CPI Property : Quarterly financial report CPI PROPERTY GROUP publishes financial results for the first quarter of 2023

CPI Property Group (société anonyme) 40, rue de la Vallée L-2661Luxembourg

R.C.S. Luxembourg: B 102 254

Press Release - Corporate News

Luxembourg, 31 May 2023

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

CPI PROPERTY GROUP (hereinafter "CPIPG", the "Company" or together with its subsidiaries the "Group"), a leading owner of income-generating European real estate, hereby publishes unaudited financial results for the three-month period ended 31 March 2023.

"CPIPG's first quarter results reflect the significant increase in our rental income due to indexation," said Martin Nemecek, CEO. "Market fundamentals in the CEE region are strong, with a healthy supply/demand balance evidenced by the Group's solid occupancy and positive rent reversion."

Operational highlights for the first quarter of 2023 include:

• Like for like-for-like rent increased by 9.9%, with a rent collection rate near 100%.
• Occupancy was steady at 92%.
• €400 million of property disposals were signed in Q1, with over €500 million completed year-to-date. Nearly €850 million have been completed since the Group's €2 billion pipeline was announced in August 2022.
• Limited real estate construction, strong tenants, healthy consumer spending, and market trends including a lower impact from home working continue to support solid appetite for CEE real estate.

Financial highlights for the first quarter of 2023 include:

• Property portfolio of €20.6 billion, total assets of €23.3 billion.
• EPRA NRV (NAV) grew to €8.2 billion.
• Gross debt declined by about €300 million.
• Net Loan-to-Value (LTV) declined 0.60% to 50.3%.

1. Q1 LTV does not reflect the positive effect of disposal proceeds received after quarter-end, plus the benefit of bond repurchases completed in Q2 2023.

• 1. Year-endtarget LTV of 45-49% is unchanged.
• Net rental income increased to €197 million and net business income rose to €213 million.
• Consolidated adjusted EBITDA was €198 million, while FFO was €108 million.
• Total available liquidity was €1.9 billion, including €850 million of undrawn revolving credit facilities, the majority of which mature in 2026.
• Unencumbered assets increased to 55%.
• Net ICR was 2.8x.

"While the Group's cash flow generation is strong, some of CPIPG's financial metrics temporarily exceed our target range," said David Greenbaum, CFO. "We made progress on reducing leverage in Q1, took further actions in Q2 and expect to announce more steps in the coming months."

Post-Q1 events and updates

In April 2023, CPIPG completed tender offers for senior unsecured bonds maturing in 2026, 2027 and 2028. In total, the Group accepted €335 million of bonds for tender. Because the bonds were repurchased at a discount, CPIPG expects to report a gain of approximately €60 million in Q2 2023.

CPIPG will consider further bond and/or hybrid buybacks over the course of 2023 and 2024 through tender offers and secondary market purchases, depending on the Group's level of cash and the speed of our bank financing and disposal pipelines.

In May 2023, CPIPG's board approved a reduction of the Group's shareholder distribution target for 2023 from 65% of FFO1 to less than 25%, with the final payout to be decided by the board in Q4 2023. In future years, CPIPG will consider similar measures to adjust the payout ratio depending on the real estate environment and considering our commitment to investment-grade credit ratings and our long-term financial policy.

In Q2, CPIPG completed the disposal of a brownfield site with a land area of almost 45,000 m2 in the Lambrate district of Milan, Italy. IMMOFINANZ also successfully closed the sale of landbank in Turkey with about 197,000 m2 of land area. Gross proceeds from the two sales were about €55 million.

Financing

CPIPG has an extensive pipeline of new secured bank loans in Poland, the Czech Republic, Romania, Serbia, the UK and other locations. One or more significant borrowings are expected to close during Q2, with proceeds used primarily to repay the Group's outstanding 2025 bridge loans, which currently stand at €1.55 billion. Additional secured bank financings are in advanced discussion for H2 2023. Overall, the Group's near-term debt maturities are highly manageable with existing liquidity resources of nearly €2 billion.

FINANCIAL HIGHLIGHTS

Performance		Q1-2023	Q1-2022	Change
Total revenues	€ million	410	216	90.3%
Gross rental income (GRI)	€ million	229	128	79.1%
Net rental income (NRI)	€ million	197	110	79.4%
Net hotel income	€ million	5	(2)	361.3%
Net business income (NBI)	€ million	213	117	81.4%
Consolidated adjusted EBITDA	€ million	198	119	66.8%
Funds from operations (FFO)	€ million	108	84	27.7%
Net profit for the period	€ million	53	381	(86.1 %)

Assets		31-Mar-2023	31-Dec-2022		Change
Total assets	€ million	23,271	23,521	(1.1%)
Property portfolio	€ million	20,551	20,855	(1.5%)
Gross leasable area	sqm	6,604,000	6,784,000	(2.6%)
Occupancy	%	92.0	92.8		(0.8 p.p.)
Like-for-like gross rental growth**	%	9.9	7.6		2.3 p.p.
Total number of properties***	No.	780	855	(8.8%)
Total number of residential units	No.	14,870	16,767	(11.3%)
Total number of hotel rooms****	No.	8,067	7,810	3.3%

• According to GLA
• Based on headline rent
• Excluding residential properties in the Czech Republic
• Including hotels operated, but not owned by the Group

Financing structure		31-Mar-2023	31-Dec-2022	Change
Total equity	€ million	9,461	9,263	2.1%
EPRA NRV (NAV)	€ million	8,203	8,005	2.5%
Net debt	€ million	10,346	10,625	(2.6%)
Net Loan-to-value ratio (Net LTV)	%	50.3	50.9	(0.6 p.p.)
Net debt/EBITDA	x	13.1x	17.5x	(4.4x)
Secured consolidated leverage	%	19.0	19.5	(0.5 p.p.)
Secured debt to total debt	%	38.6	38.9	(0.3 p.p.)
Unencumbered assets to total assets	%	55.4	54.4	1 p.p.
Unencumbered assets to unsecured debt	%	185%	179%	6 p.p.
Net interest coverage (Net ICR)	x	2.8x	3.2x	(0.4x)

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT*

	Three-month period ended
(€ million)	31 March 2023	31 March 2022
Gross rental income	229.2	128.0
Service charge and other income	116.4	47.0
Cost of service and other charges	(104.2)	(42.4)
Property operating expenses	(44.2)	(22.6)
Net rental income	197.2	110.0
Development sales	-	-
Development operating expenses	-	(0.1)
Net development income	-	(0.1)
Hotel revenue	37.5	15.5
Hotel operating expenses	(32.7)	(17.3)
Net hotel income	4.8	(1.8)
Other business revenue	27.0	25.0
Other business operating expenses	(16.0)	(15.6)
Net other business income	11.0	9.4
Total revenues	410.1	215.5
Total direct business operating expenses	(197.1)	(98.0)
Net business income	213.0	117.5
Net valuation loss	(6.6)	(0.7)
Net gain/loss on disposal of investment property and subsidiaries	(1.7)	21.8
Amortization, depreciation and impairment	(17.8)	(11.7)
Administrative expenses	(26.6)	(18.5)
Other operating income	3.5	278.2
Other operating expenses	(3.8)	(3.5)
Operating result	160.0	383.1
Interest income	6.0	2.7
Interest expense	(75.4)	(31.3)
Other net financial result	(30.2)	12.1
Net finance costs	(99.6)	(16.5)
Share of gain of equity-accounted investees (net of tax)	8.2	17.2
Profit before income tax	68.7	383.8
Income tax expense	(15.7)	(2.9)
Net profit from continuing operations	53.0	380.9

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

Gross rental income

Gross rental income increased by €101.2 million (79.1%) to €229.2 million in Q1 2023 primarily due to the contributions of IMMOFINANZ (€55.2 million) and S IMMO (€48.0 million).

Property operating expenses

Property operating costs increased by €21.6 million (96.0%) to €44.2 million in Q1 2023 due to property operating costs associated with IMMOFINANZ (€13.6 million) and S IMMO (€9.0 million).

Net hotel income

In Q1 2023, net hotel income increased to €4.8 million, primarily due to additional income generated by S IMMO (€2.5 million).

Administrative expenses

Administrative expenses increased by €8.1 million to €26.6 million due to the acquisition of IMMOFINANZ (€5.8 million) and S IMMO (€2.3 million).

Other operating income

Other operating income decreased in Q1 2023 as there was a significant bargain purchase of €274.6 million recognized in Q1 2022.

Interest expense

Interest expense increased by €31.3 million to €75.4 million in Q1 2023 primarily due to interest expense incurred by IMMOFINANZ (€12.1 million) and S IMMO (€9.0 million).