DGAP-News: CPI PROPERTY GROUP reports financial information for the first quarter of 2018

Press Release

Luxembourg, 31th May 2018

CPI PROPERTY GROUP reports financial information for the first quarter of 2018

CPI PROPERTY GROUP (hereinafter "CPIPG", the "Company" or together with its subsidiaries the "Group") hereby publishes a financial information for the first quarter of 2018.

"CPIPG remains focused on long-term investments in Czechia, Berlin and the CEE region," said Martin Nemecek, CEO of CPIPG. "I am pleased to report that our strong platforms have maintained high levels of occupancy while increasing the level of rental income. Our stable capital structure and active asset management approach support a positive outlook for the rest of 2018."

Key highlights for the quarter include:

- Total revenues of EUR 125 million, a 32% increase year on year. Gross rental income increased by 34% year on year to EUR 73 million, driven by acquisitions and like-for-like growth.

- Like-for-like growth for the total portfolio was 5.4% on an annualized basis. In Berlin, like-for-like growth was nearly 7% while in Czechia and the CEE region like-for-like growth ranged between 3% and 5%.

- Funds from operations (FFO) increased to EUR 46 million relative to EUR 27 million for Q1 2017, reflecting stronger business and operating performance.

- CPIPG's net interest coverage ratio (ICR) was 3.4x relative to 2.5x in Q1 2017, reflecting higher levels of income and a lower cost of debt following CPIPG's refinancing exercises in late 2017. CPIPG continues to target an ICR well above 3x.

- Net Loan to Value (LTV) at quarter-end was 47%, primarily due to share repurchase activities of the company during March 2018. CPIPG is confident to maintain a net LTV below 45% going forward.

- In March 2018, CPIPG signed a EUR 150 million 2-year revolving credit facility, which enhanced our capital structure flexibility.

- CPIPG completed EUR 3 million of acquisitions in Q1 2018, but was more active in disposals (EUR 19 million) as CPIPG continues to optimize the portfolio and focus on our core markets.

Key events occurring after quarter-end include:

- In April 2018, S&P Global Ratings assigned a new "BBB" long-term rating to CPIPG.

- In April 2018, Moody's Investor Service changed the outlook on CPIPG's Baa3 rating from stable to positive.

- In April 2018, the Group completed the acquisition of Futurum Shopping Centre in Czechia and five retail parks in major cities of Poland.

- In April 2018, CPIPG's primary shareholder contributed EUR 50 million of capital to CPIPG by subscribing to new ordinary shares.

- In May 2018, CPIPG issued EUR 550 million of undated subordinated "hybrid" notes, which are treated as equity under IFRS and receive 50% equity credit from Moody's and S&P. CPIPG was the first corporate issuer from the CEE region to complete such a transaction.

- In May 2018, the Group completed the acquisition of Atrium Centrum and Atrium Plaza office buildings in Warsaw, Poland.

FINANCIAL HIGHLIGHTS

STATEMENT OF COMPREHENSIVE INCOME

The income statement for the 3 months period ended 31 March 2018 and 31 March 2017 is as follows:

Net rental income

Net rental income increased by 24% to EUR 67 million, compared to EUR 54 million for the first three months of 2017. The increase in gross rental income (GRI) was attributable to acquisitions (including CPIPG's largest-ever acquisition from CBRE GI, completed at the end of March 2017) and strong like-for-like growth in our core geographies. Higher GRI was partially offset by increased property operating expenses as CPIPG continues investing in our properties to improve occupancy and rents.

Developments sales

Development sales in 2018 and related cost of goods sold (both slightly exceeding EUR 7 million) represent the sale of two appartments from Palais Maeterlinck project.

Net Hotel income

Net Hotel income was EUR 3 million for the quarter, compared to EUR 2 million for the first three months of 2017. We continue to see positive trends in our congress hotels, resorts, and city hotels.

Net income from other business operations

Net income from other business operations in both 2018 and 2017 relates to agriculture (EUR 0.4 million in 2018) and mountain resorts (EUR 7.4 million in 2018).

Administrative expenses

Administrative expenses increased by EUR 1.9 million primarily due to one-off costs.

Other net financial result

Due to the ongoing CZK appreciation against EUR, the Group has incurred in 2018 a non-cash FX loss of EUR 9 million predominantly related to EUR denominated assets in the Czech Republic. Unrealized FX losses are a non-cash item in our income statement and are offset by an increase in our translation reserve with positive impact on our equity.

Interest expense and interest income

Interest expense was roughly unchanged (EUR 1 million higher) relative to 1Q 2017, however the total balance of debt as of 1Q 2017 was only EUR 3.3 billion relative to EUR 3.5 billion at 1Q 2018. Interest income increased by EUR 2.5 million primarily as a result of new loans provided by the Group (mainly at the end of 2017) to a related party.

BALANCE SHEET

Total assets and total liabilities

Total assets increased by EUR 104 million (1.4%) to EUR 7,633 million as at 31 March 2018. The predominant driver of this growth was the increase of cash and cash equivalents which grew by EUR 65 million (27%) to EUR 304 million as at 31 March 2018 and the increase of investment property by EUR 28 million (0.5%) to EUR 5,836 million primarily due to the ongoing investments in our properties to improve their performance.

Total liabilities were EUR 4,426 million as at 31 March 2018 which represents an increase of EUR 212 million (5%) compared to 31 December 2017. Drawings under CPIPGs revolving credit facility and the refinancing of Quadrio in Prague were key contributors. Because of the Quadrio refinancing, CPIPG's ratio of unencumbered assets to total assets declined to 40% from 43% at year-end-2017. However, CPIPG continues to prioritize unsecured financing and refinancing and intends to further increase the level of unencumbered assets over time.

Bonds issued and financial debts

An increase in non-current Bonds issued by EUR 116 million relates to the adjustment of the covenants in our CPI BYTY bonds programme. This was offset by a decrease in the current part of Bonds issued.

NAV AND EPRA NAV
Total equity decreased by 3.3%, from EUR 3,315 million as at 31 December 2017 to EUR 3,206 million as at 31 March 2018. The main elements impacting equity were:

- a decrease in equity due to share buy-back programme (EUR 145 million);

- an increase by EUR 24 million (profit for three months of 2018);

- an increase by EUR 9 million in translation reserve, reflecting CZK appreciation towards EUR.

EPRA NAV was EUR 3,824 million as at 31 March 2018, a decrease of 2.8% relative to December 2017.

For further information please contact:

INVESTORS                                  MEDIA/PR
David Greenbaum                         Kirchhoff Consult AG
Chief Financial Officer                   Andreas Friedemann
CPI Property Group                       Herrengraben 1
d.greenbaum@cpipg.com             20459 Hamburg
                                                      T +49 40 60 91 86 50
                                                      F +49 40 60 91 86 60
                                                      E andreas.friedemann@kirchhoff.de

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