CPI Property Group
(société anonyme)
40, rue de la Vallée
L-2661 Luxembourg
R.C.S. Luxembourg: B 102 254

Press Release - Corporate News

Luxembourg, 30 November 2023

CPI PROPERTY GROUP publishes financial results for the third quarter of 2023

CPI PROPERTY GROUP (hereinafter “CPIPG”, the “Company” or together with its subsidiaries the “Group”), a leading European landlord, hereby publishes unaudited financial results for the nine-month period ended 30 September 2023.

“CPIPG has once again delivered solid operational performance, and real estate fundamentals in our region remain strong,” said David Greenbaum, CEO. “Disposals are progressing well, we continue to complete new external financing, and our liquidity profile is excellent.”

Highlights for the third quarter of 2023 include:

• Total assets were €23.2 billion, and EPRA NRV (NAV) was €8.1 billion.
• CPIPG’s property portfolio was €20.3 billion (versus €20.9 billion at year-end 2022).
• The Group executed €731 million of disposals during the first three quarters of 2023. More than €1.5 billion of disposals have been signed since CPIPG’s €2 billion disposal plan was announced in August 2022.
• Net rental income increased to €609 million and net business income rose to €674 million.
• Hotels reported net income of €58 million, an increase of 72% compared to the same period in 2022 and 69% above 2019 results.
• Consolidated adjusted EBITDA was €604 million, while FFO1 was €312 million.
• Rental income grew 8.2% on a like-for-like basis. A high proportion of the Group’s rents are indexed, and CPIPG has faced no difficulty to date passing inflation on to our tenants.
• Net Loan-to-Value (LTV) decreased to 50.6%, down 0.3 p.p. from year-end 2022.
  • The pro-forma net LTV accounting for the timing mismatch between signing and closing of disposals would be 49.1%
• The Group signed multiple secured bank loans and continued to raise senior unsecured debt, contributing to a total of almost €1.2 billion in new external financing year to date.
• Total available liquidity was €1.7 billion as of 30 September 2023.
• Unencumbered assets decreased to 49%, reflecting the completion of new secured loans since the beginning of 2023.
• Net ICR was 2.6x, reflecting the relatively higher cost of the Group’s temporary bridge financing arrangements, partly offset by the reduction in outstanding gross debt.

Recent Disposals

In August 2022, CPIPG announced a €2 billion disposal pipeline. Since then, more than €1.5 billion of disposals have been signed, meaning that CPIPG is currently slightly ahead of schedule.

On average, the Group’s signed disposals have occurred at a premium to book value.

November was a particularly active month for disposals. First, S IMMO completed the sale of 161 residential and nine commercial units at the “Adlerhof” in Vienna to Thalhof Immobilien. Second, CPIPG signed a binding agreement for the sale of Sunčani Hvar Hotels to Eagle Hills for more than €200 million, a premium of more than 30% to book value. Finally, CPIPG announced today the signing of a binding agreement for the sale of our assets in Crans Montana, Switzerland to Vail Resorts for more than CHF 100 million, or about double the book value.

CPIPG intends to exceed (and ideally, significantly exceed) our €2 billion target by August 2024. Assets in the disposal pipeline include residential, office, land bank and hotels in Germany, Austria, the Czech Republic, and the UK.

Financing and Debt Maturities

CPIPG signed nearly €1.2 billion of new secured and unsecured financing during 2023, including €187 million after the reporting period ending September 2023, reflecting our varied and long-standing banking relationships as well as the high quality of our properties. New loans have been drawn from Aareal Bank, Unicredit, ČSOB, RBI, MUFG, Berlin Hyp, Deutsche Pfandbriefbank, Komerční banka, Erste Bank and Rothschild.

On 30 November 2023, CPIPG drew a new €635 million 3-year bridge loan from Santander, Societe Generale/Komerční banka, RBI, SMBC, Barclays and Erste Bank. The loan replaces all previous bridge facilities related to the acquisitions of IMMOFINANZ and S IMMO. In total, CPIPG has repaid more than €2 billion of bridge financing since 2022, including €756 million since the end of June 2023.

CPIPG has €1.2 billion of debt maturing in 2024 and 2025, relative to €1.7 billion of liquidity as of Q3 2023.

The only significant debt maturity in the next 24 months is a €478 million loan secured against assets in Berlin, which matures in October 2024; CPIPG is in advanced negotiations and expects to achieve a 7-year prolongation of the loan before the end of 2023. In 2025, the largest maturities relate to secured bank financing in Poland, where refinancing conditions remain favourable.

CPIPG Consolidated Debt Maturity Profile, 2024 to 2025

Equity Raising and Expected Shareholder Support

In addition to our active and successful disposal pipeline, CPIPG continues to explore equity and capital raising in multiple forms. Our shareholder, Radovan Vitek, is considering a meaningful contribution of assets and/or cash before year-end 2023. CPIPG is also in active, advanced discussions on potential sales of minority stakes in portfolios located in Poland and Germany.

Annual share buyback

CPIPG conducts annual share buybacks to provide liquidity to our shareholders. In May 2023, CPIPG reduced our distribution target from 65% to 25% of FFO1. This follows a reduction of our 2022 distribution target from 65% to 55%.

On 20 November 2023, the Company announced our share buyback. Considering the progress made on debt repayment, and liquidity, CPIPG viewed the reduced share buyback as appropriate.

At the closing of the offer period, shareholders of the Company presented a total of 85,327,468 shares for tender at a price of €0.932 per share for a total of about €79.5 million. Approximately 84.2 million shares were tendered by Clerius Properties (Apollo), with a small amount tendered by management. CPIPG’s primary shareholder, Radovan Vitek, did not tender any shares. CPIPG understands the sensitivity of shareholder distributions in this environment and will continue to aim for a proper balance of stakeholder interests.

Changes to the Board of Directors and Senior Management Team

On 20 November 2023, David Greenbaum, CFO of the Group since 2018, was appointed CEO and managing director and was co-opted to CPIPG´s Board of Directors. David replaces Martin Němeček, who resigned from his role of CEO, managing director, and member of the Board of Directors. After a short break, Martin will remain with CPIPG in a newly created senior role focused on high-value projects.

Zdeněk Havelka, currently executive director, was appointed to the newly created position of Chief Operating Officer (COO). Pavel Měchura, Group Finance Director, will remain in his role and will become sole head of finance division.

Tomáš Salajka, Head of Acquisitions, Asset Management and Sales, has been appointed as Managing Director (administrateur délégué) of CPIPG. His role and the role of Jan Kratina, Director of CPI Hotels, are otherwise unchanged. 

Short-Seller Report

On 21 November 2023, notorious short-seller Muddy Waters published a flashy, engaging, but erroneous report specifically designed to discredit CPIPG’s reputation and disrupt the Group’s efforts to support our investment-grade credit ratings. CPIPG takes the allegations raised by Muddy Waters seriously and understands that a second report will be released soon.

As a first step, CPIPG engaged global law firm White & Case to review the Group’s governance procedures, compliance policies, and the allegations raised by Muddy Waters. CPIPG also commenced an internal audit. Jonathan Lewis, a well-known UK/European real estate solicitor serving on CPIPG’s board as independent director since 2020, has agreed to supervise the process.

We understand why CPIPG is an easy target for short sellers. The real estate sector is experiencing challenges, rating agencies are nervous, and CPIPG operates in a region which is unfamiliar to many foreign investors. However, we believe Muddy Waters has an imperfect understanding of real estate transactions, particularly in the CEE region, and made significant errors and false claims due to incomplete research and lack of local knowledge.

CPIPG is a proud family-owned company and never obscured our relationship with Radovan Vítek or his family. Disclosures on share buybacks, shareholder loans and related party transactions are extensive and easy to find. On principle, Radovan Vítek cannot “cream,” “squeeze” or “brazenly loot” his family company, as alleged by Muddy Waters.

CPIPG’s primary stakeholders are bondholders and banks, who frequently ask questions about CPIPG’s relationship with Mr. Vitek and his family. We always answer openly. Even Muddy Waters, which contacted CPIPG last month via a fake name and e-mail address, got fast, accurate, and detailed responses to their questions.

The timing of Muddy Waters’ report was particularly unpleasant, as it was timed (and obviously rushed) to coincide with a change to our senior management team. All stakeholders should be reassured that the resignation of our CEO, Martin Němeček, was completely unrelated and CPIPG had no advance knowledge of any report. Martin Němeček remains a vital member of our team.

Since the Muddy Waters report was released, CPIPG has been preparing a detailed response focused on facts and details. The report is expected to be published next week. Of course, CPIPG recognizes that our investors want answers quickly. On the other hand, we want to be entirely accurate and as detailed as possible.

Our responses to the “Part 1” report by Muddy Waters will prove:

For the first allegation (Polygon BC and MQM Czech), we will demonstrate that all details were properly disclosed, that Nas Prvy Realitny was not a related party of CPIPG (or Mr. Vitek), and that pricing can be easily justified by market developments and positive progress on planning permission. The land plots acquired for more than Є50 million in 2017 are worth more than €150 million today and include CPIPG’s highly successful Kolbenova residential development in Prague.

For the second allegation (CPI Hotels), we will demonstrate that all transactions took place on an arms-length basis and had a clear business rationale and valuation. CPI Hotels remains an important part of the Group and delivers significant income annually.

Notably, the first and second allegations took place in the period from 2009 to 2017, before CPIPG was an international bond issuer and before many of the Group’s current governance practices were enacted. Even so, CPIPG is confident that everything was disclosed accurately with a clear rationale.

For the third allegation (WXZ1), the transaction was properly disclosed and discussed openly. CPIPG is simply committed to treating investors fairly and equally, particularly when the Group acquires other listed companies.

For the fourth allegation, we will demonstrate that the acquisition of Polma was a complex restructuring transaction involving 10 assets acquired for more than €330 million, including Maximo Shopping Center in Rome. In total, the assets acquired are currently worth more than €420 million. CPIPG does not own any boats, and Radovan Vitek’s yacht does not have a golden hull.

We realize our stakeholders (and Muddy Waters) want more information, and we look forward to publishing our detailed response next week.

FINANCIAL HIGHLIGHTS
 

 
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT*

* The presented financial statements do not represent a full set of interim financial statements as if prepared in accordance with IAS 34

 
Net rental income

Net rental income increased by €168.0 million (38%) to €609.4 million in 1-3Q 2023 primarily due to the acquisitions of IMMOFINANZ and S IMMO and continuous like-for-like rental growth.

Net hotel income

Net hotel income increased from €34.0 million in 1-3Q 2022 to €58.4 million in 1-3Q 2023 due to the acquisition of S IMMO (€13.8 million) and higher overall travel demand across Europe.

Net valuation loss

Net valuation loss of €202.6 million in 1-3Q 2023 primarily related to IMMOFINANZ (€138.8 million) and S IMMO (€86 million), mainly lower-yielding office and residential portfolios in Germany and an office portfolio in Austria.

Other operating income

Other operating income decreased in 1-3Q 2023 due to one-off bargain purchase from the acquisition of IMMOFINANZ and S IMMO of €285.9 million in 1-3Q 2022. 

Interest expense

Interest expense increased by €121.0 million in 1-3Q 2023 compared to 1-3Q 2022 primarily due to the acquisition of IMMOFINANZ (€23.8 million) and S IMMO (€36.4 million), the overall increase of the cost of new financing and the relatively higher cost of the Group’s temporary bridge financing.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION*

* The presented financial statements do not represent a full set of interim financial statements as if prepared in accordance with IAS 34

Total assets

Total assets decreased by €344.1 million (1.5%) to €23,177.1 million as at 30 September 2023 compared to 31 December 2022. The decrease was driven primarily by negative revaluations of investment property (€202.6 million) and property disposals.

Total liabilities

Total liabilities decreased by €397.6 million (2.8%) to €13,860.6 million as at 30 September 2023 compared to
31 December 2022, largely due to the repurchase of non-current bonds issued by CPIPG of €334.5 million and the repayment of IMMOFINANZ bonds of €197.5 million.

EQUITY AND EPRA NRV

Total equity increased by €53.5 million to €9,316.5 million as at 30 September 2023 compared to 31 December 2022. The movements of equity components were primarily as follows:                  

• Decrease due to the profit for the period of €51.7 million (profit to the owners of €8.0 million, interests to perpetual notes holders of €56.8 million and loss attributable to NCI of €13.1 million);
• Increase in revaluation and hedging reserve in total of €36.3 million;
• Decrease in translation reserve of €8.4 million.

EPRA NRV was €8,071 million as of 30 September 2023, representing an increase of 0.8% compared to 31 December 2022. The increase of EPRA NRV was driven by the above changes in the Group’s equity attributable to the owners (revaluation reserve).

GLOSSARY
 

APM RECONCILIATION*

* Totals might not sum exactly due to rounding differences.

* Includes pro-rata EBITDA/FFO of Equity accounted investees.
 

 *Annualised.

 
For further information please contact:

Investor Relations

Moritz Mayer
Manager, Capital Markets
m.mayer@cpipg.com

For more on CPI Property Group, visit our website: www.cpipg.com    
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