WOOD Flash – CTP: 2Q23 – recurring in line, FFO guidance reiterated, leasing backdrop supportive, LTV contained
Despite the softer economic backdrop, the leasing demand for modern logistics space in CEE remains robust, driving rental growth above inflation. The new leases that CTP closed in 1H23 were priced c.12% above the leases closed in 1H22. At 45.9%, the LTV is a touch above CTP's 40-45% target range, but well below the level of c.50% – this is, roughly, where we would see a risk that CTP may need to slow the development activities. The growing rents continue to offset the impact from yield expansion and, together with the development pipeline, they continue to generate revaluation gains (c.EUR 200m in each of 1Q and 2Q23). CTP estimates that the construction costs have come down some 10-12% yoy (to around EUR 500/sqm, excluding land), and it expects to develop new space at a yield on cost of around 11%, going forward. This is a huge spread over the cost of funding – thanks to pre-agreed swap lines, even the loans that CTP has been closing in recent weeks and months were still priced at around 4.5-5.0%. Additionally, with a wide spread over the fair value yields, the development pipeline continues to be hugely NAV accretive. CTP, which grew its net rental income by over 30% yoy in 2Q23 (the rental uplift and expansion via developments), plans to complete at least 1m sqm of new GLA this year. The company is on track to reach its 2023E FFO guidance (EUR 0.72/share, a c.5.8% yield on the current share price). The FFO is likely to reach EUR 0.80-0.85/share next year (a 6.5-6.9% yield), in our view, depending on the magnitude of new developments.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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