In the first three quarters of the year, the Warimpex Group improved all of its key financial metrics versus the prior-year period. The profit for the period increased from €2.6 million to €13.6 million. These developments can primarily be attributed to the following factors: higher occupancy at the office properties in Poland; the full consolidation of an additional office property in St. Petersburg; an improvement in occupancy rates at hotels, particularly in comparison to the previous year, which was still significantly impacted by COVID-19; and not least the strength of the Russian rouble. In addition, an earnings contribution of €2.8 million came from the successful disposal of the B52 office building in Budapest, while no sales transactions were completed in the prior-year period.
“These results are particularly pleasing against the backdrop of the current geopolitical and economic upheavals caused by the armed conflict in Ukraine, although the disastrous humanitarian situation in the country is deeply concerning,” said Franz Jurkowitsch, CEO of Warimpex. “The solid business development is based not least on the long-standing business strategy that affords us both the necessary flexibility to be able to react to market developments quickly and the long-term stability to excel at getting real estate projects off the ground. Our focus continues to be on innovative and sustainable office developments and strengthening our portfolio in Poland and Germany.”
Substantially improved profit for the period
The financial metrics for the Warimpex Group in the first three quarters of 2022 were as follows: Revenues from the rental of office properties rose from €14.9 million to €23.9 million, primarily due to the first-time inclusion of the revenues from the Jupiter office towers in St. Petersburg, which have been fully consolidated in the Group since the end of 2021, the recovery of the rouble following the currency’s steep slide in February and March, and the higher occupancy rate of the Polish office properties. Revenues in the Hotels segment rose to €6.6 million in the first nine months of 2022, which represents an increase of 103 percent compared with the prior-year period. The development of revenues was still stunted by the COVID-19 pandemic in the previous year. Total revenues increased by 69 percent to €32.4 million.
At the end of June 2022, the B52 office building in Budapest was sold under a share deal generating an earnings contribution of €2.8 million. The Group conducted no real estate transactions during the prior-year period. EBITDA rose from €7.9 million to €15.9 million, primarily due to the improvement in gross income from revenues and the gains on the disposal of properties. EBIT increased from €8.3 million to €21.5 million.
This increase is primarily due to the higher EBITDA and a better result from property valuation. The financial result went from minus €5.4 million to minus €5.6 million. This includes currency translation gains of €3.0 million (2021: €0.9 million) and losses from the measurement of derivatives held for interest rate hedging purposes and currency hedging purposes in the amount of €1.0 million.
In total, this resulted in a profit for the period of €13.6 million, up from €2.6 million in the prior-year period. Key figures such as the equity ratio of 36 percent (up 2 pp) and cash flow from operations (up 96 percent to €8.1 million) are also positive highlights.
Property development focused on Poland and Germany
With regard to developments, Mogilska 35 Office, which will offer roughly 11,900 sqm of space, is currently being built in Krakow. The project is scheduled to be completed in 2023. Building permits have been issued for the MC 55 office building in Białystok with roughly 38,500 sqm of space and the Chopin office building in Krakow with roughly 21,200 sqm of space – construction will start as soon as sufficient tenant demand has been secured.
In the German city of Darmstadt, the planning for the West Yard 29 office building with roughly 13,800 sqm of space in the immediate vicinity of the greet hotel owned by Warimpex is already at an advanced stage. While the B52 office building in Budapest was sold at the end of June, Warimpex acquired Red Tower in Łódź with over 12,400 sqm of lettable space, which will be refurbished while remaining occupied.
In Russia, Avior Tower 1 at AIRPORTCITY St. Petersburg, which started being built in 2020 and offers roughly 16,900 sqm of space, was completed in the third quarter of 2022 and is already fully occupied; the lease term will begin in January 2023. New developments at the site are not being pursued at this time.
Franz Jurkowitsch commented, “The projects listed above make it clear that we have increased our focus on Poland. It has always been one of our most important markets, in no small part due to the demand for high-quality office space in medium-sized cities apart from Warsaw. These locations offer highly skilled workers and strong infrastructure, which are key factors for attracting international companies as tenants.”
Innovation and sustainability
Energy efficiency, the use of renewable energy sources, and reducing carbon emissions are core considerations in the construction and refurbishment of properties. Warimpex is striving to obtain certifications in this area by implementing sustainability concepts in its property portfolio. At the same time, innovative office concepts are being initiated as a response to the changes in the working world – not least due to the coronavirus pandemic. Warimpex now offers coworking spaces at three of its office buildings – Ogrodowa Office and Red Tower in Łódź and Mogilska 43 Office in Krakow – where workstations, as well as small and medium-sized offices, are let out on short-term basis, thus providing excellent work infrastructure along with a high level of flexibility. These offerings are being received well and will therefore be expanded.
“Overall, we succeeded in consistently pursuing our strategy in the first three quarters despite challenging market conditions and are thus headed into the end of the year with an optimistic outlook. Our goal is now to bring planned construction projects to completion and to further develop our operational activities with stable cash flows. One of the key factors here is keeping a close eye on the economic and geopolitical conditions and acting rationally on the basis of the important experience we have gained in recent years,” said Franz Jurkowitsch in closing.