O1 Properties announces annual financial results for 2016

May 4, 2017. O1 Properties Limited (“O1 Properties” or the “Group”), one of the largest owners of Class A office properties in Moscow, has announced its annual financial results for 2016.

 

2016

(USD mln)

2015

(USD mln)

Net rental income

284

325

EBITDA

264

307

Monetary interest expense

208

198

Investment property

3,675

3,699

Total assets

4,242

4,282

Equity

995

1,075


The O1 Properties Group’s net rental income decreased by 12.7% in 2016 compared to 2015, amounting to USD 284 million. This decrease was mainly driven by adjusting rents to market levels, often in exchange for lease term extension. The Group believes it has completed adjusting rent levels with major tenants as a result of the economic downturn that started in 2014.

The value of the O1 Properties Group’s investment property portfolio decreased by USD 24 million, mainly as a result of a combination of the above described market correction and the Group’s acquisitions in 2016.

At the end of the reporting period, the occupancy rate at the office centres owned by О1 Properties (excluding development projects) was 88%, which was higher than the average market occupancy rate of 82% for a similar class of properties in Moscow. As in previous years, the Group’s key tenants included leading national and international companies.

О1 Properties’ net debt amounted USD 2.8 billion, compared to USD 2.7 billion at the end of 2015. The main reason for the net debt increase was a revaluation of the Group’s Russian rouble bonds (the Russian rouble appreciated 17% over the year 2016). The Group’s cash interest expense on loans, excluding one-off and overlapping interest expenses, amounted to USD 208 million, compared to the 2015 level of USD 198 million.

In September 2016, the Group successfully placed Eurobonds in a principal amount of USD 350 million with interest rate of 8.25% per annum, followed by another successful USD 335 million USD-denominated bond placement with interest rate of 7% per annum on the Moscow Exchange. The proceeds from both placements were mainly used to repay the Group's financial liabilities. 

Both bond issuances are in line with Group’s mid-term strategy to optimize and lower cash interest expense. The Group estimates that the bond issuances and negotiations with lenders will result in annual cash interest savings of USD 27 million, or 13% compared to 2016.

The weighted average interest rate on the Group's debt for 2017 is expected to be 6.7%, including hedging costs and benefits. The weighted average term of the Group’s banks loans has improved from 4.1 years at the end of 2015 to 4.7 years at the end of 2016. The Group's net LTV ratio was 67% at the end of 2016.

The O1 Properties Group’s total comprehensive loss for 2016 amounted to approximately USD 80 million (compared to total comprehensive loss of USD 177 million in 2015), which was mainly driven by cash positive results (net rental income less cash interest expense, administrative expenses and income tax paid plus net other income and expenses) in the amount of USD 77 million, adjusted by unrealized foreign exchange losses on revaluation of Russian bonds of USD 64 million and negative revaluation of investment properties in the amount of USD 84 million.

Tomasz Zamiara, Chief Financial Officer of О1 Properties, commented: "Given the better market sentiment we’ve observed for the last 9 months, we believe the Group has achieved market rental levels as adjusted for the economic turbulence that started in 2014. We managed to compensate for the drop in rental levels by adjusting our cost of funding to levels that we believe are now market levels. In 2017, the Group will target reaching one-digit vacancy levels and continuing to decrease its cost of debt through debt portfolio restructuring activities similar to 2016. At the same time, we have noticed increased interest in Russia from potential foreign, equity investors, which is very good sign for the market.”

 

 

Note on forward-looking statements

Certain statements in this announcement are not historical facts and may include prospects, statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties. These forward-looking statements may be identified by words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue” and other similar terms and phrases, including references to forecasts of future cost savings, vacancy levels, transactions, results and economic conditions. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance, and the actual results of the Group’s operations, financial position and liquidity, and the development of the markets and the industries in which the Group operates, may differ materially from those described in, or suggested by, the forward-looking statements contained in this announcement.

The Group disclaims any obligation or undertaking to update any information or forward-looking statement contained in this announcement, whether as a result of new information, future events or otherwise.

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