CPI PROPERTY GROUP – Financial Results for 2020

“CPIPG’s high-quality and diversified portfolio was well-suited to a challenge like COVID-19,” said Martin Nemecek, CEO. “Our portfolio continued to grow, rents increased and rental collections were high while occupancy and valuations remained stable.”

Highlights of the 2020 financial year include:

- CPIPG’s property portfolio increased to €10.3 billion (up 13% versus 2019) as the Group completed €1.2 billion of acquisitions (primarily 6 offices in Warsaw and a 29.6% stake in Globalworth) and continued a moderate pace of capex and development.

- Total assets increased to €11.8 billion (up 11% versus 2019), driven by increases to the property portfolio, offset by a slight reduction in cash and cash equivalents.

- Net rental income increased to €338 million (up 15% versus 2019) due to office acquisitions and resilient rent collections, broadly stable occupancy at 93.7% and 0.8% like -for-like growth in gross rental income.

- Because of sharp cost control, the hotel segment reported only a small net loss despite hotels being closed for much of 2020. CPIPG’s net hotel income averaged about €40 million in 2018 and 2019, and the Group believes that travel will recover as vaccinations are rolled out.

- Consolidated adjusted EBITDA increased to €338 million (up 16% versus 2019), due to the increase in net rental income, the contribution from recent acquisitions and the impact of cost reductions, which combined to more than offset the reduction in hotel income.

- Net business income (down 0.2% to €344 million) and FFO (up 1.3% to €222 million) were stable, demonstrating that CPIPG continued to generate substantial income and cash even during the COVID-19 pandemic.

- Year-end property portfolio valuations were slightly positive on an asset-by-asset basis, but slightly negative including FX impacts, with higher valuations in offices and residential offset by slightly lower valuations in retail and hotels.

- The Group collected 95% of contracted rent in 2020 before the impact of one-time COVID-19discounts (less than 4% of Group gross rental income), and 99% including discounts. Collections in office and residential were close to 100%.

- EPRA NRV (NAV) was unchanged at €5.1 billion.

- Net Loan-to-Value (LTV) at 40.7% and Net ICR at 5.4x reflect an increase in net debt related to acquisitions, but remain in line with the Group ́s financial policy. Actions taken by the Group reduced Net LTV by 1.8 p.p. at the end of 2020 compared to the end of the first half.

- Unencumbered assets remain high at 70% (unchanged versus year-end 2019).

- During 2020, the Group issued nearly €1.3 billion equivalent of senior unsecured bonds across Euros, Sterling, Hong Kong Dollars and Hungarian Forint. CPIPG also issued subordinated “hybrid” bonds of €0.6 billion equivalent in Euros and Singapore Dollars and signed secured loans of close to €0.4 billion. Proceeds from external financings were partially used for acquisitions and to repay more than €1.2 billion of senior unsecured bonds, Schuldschein and hybrid bonds maturing in 2022, 2023, 2024 and 2025.

- In November 2020, the Group improved its liquidity position by signing a new €700 million revolving credit facility which expires in 2026, replacing the €510 million three -year facility arranged in 2019.

- Together with the new revolving credit facility, CPIPG’s total available liquidity stood at €1.4 billiont at the end of 2020.

“Our strategy, portfolio and team passed many tests during COVID-19,” said David Greenbaum, CFO. “CPIPG is a better, stronger, wiser company in 2021 and we look forward to a post-COVID world.”

Notable events occurring after the end of 2020 include:

- In January 2021, the Company issued €650 million of 10-year senior unsecured bonds and €400 million of hybrid bonds callable in 2028. The proceeds were used to repay more than €750 million of senior unsecured bonds, Schuldschein and hybrid bonds callable or maturing in 2022, 2023 and 2024.

- In January 2021, a mandatory tender offer was concluded to acquire the remaining shares in Nova RE SIIQ S.p.A. (“Nova RE”). A total of 9,348,018 shares were tendered for a consideration of €2.36 per share and a total value of €22.061 million. Following the mandatory tender offer, CPIPG held in total 20,360,573 ordinary shares of Nova RE, approximately 92.44% of the relevant share capital (or 92.62% including treasury shares).

- In February 2021, CPIPG repurchased a total of 641,658,176 shares tendered by shareholders for an aggregate amount of €395.261 million (€0.616 per share). About 94% of shares were tendered by CPIPG’s primary shareholder, Radovan Vitek (350,500,000 shares) and CPIPG’s subsidiary CPI FIM SA (252,302,248 shares), together with management and third parties. Mr.Vitek used the proceeds received from the share repurchase to repay loans to CPIPG. The tendered shares were cancelled by the extraordinary general meeting of the shareholders held on 31 March 2021 (the “EGM”). The EGM resolved to decrease the corporate capital to EUR 801,005,815.50 represented by 8,010,058,155 shares and to approve the related modifications of the Company’s articles of associations.

- In March 2021, CPIPG acquired 27 Savile Row in Mayfair, London. Recently decommissioned as London’s West End Central Police Station, the property was purchased by CPIPG from the Police following a competitive process. With a prime location nearby Bond Street tube station, 27 Savile Row provides over 60,000 square feet (about 5,500 square meters) of space over nine floors. CPIPG sees a clear opportunity to reposition 27 Savile Row as an office, residential, or mixed-use scheme in-line with the building’s heritage and prime location.

- InMarch2021, CPIPGannouncedchangestotheGroup’senvironmentalstrategyandtargets.CPIPG’srevised target is to reduce GHG emissions intensity by 30% by 2030 versus baseline 2019 levels (across all scopes 1-3). In support of this objective, the Group has also committed to transition all electricity purchases by the Group to 100% renewable sources by 2024. Based on analysis undertaken with our external consultants CI2 and University Centre for Energy Efficient Buildings CTU in Prague, the Group’s new GHG reduction target would align CPIPG to Paris Agreement climate goals to limit the global temperature increase to well-below 2 degrees centigrade versus pre-industrial levels.

Update on rental collections in Q1 2021

  ̶ The first few months of 2021 have seen continued challenges for the hotel and retail sectors. On the other hand, CPIPG sees positive signs in gradual vaccination rollouts across Europe and believes that pent-up consumer spending and appetite for travel will power an eventual recovery.

- In the first two months of 2021, rental collection rates appear to be following similar trends to 2020. Initial rent collection rates are nearly 90% for the Group, and are expected to rise over time. Office, residential and logistics segments were normal, while initial retail collections were about 72% before discounts. CPIPG expects that retail rent collections will continue to be aided by government support and the overall strength of our tenants, who remain in sound financial position despite COVID-19.