initial planning. We completed the building in May 2016. Currently, it is leased at 88% and occupied by tenants such BNP Paribas, Philip Morris and General Electric and we expect it will be fully leased at the end of 2017.
read moreWest Station I, Warsaw
This project is a part of our joint venture with PKP and represents the first phase of the whole centre. Construction of West Station I (30,800 m² of GLA) started in the fall of 2014, and the project was completed and delivered to its clients in October 2016, exactly on the schedule. Around 93% of the project is currently leased and is already occupied by the PKP Group and Coface.
read moreWest Station II, Warsaw
The second phase of the project, West Station II (37,900 m² of GLA), followed its older sister to completion six months ahead of the original schedule – the construction was launched in November 2015. We plan to complete the project and deliver it to the tenants in the fall of 2017. The building is currently (6 months before completion) leased at 38% and we expect it will be around 60% leased at the time of completion.
read moreVarso Place, Warsaw
We are finally making a start on our landmark project in Warsaw’s CBD. Varso Place (145,200 m² of GLA) received valid building permits just before the end of 2016 and we immediately launched construction. Our new flagship is a complex consisting of one office high-rise (230 metres without antenna) and two mid-rise office buildings, all rising from a common platform that will provide retail services to visitors and connections between the buildings. We are excited to work closely with Fosters+Partners, one of the world’s best architectural studios, on the optimization of the tower’s concept and design. We believe Varso will become not only our landmark project but also Warsaw’s.
read moreBurakowska 14, Warsaw
In July 2015, the Group acquired a 2 ha plot at Burakowska Street in Warsaw. The purchase price was €17 million and we plan to develop an office scheme with approximately 77,000 m² of GLA. The plot is located just opposite the Arkadia Shopping Center, one of the most successful in Poland. We are now in the middle of the product design stage and aim to deliver another remarkable office scheme here. It will be split into two phases and will consist of an office tower with a lively mixed-use ground floor and several low rise buildings. The scheme will be more open to the general public and carefully landscaped to provide space for several types of events. As the plot is located just few hundred meters from our very successful Gdanski Business Center, we believe this will be another success story and will contribute to evolving this part of the city into a modern district.
read moreFollowing an extraordinarily strong year in 2015, the Czech economy slowed significantly in the reporting year (2.5% against 4.7% in 2015). Similarly to other economies in the region, this is due to reduced EU investment inflows. The labour market is extremely tight with higher wages as inevitable knock-on effect. If upbeat consumer confidence, rapid industrial output growth and a strong order book are added to the mix, then expectations are that figures will rebound in 2017. Yet, it is not all good news. The stability of public finances remains uncertain. National elections for the lower chamber of the Czech parliament are scheduled for October 2017, with all 200 seats up for re-election. Also like many other countries in the EU, the Czech Republic has its own populist party that could play a significant role in any future government.
read moreChanges in Czech development property value (€m)
Prague
Aupark Shopping Centre, Hradec Kralove
We completed our Aupark Shopping Centre in Hradec Kralove (22,700 m² of GLA), the first Aupark outside of Slovakia, exactly as planned. The grand opening took place at the beginning of November 2016, so the centre was ready for the Christmas season. At the opening, occupancy was over 80%, currently achieving 88%. As always with a new shopping centre, we are currently working hard to optimise the operation and to get it up to speed as quickly as possible.
read moreVinohradska, Prague
The acquisition of an existing older office scheme with an excellent location at Vinohradska Street, just opposite the National Museum, was completed in August 2014. The plan was to redevelop it into a truly landmark office scheme with 22,600 m² of GLA. During 2016, we continued in work on optimising the concept and design of the scheme through the difficult and challenging permitting process. Although not always easy, in the meantime we have achieved some positive points which will allow us to progress the process. We believe construction could start around year-end 2017 or during the first quarter of 2018.
read moreRadlicka, Prague
During 2016 we worked on the concept and design of our fifth office project in Prague at Radlicka Street. The plot is well located in Prague’s Smichov at the one of most important arteries in the south-west of the city. We acquired it in March 2016 for €6.9 million with a plan to deliver around 28,500 m² of top class office GLA in around mid-2019.
read moreAupark Shopping Centre, Brno
Our second retail scheme in the Czech Republic, the Aupark Shopping Centre in Brno, is still struggling with permitting. We are awaiting a positive change in the city’s master plan for the zone.
read moreSlovakia was once again among the Eurozone and CE’s strongest performers in 2016 in spite of a slowdown in GDP growth to 3.1% (2015: 4.2%). Inflation is accelerating due primarily to energy prices. The labour market is picking up and unemployment fell steadily throughout the year to around 8.8%. This has resulted in a return to higher levels of wage growth, a trend that is expected to continue. This optimistic environment has impacted the residential real estate market and there is currently a boom in mortgages. Fuelled by low interest rates and a rising labour market, residential prices rose a bearish average of 7% with the biggest demand in smaller one and two-bedroom apartments.
read moreChanges in Slovak development property value (€m)
Bratislava
Twin City B, C, Bratislava
The construction of Twin City B (23,500 m² of GLA) was completed in March 2016. In line with the original schedule and agreements, the project was subsequently delivered to its almost exclusive tenant Swiss Re (21,800 m² of GLA, including options for future expansion).
read moreTwin City Tower, Bratislava
Construction of the Twin City Tower (34,700 m² of GLA) was launched in July 2016. This project, adjacent to the block of already completed A, B, and C buildings will complete one zone (A) of the Twin City area in the heart of the business district, just a few steps away from the historical city centre.
read moreNivy Mall and Central Bus Station, Bratislava
Nivy Mall will clearly be a landmark project in a unique location. And that deserves unique solutions. In cooperation with London’s Benoy, the well-known architectural studio focusing on the design of top class retail schemes, we are aiming not only for a unique and large (73,000 m² of retail GLA) shopping complex but much more. We will create a concept that is sophisticated in its every detail. There will be around 3,000 m² for a market for fresh produce. There will be plenty of green areas inside and a green roof on top. We will also include a representative gateway to Bratislava with a fully integrated bus station (30,000 m²). We plan to deliver all this in 2020. Currently, we are preparing construction and plan to launch the build itself in July 2017.
read moreNivy Tower, Bratislava
Nivy Tower, with around 31,200 m² of GLA, will be a remarkable office tower rising up out of the Nivy Mall. The tower will provide modern office space solutions for demanding clients and will be designed to BREEAM ‘Outstanding’ standard. The construction will be launched simultaneously with the Nivy Mall in July 2017 and its completion is planned for April 2019.
read moreHungary’s macro-economic fundamentals have now been positive for the past three years. Although the GDP growth rate slowed slightly (to 1.9% against 3.2% in 2015) in the reporting year, growth in the coming year is expected to bounce back in 2017 to around 3.2%. As elsewhere in the region, the primary reason for drop in GDP is less funding from the EU. However, household consumption is up again (4.8%), driven by wage hikes following years of stagnation and growing employment which is set to reach new record levels in the coming years.
read moreChanges in Hungarian development property value (€m)
Budapest
Agora, Budapest
For a full year from December 2014, we worked systematically on acquiring an interesting plot of land in Budapest. During the reporting year, we worked on fine-tuning the Agora concept and design with a leading British studio, Make architects. As this project with around 133,800 m² of GLA will significantly change this part of the city, we were cooperating closely with city representatives to create a truly iconic and remarkable design. With its five office buildings and spacious community areas, Agora Budapest will not only be a new city landmark but once completed will offer workspace for over 12,000 people.
read moreThere were enough drivers for our decision that Berlin is our next new market.
We are looking at an overall positive macro environment in Germany. Berlin is highly attractive for young talent and new start-ups. Office vacancy is falling and demand for new space is very healthy. Initially, we planned to enter the market through the acquisition of an active local office development platform and we explored that option thoroughly. But in the end, we decided to follow our tried and tested method of market entry – setting up our own presence and building it up through organic growth, specifically based on intimate knowledge of the market. For example, Berlin’s reported total office stock is approximately 19 million m² of GLA. However, when looking at it more deeply, we believe the true modern office stock represents less than one third of that number.
read moreAs part of our growth strategy, we began exploring the market in Turkey in 2013.
Although the Turkish economy slowed in 2014, after general elections in 2015, robust growth returned and 2016 began very positively. There was growing confidence in the business environment, supported by political stability, and there were signs of recovery in both the overall economy and in real estate. However, the series of events that began with an attempted coup in July had a severe effect on the economy and ultimately on the real estate market.
read more10 Portfolio Overview
Managed GLA, of total 370,520 m²
Market value by country, owned assets of total €876m
Market value by segment, owned assets of total €876m
| Country | No. of projects | Developed GLA (m²) | Market value (€m) |
|---|---|---|---|
| Owned income-producing assets | 11 | 305,024 | 692.3 |
| Poland | 4 | 117,758 | 337.5 |
| Office | 4 | 117,758 | 337.5 |
| Czech Republic | 2 | 77,542 | 108.9 |
| Office | 1 | 34,069 | 76.9 |
| Logistics | 1 | 43,473 | 32.0 |
| Slovakia | 5 | 109,724 | 245.9 |
| Office | 5 | 109,724 | 245.9 |
| Assets managed by HB Reavis IM | 3 | 65,494 | 183.7 |
| Total | 14 | 370,518 | 876.0 |
Note: Figures based on external expert valuations and management report.
In line with our strategy, the Group is focused on achieving and maintaining a balanced share of investment property and assets under development for the longer term.
We aim to achieve this through continual active divestment of matured assets. However, during the time we retain and manage the assets, we obviously aim to maintain them at top commercial and operational levels so that when we divest, we do so in the best achievable conditions. At the same time, and perhaps even more importantly, we also aim to focus on always providing services that exceed tenant and employee expectations, thereby maintaining long-term clients’ relationships.
read more| Group income producing portfolio |
GLA (m²) | Valuation | Rental income 2016 |
ERV | Equival. yield |
Capital return |
Rental return |
Total return |
||
|---|---|---|---|---|---|---|---|---|---|---|
| 2015 | 2016 | 2015 | 2016 | |||||||
| AM portfolio from 2015 | 233,864 | 458.9 | 496.2 | 20.5 | 37.6 | 7.34% | 6.99% | 3.2% | 4.5% | 7.7% |
| Office | 190,391 | 428.6 | 464.2 | 17.7 | 35.5 | 7.26% | 6.95% | 3.1% | 4.1% | 7.2% |
| Logistics | 43,473 | 30.3 | 32.0 | 2.8 | 2.1 | 8.50% | 7.50% | 5.5% | 9.2% | 14.7% |
| Additions to portfolio in 2016 | 136,654 | 219.7 | 379.8 | 0.9 | 27.3 | 6.88% | 6.41% | 23.5% | 0.4% | 23.9% |
| Property exits in 2016 | 302,734 | 541.4 | 584.7 | 20.0 | 40.3 | 6.97% | 6.71% | 6.5% | 3.7% | 10.2% |
| AM portfolio for 2016 | 370,518 | 1,000.3 | 876.0 | 41.4 | 65.0 | 7.14% | 6.73% | 5.0% | 4.2% | 9.2% |
Note: Figures based on external expert valuations and management report. The external valuations are not adjusted for IFRS adjustments that are taken into account in IFRS financial statements.
11 Investment Management
HB Reavis launched its Investment Management business in 2011. The goal is to create a platform for investors looking for exposure to real estate in Central Europe that leverages the Group's robust presence and proven track record in the region. The first fund has been up-and-running since 2011.
read more
11.57% p.a.
Total return since inception
5.84% p.a.
Cash dividend since inception
HB Reavis CE REIF – Fund performance
12 Financial review
Changes in real estate trends and in the way tenants perceive the way they occupy space present new challenges for our financial strategy. We are working hard to address those challenges in a proactive way.
read moreEBIT
€171.1m
Net profit
€107.5m
NAV
€1,220.6m
Shareholders’ return
6.9%
Net Debt Leverage Ratio
17.4%
Net rental income
€46.1m
Revaluation gain
€174.5m
At HB Reavis we are continually engaged in monitoring anticipating and analysing market trends and reviewing our financial strategy against any changes. Our aim is to ensure our financial strategy is fit for purpose and allows us to maintain a healthy capital structure while ensuring the availability of both new debt and new equity to support the Group’s growth ambitions.
read more01
Balanced cash flow management matching nearterm recurring income and operating expenses as well as balancing long-term investments with sources of long-term funding
02
Careful risk management aimed primarily at mitigating foreign exchange and interest-rate risks associated with macroeconomic or property cycles
03
Target Gross Debt to Total Assets at 40% and Net Debt to Total Assets at 35% with an appropriate mix of non-recourse project debt and Group-level debt
04
Cash reserve target at 5% of the balance sheet with special reserve build-up profile to cover future debt-bullet repayments well in advance
05
Dividend pay-out in line with historical levels up to 3% of NAV
In terms of overall performance, in 2016 we delivered significantly lower financial results than in 2015. However, the fundamentals are strong as is our business result. Obviously, the main driver was a revaluation gain of €174.5 million over the year, down by 34% year-on-year (2015: €263.2 million). At €46.1 million, Net operating income was up slightly (2015: €44.6 million) while Result from disposal of subsidiaries increased somewhat to €16.9 million (2015: €13.6 million). Bottom line: we achieved a Net profit of €107.5 million (2015: €239.4 million). Our growing business also drove up growth in personnel primarily in Poland and UK, but we are also adding some head-office positions so that we are ready for further growth.
read moreEBIT
€171.1m
Net profit
€107.5m
NAV
€1,220.6m
Shareholders’ return
6.9%
Net Debt Leverage Ratio
17.4%
Net rental income
€46.1m
Revaluation gain
€174.5m
We delivered an operating profit of €235.3 million (2015: €302.5), which represents decline of 19% year-on-year.
Net operating income (€m)
46,1
Revaluation gains (Net of yield shift, €m)
107,7
Investment portfolio yield
6,17%
Group profit decomposition (€m)
Note: Figures based on consolidated, IFRS audited report; numbers are rounded.
In 2016, financial institutions were still very positive about real estate projects. The financing market environment offered reasonable conditions on loan-to-cost ratio, and pricing and the ability to deploy debt funding at earlier stages of the development phase were favourable. These conditions were the same across all our markets except for London, where the results of the British EU referendum prompted financial institutions to reconsider financing speculative office development.
read more| Cash flows (€m) | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
|---|---|---|---|---|---|---|
| Cash beginning of period (BOP) | 76.6 | 141.8 | 48.6 | 49.9 | 155.3 | 115.4 |
| Operating cash flow | 7.6 | 16.3 | 9.0 | 20.6 | 24.3 | 30.6 |
| Land/property acquisitions | 0.0 | -143.0 | -79.2 | -56.7 | -40.0 | -76.0 |
| Construction investments | -101.7 | -86.5 | -112.6 | -122.6 | -215.5 | -244.9 |
| Land/property exits* | 141.8 | 15.9 | 76.1 | 88.0 | 13.5 | 162.6 |
| Other investments | -16.9 | -4.7 | -8.2 | -10.8 | -8.1 | -1.4 |
| Investment cash flow | 23.2 | -218.3 | -123.9 | -102.1 | -250.1 | -159.7 |
| Borrowings change | 54.1 | 105.6 | 125.1 | 200.7 | 244.9 | 379.1 |
| Dividends/equity contributions | -19.7 | 3.2 | -8.9 | -13.8 | -59.0 | -49.0 |
| Financing cash flow | 34.4 | 108.8 | 116.2 | 186.9 | 185.9 | 330.1 |
| Cash end of period (EOP) | 141.8 | 48.6 | 49.9 | 155.3 | 115.4 | 316.4 |
| Share of cash on total assets | 11.3% | 3.3% | 3.3% | 8.6% | 5.5% | 15.0% |
Note: Figures based on management report.
*Land/property exits presented net of related investment loans repaid in relation to exit.
Financing activity is intended to support the Group’s core business lines by ensuring sufficient funding while maintaning both the long-term cost and tenor of borrowed capital at optimal levels.
read moreDebt maturity profile as of 31 December 2016 (€m)
*Excluding borrowings in JV.
The amount of capital raised and available for real estate is at record levels. This is driven mainly by the low interest rate environment and increased allocations to the real estate asset class. This helps investors diversify from the volatility in other asset classes and represents a source of long-term sustainable income for them. High demand and low supply of good quality real estate products has put downward pressure on yields leading to decreasing spreads between real estate returns and government bond yields.
read moreThe Group is exposed to the risks that are part of the general commercial environment as well as to various risks that are specific to our business.
An inherent part of the Group’s business management is the emphasis on identification and monitoring of all relevant risks. Where possible, we deploy proactive mitigation tools to manage any risks that could have a material impact on our business. As a SWOT analysis of our business shows, the majority of weaknesses and threats are the focus of our comprehensive risk management.
read moreS
Strengths
- Diversification across markets and locations
- Efficient construction procurement
- Strong office product design know-how and experienced team
- Proven ability to deliver high quality buildings on all Group markets
- Proven ability to divest property assets on all Group markets
- Strong financial track record and credibility with banks and investors
W
Weaknesses
- Robust growth in recent years has put some pressure on some operational processes
- Less than optimal leverage of Group balance sheet
O
Opportunities
- Strong demand in Bratislava and Budapest
- Strong leasing activity in Warsaw and Prague
- Increased leverage through sustainable and diversified funding sources – loans and bonds
- Accelerated know-how transfer and implementation in markets outside CE
- Acceleration of leasing through higher engagement with clients
- Higher efficiency through successful implementation of new processes
- Leadership in setting office trends
T
Threats
- Further prolongation of oversupply in office markets in Warsaw intensifies pressure on rents
- Not enough opportunities to redeploy Group capital that would meet our Group risk-return expectations
- Uncertain environment on London market due to Brexit
- Unexpected shock on financial markets
SWOT Analysis
13 Our responsibility
Corporate Social Responsibility (CSR) has been part of our business from the very beginning. We were the first to bring BREEAM to Central European commercial real estate and are pioneering the notion of buildings as areas of ‘well-being’ for users. In our own organization, we have created a corporate culture in which sustainability and responsibility have become an integral part of everything we do.
read more
Sustainable buildings – highest quality solutions
At HB Reavis we try to address any environmental challenges while finding solutions that meet not only client requirements but also our sustainability goals. Our clients increasingly demand sustainable spaces with energy efficient operational and maintenance costs. We want satisfied clients.
read more
From brownfield to living spaces
Throughout our history, HB Reavis has acquired numerous abandoned and run-down areas and has developed them gently so that once again they become vibrant and useful sites where people can live and work. And we continue to do so.
read moreBusiness wise, CSR has evolved into a natural part of our vision and strategy. We want to bring remarkable experiences to people’s lives through our real estate solutions. That is why we aim to create something unique and innovative, something our clients and the communities we serve do not expect from a real estate developer.
read moreBREEAM
'Very Good'
- City Business Center III-V
- River Garden I
- Konstruktorska Business Center
- Gdanski Business Center A - B
- Aupark Hradec Kralove
- Nivy Mall
- Cooper & Southwark
BREEAM
'Excellent'
- Forum Business Center I
- Vaci Corner Offices
- River Garden II-III
- Metronom Business Center
- Postepu 14
- Gdanski Business Center C - D
- West Station I-II
- Twin City A, B, C
- 33 Central
- 20 Farringdon Street
- Vinohradska
BREEAM
'Outstanding'
- Twin City Tower
- Twin City next phases
- Nivy Tower
- Radlicka
- Burakowska 14
- Varso Place
- Agora
14 Awards
World Finance - HB Reavis Group
Best Office Developer
CoStar Agency - United Kingdom
Best Newcomer 2016
AON - Poland
Best Employer 2016 in Poland
CIJ - Poland
Leadership of the Year
CIJ - Czech Republic
Best Retail Development & Developer of the Year
CIJ - Czech Republic
Best Office Lease of the Year
Euromoney - Slovakia
Best Real Estate Developer – Offices/Business
Euromoney - Slovakia
Best Real Estate Developer
PIE Europe Property Awards - Slovakia
Investment of the year – Best Office Deal
View or download our annual reports
Find out how we performed in previous years. Have a look at our financial highlights or download whole annual reports in PDF