Annual Report 2020

I think we can all say 2020 was one of the most challenging years we’ve ever experienced. But as often happens in difficult times, people have become more open to new ideas.
Message from Marian Herman

Herman
Perhaps one of the most obvious signs of this is the broader faith employers have in their people working from home. What was once considered a prized job benefit is now growing to become a modus operandi of the way we all operate.
A new approach to the office?

This has unquestionably accelerated a change in the way we think about workspaces. Offices are evolving from rows of desks to collaborative spaces with productivity-boosting features. And businesses will need more flexibility in terms of usage, size and lease terms.

Yes, the pandemic has affected occupational activity. Tenants have put off decisions until the future is clearer, and rental levels are under pressure as a result. However, we expect to see a full recovery in the medium term. So, while transactional and financial liquidity are under pressure, the long-term fundamentals in the sector remain solid.

Facing up to COVID-19

Our employees have been our first priority throughout the pandemic. Yet, even as we embedded new safety and escalation protocols – across both sites and offices – we kept all 11 of our buildings under construction moving smoothly forward.

The only delays were down to supply chain issues. This meant we were able to complete five buildings during the year and saw huge success in terms of commercialisation, despite the challenging environment. We also secured 100% funding for all our projects under construction – they’re now all covered for full completion.





Success across Europe

There were other highlights too. In Hungary, we leased over 90% of Agora – and have since seen Huawei sign a large deal. And Bratislava saw progress on all our projects under construction, from Nivy Mall to New Apollo – with the latter signing an important global anchor tenant IBM in February of this year.

Varso Tower in Warsaw is now the EU’s tallest structure at 310 m and offers new tenants an address in one of the world’s most iconic new buildings. Elsewhere in the city, one of Forest’s buildings was smoothly completed, and we’ve since signed a contract with French home improvement business Leroy Merlin, who’ll make it their new 12,358 sq m HQ.

leased over

90%

of Agora, Hungary

Leroy Merlin signed a contract with

12,358
sq m

Our UK colleagues are continuing work on Bloom Clerkenwell in London. With finance secured, we expect the occupational market there to take off once the restrictions are lifted. Equally, we now have all the permits for One Waterloo, – huge congratulations to the team – and as the market stabilises the demolition phase will begin. The fledgeling One Worship Square project is now ready to see more concentrated activity over the coming months too.

Things are also moving forward at speed in Germany. Our DSTRCT.Berlin project is progressing according to plan and several large leasing deals should be pushed through shortly. One of them, e-commerce furniture brand, home24, take more than 13,000 sq m in May 2021.

Although 2020 saw a net loss of €184 million and our NAV as a result declined to €1.514 billion, we confidently expect to capitalise on our development pipeline across all four markets and use new business opportunities to help us get fully back on track.
Looking forward

The year brought changes to our business strategy. We discontinued our future development activities in Hungary to focus on our projects in London, Berlin, Warsaw and Bratislava.

The year brought changes to our business strategy. We discontinued our future development activities in Hungary to focus on our projects in London, Berlin, Warsaw and Bratislava.

1.

to concentrate on our
four core countries

2.

retain completed projects in a soon-to-be-created separate investment vehicle rather than sell them

3.

evolve our Workspace
as a Service portfolio

4.

roll out the Way We Work (WWW) initiative, which helps us efficiently run projects with clear expectations

A bright future

Financially, we are now very well positioned – especially after raising €90m by tapping into the bond markets in the Czech Republic, Poland and Slovakia from December to March 2021.

Our key 2021 targets now revolve around replenishing our development pipeline, mainly in Germany and Poland, and founding the REIT vehicle, which will hold our completed developments. We also expect our Investment Management business to grow the assets under management, mainly through its flagship CE REIT fund.

Going forward, we’ll continue building our core development business by focusing on high-quality modern workspace products: super-prime core, well-connected locations crafted with exceptional quality and sustainability standards to create healthy, stimulating and modern workspaces.

The function of the workspace will innovatively shift from desks and chairs towards collaborative, healthy workspaces and supportive environments. So our strategy, with wellbeing and productivity at its heart, will garner positive results.

In fact, the topic of responsibility and the overall ESG policy is a pivotal part of our value creation and product development. We have incorporated ESG into our development process, making it a key component in ensuring our products comply with today’s standards. We aim to become market leaders in this area by securing future- proof developments.

Although occupational activity last year was restricted due to COVID-19, we are already seeing a gradual return to normal, with leasing activity picking up at the beginning of 2021 – a strong sign for healthy demand in the future.

We are also seeing the results of our well- established focus on wellbeing and productivity. Clients associate us with people-centrism, and this gave us a competitive advantage during and after the pandemic.

Of course, success depends completely on our people. To that end, we have created a new mentoring programme that launches later this year. And, following research, we have also adjusted how we set goals and recognise performance – putting more weight on variable rewards. The result is that we all are now even more invested in the success of HB Reavis.

Let me finish by thanking all of my colleagues and our partners for their commitment. I’m in awe of the way they’ve balanced the demands of home life and work over the last 12 months while delivering such great performance.

I very much look forward to seeing what we can all achieve together – and seeing the progress in person – when all the restrictions are lifted.

I’ve been associated with HB Reavis for some 13 years now, but I’ve never been more proud to be part of the company.

Maarten Hulshoff

Maarten Hulshoff

8 01 That’s us It’s at times of pressure that the quality of our people really shines through. And over the last year, I’ve seen so many among us manage our business in a proactive, hands-on manner – always keeping our clients’ interests at the forefront of our minds.

Naturally, most clients spent the majority of the year dealing with the COVID-19 crisis. Ultimately, this led to some delayed office moves – a situation compounded by larger companies releasing space and creating a new market for subleases. However, companies were generally positive about the long-term situation, with many enquiring how we can help them improve productivity and efficiency.

This was primarily down to the great strides we’ve made with our Workspace as a Service (WaaS) strategy. During 2020, we focused further on providing advisory services to our clients – enhancing employee satisfaction, productivity, health and wellbeing on one hand, and raising sustainability standards on the other.

In fact, environmental, social and governance have been at the top of our agenda. Last year saw the introduction of a new strategy and set of principles that will help to create a further point of difference in the market.

Its ethos is reflected in the work of services like Symbiosy and Origameo. These were already established, but will now become even more important as we look to the future. Increasingly, we will move from hard-core office development to an approach centred around soft and motivational people issues – combining stimulating office environments with innovative technologies that create a hybrid form of working that improves the employee experience.

As for the office developments themselves, we will be even more selective and, what I like to call, laser-beam focused on developing prime properties. Making decisions based on location, connectivity and sustainability, these will become the best possible environments for our clients and their employees.

Effectively, I expect to see an evolution from being a pure developer recycling our capital by exiting our projects, to a more selective and focused developer that creates then holds onto assets for a long time.

n Bratislava, where the company was originally established, we will also start to diversify with some residential development opportunities.

At the end of 2020, our development portfolio, all located at vital transport crossroads, added up to some 1.1 million sq m. Around 44% of this is in London (market value on completion), with the most eye-catching scheme at One Waterloo – next to the UK’s busiest station, handling over 92 million visitors a year.

Financially, the year was not as rewarding as we hoped. Our clients went through difficult times staying safe and managing employees at a distance. This led to uncertainties that resulted in the demand for leases stagnating, and in some cases longstanding deals were cancelled or postponed. Agora, however, was an impressive exception, leasing almost 71,000 sq m.

Overall, we managed to keep construction going despite supply chain disruptions, but increases in the price of materials did lead to a few cases of cost overruns. As a result, we do have a leasing backlog.

What is positive, however, is our impressive performance in Q1 2021. It’s clear that businesses feel the end is in sight and want to make ambitious decisions so they’re best-placed to succeed in the long term.

We’re grateful for all the support and patience given from our stakeholders, including our clients, financiers, suppliers and our own staff.

There’s no doubting that our staff spent 2020 under pressure, dealing with both work and family dilemmas.

Yet I have been constantly impressed by their resilience, and want to complement everyone for coping so well in spite of the challenges we all faced.

Financial Highlights

02

How we
performed

In 2020,

our financial performance
increased robustly
and outperformed our
long-term target.

How we performed The pandemic situation has significantly impacted the real estate sector. Leasing activity has recorded its lowest volumes in a decade. Deferrals of future rental income linked to our under-construction portfolio has been driving the fair market values, translating into net revaluation gains in 2020 of €28.7m (€519.4m in 2019).

In connection with a depreciation of CEE currencies and FX losses of €110.2m (compared to €22.7m profit in 2019), this resulted in a comprehensive loss of €183.8m (€388.6m in 2019).

Despite the macro situation, the Group managed to keep the construction activities going while securing debt financing to maintain progress on developments. The balance sheet value has grown to €3,097m (€3,040m in 2019) due to debt deployment, bringing the net debt ratio level to 38.2% (32.4% in 2019), within our targeted range of 35–40%.

Net Debt Leverage Ratio (%)
2019
32.4
2020
38.2
Return to Shareholders (%)
2019
33.3
2020
-11.6
Comprehensive Income (€m)
2019
388.6
2020
-183.8
Revaluation Gain (€m)
2019
541.5
2020
-41.2
(incl. the translation of foreign operations to the presentation currency)
Net Asset Value (adjusted, €m)
2019
1,738.6
2020
1,513.8

One Waterloo

Location

Waterloo, London

Estimated GLA*

122,510 sq m
1,318,689 sq ft

Architects

AHMM


Status

Consent

Estimated GDV

€2.443bn
£2.196bn

Expected Certifications

WELL Core Platinum,
BREEAM UK New Construction Outstanding,
WiredScore Platinum

Note: The estimated GLA/GDV and delivery of the project are subject to the successful closing of acquisitions, permitting, construction delivery and commercialisation.

One Waterloo, in the heart of the South Bank, is our largest project in the UK to date. After 22 Bishopsgate, it’s also the largest office single build in Central London’s history.

The 122,510 sq m/1.3 million sq ft redevelopment of what is currently known as Elizabeth House will be an inclusive, wellbeing-focused environment for 11,000 workers – from startup and scale-up businesses to larger organisations.

This iconic and vibrant multi-purpose destination is located next to Waterloo Station – the busiest in the capital, supporting 180 million journeys each year.

And it will be a prominent scheme influenced by connected themes: the neighbourhood, nature and health, sustainability and future workspace – all underpinned by the user and visitor experience.

Targeting WELL Platinum with a focus on health and wellbeing, three acres of outdoor space will be created within One Waterloo to support the office workers and the wider community. A publicly accessible 200 m long garden promenade which is elevated two floors above street level will create a scenic journey from the concourse level at Waterloo Station directly into the building.

Victory Arch Square, the uniquely covered Waterloo Square and ‘The Curve’, a major new pedestrianised retail street lined with shops and cafés, will transform the public realm. Cascading terraces and gardens for office occupiers will provide a choice of outdoor spaces to find the right place to relax and rest. Additionally, an urban sky farm will offer ultra-fresh produce for the scheme’s occupiers.

With aspirations to be one of London’s most sustainable developments, the office space will be fossil fuel free, implementing low carbon solutions in all the project stages. We are targeting net zero carbon in operation too with over a 35% reduction in energy consumption through a ‘Lean, Clean and Green’ innovative building design by specialist Swedish designers that maximises efficiency through an all-electric solution combining integrated heat pumps and heat recovery. In addition, 98.8% of demolition waste is to be diverted from landfills. These initiatives, among others, will support the building in achieving BREEAM Outstanding.

Since our possession of the vacant offices at Elizabeth House in April 2020 and throughout the COVID-19 lockdown, we have provided ongoing support to the ground floor retailers to help the local business community, in particular by providing free car parking for NHS staff at Guy’s & St Thomas’ Hospital.

Bloom Clerkenwell

Location

Clerkenwell, London

Estimated GLA*

13,274 sq m
142,884 sq ft

Architects

John Robertson Architects


Status

Under construction

Estimated GDV

€260m
£234m

Expected Certifications

WELL Core&Shell Platinum,
WELL Health-Safety Rating,
BREEAM UK Nes Construction Outstanding,
WiredScore Platinum

Note: The estimated GLA/GDV and delivery of the project are subject to the successful closing of acquisitions, permitting, construction delivery and commercialisation.

Bloom is ideally positioned within the vibrant Clerkenwell neighbourhood and in close proximity to the City of London.

It’s also situated adjacent to the newly built Farringdon Station, giving it optimum connectivity. Currently, the station serves overground Thameslink trains as well as District, Circle and Hammersmith and City Underground Lines. And with the forthcoming opening of the Elizabeth Line, a quarter of the UK population will soon be within a 45-minute commute.

John Robertson Architects designed the building to meet the highest standards of office wellbeing, catering to a variety of businesses that truly value the importance of having a well-designed and sustainable workspace where employees can thrive. The design of the building reflects the rich and varied context of Clerkenwell and nearby Hatton Garden, with a unique coloured, glazed terracotta façade.

Bloom Clerkenwell offers direct access to London’s Cycle Superhighway along with 243 cycle spaces, a 110 sq m (1,200 sq ft) multi-function training studio and more terrace space than any other office building of its size in London– helping to move the working day beyond the desk. It’s also connected to the thriving Clerkenwell neighbourhood through an activated ground floor public retail offering.

Testament to the quality of the building, we are aiming for Bloom to be among the first buildings in London to achieve a combination of BREEAM Outstanding, WiredScore Platinum and WELL Certified Platinum ratings.

Its sustainability credentials are enhanced by its use of a neighbouring district’s heating and cooling system, Citigen, which removes the need for high carbon energy-producing boilers and chillers on-site.

The building is targeting completion in June 2021, when it will become owner operated. Our new Ready to Work office space concept will be featured on the first floor, fully integrated with the Symbiosy platform. Companies choosing the Ready to Work offer will benefit from a tailored approach to workspace design, reduced upfront capital expenditure and a flexible approach to leasing.

One Worship Square

Location

Shoreditch, London

Estimated GLA*

12,836 sq m
138,165 sq ft

Architects

MAKE Architects


Status

Planned

Estimated GDV

€242m
£217m

Expected Certifications

WELL Core&Shell Gold,
WELL Health-Safety Rating,
BREEAM UK Nes Construction Excellent,
WiredScore Platinum

Note: The estimated GLA/GDV and delivery of the project are subject to the successful closing of acquisitions, permitting, construction delivery and commercialisation.

One Worship Square is ideally located in Shoreditch, in the heart of London’s Tech City. It’s only minutes from Old Street, Liverpool Street, Moorgate and Shoreditch High Street Stations – together serving 200 million journeys a year. The neighbourhood is also one where creative entrepreneurs want to work, and where growing companies want to be.

The building’s eye-catching design and blue façade will create a recognisable local landmark with a distinct identity. The 13,000 sq m/138,000 sq ft of floor space spread over nine storeys will be a mix of high-quality communal, collaborative and flexible spaces to suit the everyday needs of occupiers and their business activities. The ground floor lobby will open directly onto a new public square and feature a café and retail spaces.

The project is HB Reavis’ first London building designed for the post-COVID world, with fully integrated office and space management technology powered by Symbiosy.

Flexibility, sustainability, technology and wellbeing create a future-proofed workspace designed for employees first.

One Worship Square will be managed using a native app and in-house concierge teams. The app will give occupiers access to food delivery, laundry services and environmental and recycling monitoring data. The building will also please socially conscious employees: it will be net zero carbon in operation and a plastic free workspace. Just as well, the lobby will be a green heart of the building, featuring biophilic design and digital displays showing environmental and sustainable indicators.

The site was purchased with planning consent, but we’ve redrawn plans to include more outdoor terrace space as well as cycle storage directly on the ground floor.

Targeting WELL Platinum, the highest certification for wellbeing, the design includes a fitness suite for employees as well as free rentable bikes and e-scooters for those dashing to a meeting. One Worship Square will also sit on a new public square, available for employees and the public to use year-round. The aim is to host events there too, from a weekly food market to summer ‘big screen’ days, to create a lively and sociable space in addition to the project’s outdoor terraces.

Its high-quality design reflects the personality and creativity of Shoreditch and London Tech’s City. Designed by MAKE Architects, it’s scheduled for completion in 2023 with plans to start on-site in 2021.

DSTRCT.Berlin

Location

Landsberger Alee, Berlin

Estimated GLA*

48,535 sq m
522,426 sq ft

Architects

Gewers & Pudewill


Status

Under construction

Estimated GDV

€399m
£358m

Expected Certifications

WELL Core&Shell Gold
DGNB Gold
WiredScore Platinum

Note: The estimated GLA/GDV and delivery of the project are subject to the successful closing of acquisitions, permitting, construction delivery and commercialisation.

Work. Eat. Meet... repeat.
There’s a new address tailor-made for Berlin’s creative and tech-led communities. Multipurpose DSTRCT.Berlin is nestled between vibrant Friedrichshain and Prenzlauer Berg. 20 million people travel through a major public transport hub yards away. It’s also only a few minutes from Alexanderplatz and downtown Berlin.

The new building’s modern curves and symbiotic features complement the charm of the former slaughterhouses – the four old halls are being carefully reconstructed to create a multifaceted destination with a new approach to business.

To help the development integrate with the area as a whole, we’ve taken the lead from our neighbours. The nearby Velodrome – the heart of Berlin’s cycling scene – inspired us to include a cycle garage for over 800 bikes. And there are a number of other wellbeing features, including spaces for cultural events and eateries, which combine with the new offices to create a buzzing, cohesive district.

A WiredScore Platinum certification reflects DSTRCT.Berlin’s superior tech capabilities. It also received WELL GOLD Precertification early in 2020, and we’re applying for DGNB Gold status – which will prove DSTRCT.Berlin’s sustainability credentials.

Beyond the benchmarks, the fact we secured a €235m development loan with Helaba proves others believe in our vision. The project is now 100% financed.

The end of 2020 saw a key construction milestone with the ‘topping out’ of the building. With the main structure complete, the focus is now on adding the beautiful glass façade and crafting the interiors. We aim to complete this project in autumn 2021 and hope to announce occupiers in the very near future.

Varso Place

Location

Chmielna Street,
Central Business District

Estimated GLA*

without the viewing
platform and aerial storage:
143,806 sq m/1,547,911 sq ft

Architects

Foster + Partners
HRA Architekci
Benoy


Status

Under construction

Estimated GDV

€399m
£358m

Expected Certifications

BREEAM New Construction Outstanding,
BREAM Core&Shell Gold,
WELL Health-Safety Rating

Note: The estimated GLA/GDV and delivery of the project are subject to the successful closing of acquisitions, permitting, construction delivery and commercialisation.

The three high-rise buildings in central Warsaw that make up Varso Place encompass offices, a hotel and a shopping arcade, and will soon include a public terrace at the top of Varso Tower with views over the city.

The nearby Warsaw Central Station with neighbouring Warszawa Śródmieście and WKD commuter railway support 57 million passenger journeys each year. Both metro lines and several dozen public transport options are within just a few minutes’ walk. It’s also next to the city’s most popular mall – Zlote Tarasy – which sees more than 20 million visitors annually. And as well as both lines of Warsaw’s metro, there is excellent access to several dozen public transport options within just a few minutes’ walk.

Designed by Warsaw-based studio HRA Architekci, the two lower buildings were completed and almost fully leased in 2020.

Varso 1 (29,736 sq m/320,285 sq ft) is home to Poland’s first four-star NYX hotel, which boasts a total of 331 rooms. For fitness enthusiasts, Varso Place’s health centre and two-storey fitness club are already up and running.

Varso 2 (44,264 sq m/476,133 sq ft) has welcomed a mix of Polish and international companies, including Bank Gospodarstwa Krajowego, Cambridge Innovation Center, Orsted, Nvidia, Workday and act BSWW legal firm and a global payments technology company.

Designed by Foster + Partners

Varso Tower (69,816 sq m/751,493 sq ft without the viewing platform) is the centrepiece of this new mixed-use district.

When the roof topped out at 230 metres last year, the building surpassed Warsaw's Palace of Culture and Science to become the tallest building in Poland. And as works continued into Q1 2021, an additional 80-metre-tall spire means Varso Tower reached 310 m to become the tallest building in the European Union.

Varso Tower combines sustainable design with energy efficiency as one of the country’s greenest buildings. It scores highly across all safety, energy and comfort benchmarks, which helped it earn the highest level of BREEAM and WELL certifications.

Most of the buildings around Varso Place are already clad in a 4 m tall glass curtain wall, which provides the interiors with an abundance of natural light. Construction is set to be completed in Q1 2022. When finished, it will be an inviting haven for passers-by, with a tree-filled internal courtyard and 10-metre high lobby walls covered with handmade ceramic mosaics.

Forest

Location

Burakowska, Wola district

Estimated GLA*

79,391 sq m
864,560 sq ft

Architects

HRA Architects


Status

Under construction

Estimated GDV

€292m
£262m

Certifications

BREEAM Communities Very Good

Expected Certifications

WELL Core&Shell Gold,
BREEAM New Construction Excellent

Note: The estimated GLA/GDV and delivery of the project are subject to the successful closing of acquisitions, permitting, construction delivery and commercialisation.

A campus-style environment, Forest offers around 79,000 sq m/864,000 sq ft of workspace, ground floor retail and restaurant opportunities

Public courtyard filled with
200 trees

It’s located between hipster Burakowska Street and Arcadia – Warsaw’s largest mall at 117,000 sq m with 18 million visitors each year. Warszawa Gdanska metro a train station, with 8 million journeys a year, is just a 12-minute walk away.

Perfect for corporate, creative and startup businesses, it will offer the city’s largest floor plate as well as astonishingly flexible office layouts and coworking spaces.

The design maximises resources. Rainwater will be reused to irrigate the landscaping and improve Forest’s carbon footprint. The roofs also feature a community farm, relaxation zones and views of the lush greenery – all of this with the aim of improving the health, wellbeing and productivity of the people who work there.

It’s an approach that helped it become one of the country’s greenest offices, with BREEAM and BREEAM Communities certifications and WELL Precertification.

The first buildings are due to be completed in Q1 2021, with the 120-metre tall Forest Tower ready for the beginning of 2022.


New Nivy



The largest construction site in Europe

A revitalised brownfield that’s set to become the capital’s vibrant new business district, New Nivy encompasses a number of separate developments.

At its heart is an inspirational new international bus terminal, Nivy Station. With Twin City – and WELL Certified Twin City Tower – also creating a new spirit and energy in the heart of Bratislava, New Nivy is already thriving.

For proof, look no further than the BREEAM Communities certification at the Excellent level that New Nivy received last year – making it their fourth-highest rated development worldwide. The unique design standard assesses the impact of developments on their environment with an emphasis on social responsibility. The certification is further recognition of our ability to create people-centric workspaces that enhance local and business communities.



Nivy Station

Location

Mlynske Nivy Street,
New Nivy zone

Estimated GLA*

102,160 sq m
1,099,641 sq ft

Architects

Benoy
Siebert+Talas


Status

Under construction

Estimated GDV

€345m
£310m

Certifications

BREEAM Communities Excellent

Expected Certifications

BREEAM New Construction Very Good

Note: The estimated GLA/GDV and delivery of the project are subject to the successful closing of acquisitions, permitting, construction delivery and commercialisation.

A future-proofed destination, 20 million passengers pass through Nivy Station each year – making it one of the region’s key transport hubs. But it’s the breadth of lifestyle activities offered in one location that elevates its role in the city.

The design draws inspiration from our years of experience, feedback from clients and the latest retail trends. Bratislavians now have a new airport-style bus terminal, over 250 retail outlets, a fully-fledged gastronomic zone and fresh produce market, and a green roof for exercise and relaxation. All within a dynamically developing business zone.





Nivy Tower

Location

Mlynske Nivy Street,
New Nivy zone

Estimated GLA*

32,470 sq m
349,504 sq ft


Architects

Benoy
Siebert+Talas

Status

Under construction


Estimated GDV

€124m
£111m

Certifications

BREEAM Communities Excellent

Expected Certifications

BREEAM New Construction Outstanding,
WELL Core Gold,
WELL Health-Safety Rating

Note: The estimated GLA/GDV and delivery of the project are subject to the successful closing of acquisitions, permitting, construction delivery and commercialisation.

Bratislava’s new 125 m architectural landmark offers innovation, breathtaking views and exceptional flexibility. There’s a direct link to the international Nivy Station travel hub. And smart technologies like the country’s fastest lifts complement signature services like workspace counselling, asset management and flexible leasing to make everyday life simpler.

It’s a stunning space and now officially Slovakia’s tallest office. We hope it will also win both BREEAM and WELL certifications.

Agora Budapest

Location

Vaci Office Corridor

GLA*

71,885 sq m
773,764 sq ft

Architects

Make Architects
Finta Studio


Status

Under construction

Estimated GDV

€280m
£252m

Expected Certifications

WELL Certification

Certifications

BREEAM 2016 New Construction Excellent and Outstanding,
BREEAM Communities Very Good

Note: The estimated GLA/GDV and delivery of the project are subject to the successful closing of acquisitions, permitting, construction delivery and commercialisation.

World-class architects from London and Hungary have worked together to create this new landmark at one of Budapest's busiest transport crossroads.

The Arpad Bridge metro station close by is the city’s fourth busiest with 37 million yearly journeys, and Volan Bus station adds 2 million more.

When completed, Agora will offer a range of community-led facilities. Inspired by local research, they’re designed to improve the productivity and health of everyone around the buildings and provide a rich combination of services that make everyday life easier.

Agora Budapest became the first commercial building in Hungary to receive preliminary BREEAM community certification. Furthermore, Agora Hub and Agora Tower both received BREEAM preliminary certifications – with the Hub matching top performers like Bloomberg’s London HQ and Edge in Amsterdam.

2020 saw major tenants start to move into the buildings. In one of the year’s biggest deals, Raiffeisen Bank now has over 1,300 people spread across Agora Tower in their new headquarters. Their Origameo-inspired workspace is based on data-driven designs and will enhance employees’ collaboration, productivity and wellbeing.

bp also moved in during the summer and, together with their neighbours, are enjoying all the features of this new business district, from the quality cafés and restaurants to conveniences like the supermarket and barbershop.

Group Overview

04

Group
at a glance

€2,766.1m in investment property
1,287,016 sq m developed
1,144,873 sq m under preparation
705 professionals

United
Kingdom

€-7.3moperating profit
€620.5min investment property
36,021 sq mGLA under preparation
153,540 sq mGLA under preparation
64professionals

Germany

€28.2m operating profit
€246.5m in investment property
89,015 sq m GLA under preparation
28 professionals

Poland

€7.8m operating profit
€831.2m in investment property
327,140 sq m GLA developed
189,583 sq m GLA under preparation
140 professionals

Czechia

€-0.7m operating profit
€70.6m in investment property
160,062 sq m GLA developed
124,834 sq m GLA under preparation
22 professionals

Slovakia

€-34.8m operating profit
€667.7m in investment property
670,294 sq m GLA developed
523,799 sq m GLA under preparation
384 professionals, incl. HQ based

Hungary

€14.2m operating profit
€329.6m in investment property
93,488 sq m GLA developed
64,101 sq m GLA under preparation
56 professionals

Luxembourg

5 professionals

Netherlands

3 professionals

Cyprus

3 professionals
Note: Data based on external expert valuations
and internal management reports.
Planned GDV by phase
25% Projects under
construction
4% Permitted pipeline
71% Unpermitted pipeline
25%Projects under
construction
4%Permitted pipeline71%Unpermitted pipeline€6,902m
25%
Projects under construction
4%
Permitted pipeline
71%
Unpermitted pipeline
Market value upon completion by country
44% UK
9% DE
12% PL
7% CZ
25% SK
3% HU
44%(€3,037m) United
Kingdom
9%(€621m) Germany12%(€828m) Poland7%(€483m) Czechia25%(€1,726m) Slovakia3%(€276m) Hungary€6,902m
44%
(€3,037m) United Kingdom
9%
(€621m) Germany
12%
(€828m) Poland
7%
(€483m) Czechia
25%
(€1,726m) Slovakia
3%
(€276m) Hungary
Planned GLA by country
13% UK
8% DE
17% PL
11% CZ
46% SK
5% HU
13%(153,540 sq m) United
Kingdom
8%(89,015 sq m) Germany17%(189,583 sq m) Poland11%(124,834 sq m) Czechia46%(523,799 sq m) Slovakia5%(64,101 sq m) Hungary1.145 thd sq m
13%
(153,540 sq m) United Kingdom
8%
(89,015 sq m) Germany
17%
(189,583 sq m) Poland
11%
(124,834 sq m) Czechia
46%
(523,799 sq m) Slovakia
5%
(64,101 sq m) Hungary
Managed GLA, of total 363,670 sq m
30% HB Reavis Investment
Management
70% HB Reavis Asset
Management
30%HB Reavis Investment
Management
70%HB Reavis Asset
Management
363,670 sq m
30%
HB Reavis Investment Management
70%
HB Reavis Asset Management
Market value by country €1,263m
32% PL
6% CZ
40% SK
22% HU
32%(€404m) Poland6%(€76m) Czechia40%(€505m) Slovakia22%(€278m) Hungary€1,263m
32%
(€404m) Poland
6%
(€76m) Czechia
40%
(€505m) Slovakia
22%
(€278m) Hungary
Managed GLA by country
20% PL
6% CZ
50% SK
24% HU
20%(72,734 sq m) Poland6%(21,820 sq m) Czechia50%(181,835 sq m) Slovakia24%(87,281 sq m) Hungary363,670 sq m
20%
(72,734 sq m) Poland
6%
(21,820 sq m) Czechia
50%
(181,835 sq m) Slovakia
24%
(87,281 sq m) Hungary

Countries Overview

05

United
Kingdom

From the CEO
Looking back at 2020, it is hard to focus on much else other than the pandemic. However, we shouldn’t forget that due to the efforts of our exceptional team in the UK, we started the first few months of last year in a solid position with a positive outlook.

HB Reavis UK had successfully completed the leasing programme of 20 Farringdon Street ahead of valuation, with all of the new customers moved in and enjoying the workspace.

In the same building, we had successfully opened our community-focused coworking space HubHub, which was attracting a wide range of startups, scale-ups and companies wanting to use office space in a new, flexible way. HubHub was exceeding expectations with near full occupancy and significant increases in average desk rates over the year.

Our major project under construction, Bloom Clerkenwell, was making significant progress – under budget, on programme and fully under offer (again significantly ahead of valuation) with a sustainability-focused financing package agreed.

Steven Skinner
Steven Skinner


At Elizabeth House, alongside achieving vacant possession, we had secured the resolution to grant planning consent for what will become one of London’s landmark projects. We were working well through the final parts of the stage 3 design and the development obligations to be able to start works.

We were also continuing to recruit and grow our UK operations.

And with the addition of our One Worship Square project, we had further secured our development pipeline with a strategically-sized and timed project to optimise and transfer our knowledge and learnings from Bloom.

WORSHIP STREET

And then COVID-19 came along, turning the world on its head. We are all too familiar with the impact it’s had on our sector, our business and each one of us personally. As the first lockdown in late March arrived, the business adjusted to working remotely.

We were well positioned to do so, after previously adopting flexible working tools and technologies. Our internal collaboration, external consultant management, planning committees and discussions, pitches and presentations, and supplier relationships all switched to a ‘virtual’ setting – and I’m very proud of how our teams showed both the resilience and adaptability to ensure a seamless transition during a time of unprecedented stress.

The other parts of our business in the UK were also impacted, and none more so than in the leasing market. During the year, as uncertainty grew, we saw many potential occupiers adopt a ‘wait and see’ approach which led to record low levels of take up and a near doubling of the vacancy rate.

Unfortunately, this led to both of our prospective customers at Bloom deciding against relocating their offices and agreeing short-term lease re-gears at their current older buildings. This was a theme seen throughout the London market, with over 3.5 million sq ft of lease expiries pushed out by 2-5 years as occupiers sought optionality. However, given the very limited supply of new space, we have yet to see any material impact on rental levels.

While the overall financial performance of the projects was negatively impacted as a result, our teams worked incredibly hard to mitigate any impacts, and we should not let that be forgotten in all the negativity of the year.

In May, we sold 20 Farringdon Street during the period of total lockdown when there was almost zero liquidity. At that time it was the largest City of London asset to trade. It emphasised both the appeal and liquidity of the high-quality workspaces we develop – especially as the completed price was the highest per sq ft for a building in the City.

At Bloom Clerkenwell, we faced the difficult challenge of deciding if it was safe for our works to continue. To protect our teams and our supply partners, we made the decision to suspend construction for a number of weeks to give time to assess how we could continue to operate safely. Then, following all government guidance we reopened the site with new health and safety measures in place.

I’m especially proud of how our collaborative approach to our supply chain allowed us to jointly agree to suspend all works on-site in a matter of days. The same collaborative approach allowed us to restart the works in an optimised way. We remain on budget and on programme for practical completion in June 2021, when Bloom will be one of the very first buildings globally to target WELL Platinum, BREEAM ‘Outstanding’ and WiredScore Platinum.

For our new One Worship Square project, we effectively assembled a brand-new team and started the project journey remotely. The team spent the majority of the year working on the concept design, focusing on providing a sustainable, flexible, people-focused place of work, supported by smart building technology.

We’re now adding an additional penthouse office floor, introducing a communal roof garden along- side an in-house gym. The development will also feature our affordable and flexible workspace concepts and will be supported by Symbiosy to provide the very best customer experience. We have now secured vacant possession and are preparing to commence construction works in early 2021.

At One Waterloo, we have made excellent progress getting ourselves into the best position for starting major construction works. We successfully achieved vacant possession and concluded our stage 3 design in excess of our target net internal area (NIA) and in line with the cost target.

20FarringsonStreet

We have continued to make progress on the development obligations, concluding the Asset Protection Agreement (APA) with Network Rail and having the agreements with the Secretary of State for Transport and TfL substantially agreed. We also finished the year with the great news that the S.106 (which secures the planning consent) was agreed and is now in the process of being signed.

Last but not least, I think the biggest achievement was by each individual member of our team dealing with all the personal and professional adversity that last year threw at us. I am not sure if I can ever find the right words to express this, but I was just so incredibly impressed and proud of how adaptable and resilient everyone was to getting on with it and getting through it – I can’t thank each and every one of them enough.

A special mention here must go to our site-based teams who have continued to turn up on-site every day despite a global pandemic to keep our projects on track – I salute you.




Looking forward to 2021
We start the first part of 2021 back in a national lock down, but I am filled with cautious optimism. We now have a Brexit deal secured, the most recent lockdown appears to have reduced the number of cases significantly and the UK’s vaccination roll out is moving at great speed. With projections that the majority of the UK population may be vaccinated by the summer, we now have been provided with what will be a permanent plan to exit lockdown and return back to a more normal way of life.

The outlook for the London office market remains robust with low levels of supply of the high-quality workspaces we create – there is currently only 3 million sq ft of space under construction and available with over 9 million sq ft of active demand.

There will remain a temporary period of supply/ active demand imbalance. We expect this to be quickly reversed by year-end as our customers are able to plan for the future with more certainty, and when they return to the market, they will be focused on how their workplace will be used in a more flexible, collaborative and people-focused way – all of which we are well-placed to provide.

Capital markets remain supportive too, with £9 billion transacted in 2020, over half of which was transacted in the final quarter of the year.

With a Brexit deal now in place and over £50 billion of capital looking to invest in London, we are already starting to see some yield compression for highly sought after new office buildings.


We will also continue to explore building our UK pipeline and taking advantage of any market distress, but only as and when we can do so in a financially prudent and sustainable way.

I would like to finish by saying that I have a huge amount of optimism for HB Reavis and our future in the UK. The future success of office developers will rely on businesses that control their own capital, have a deep understanding of their customers and can develop best in class assets with great transport connections that have a clear focus on individual wellbeing, sustainability, flexibility and technology.

We continue to be one of the very few developers that can meet this brief with the added benefit of having a sustainable competitive advantage through our fully-integrated model of design, procurement, delivery and operation. Unlike many of our competitors, this isn’t a reaction to COVID-19 – we have been operating like this for many years and continue to deliver on our promise to create remarkable customer experiences for everyone that uses our projects.

I really do believe we have something special. By challenging the established way of providing workspaces and by doing it in an entrepreneurial and creative way, we can become the leading office developer in London.

So please, do all you can to support each other through these difficult months in order to give us the best chance of success in 2021 and beyond.

Hope to see you all soon and stay safe.




Steven Skinner



The market
The market in London started 2020 with very strong fundamentals: historically low availability, a committed development pipeline of over 50% pre-let, a well-balanced and robust customer demand outlook and both headline and net effective rental values growing.

Following Q1, the majority of the year was spent in varying degrees of COVID-19 restrictions, albeit with some initial easing that was quickly reversed after the summer.

Many companies adopted a wait-and-see approach to their real estate strategy as they adapted to working remotely and then started thinking longer term about how their workspaces would be used. As a result, we saw a total central London office take up of 5.6 million sq ft, which was about a 56% decline on the long-term average of 12 million sq ft.

Of this 5.6 million sq ft, 45% was completed before March and the first of the lockdowns, resulting in the remaining quarters seeing some of the lowest levels of activity ever recorded.


Transaction sizes were also significantly reduced in 2020 with only 10 leases signed for over 50,000 sq ft – which is 70% below the long-term average – and nearly all deals were either concluded or already agreed by the start of the first lockdown.

The amount of active occupier requirements remained somewhat more resilient than the take up figures, with a decrease of around 25% to end 2020 at 5.5 million sq ft compared to 7.7 million sq ft at the end of 2019.

This should be seen in a positive light given there remains a commitment from customers to keep requirements live as well as a large increase in short-term lease renewals of 3.5 million sq ft, which is essentially deferred and not cancelled demand. We remain well placed to capture demand as and when it returns with our established strategy of people, planet and productivity-focused workspaces.

The overall availability of office space has increased substantially over the year to just over 23 million sq ft – the highest levels seen since 2004 with an additional 10.5 million sq ft added in just 12 months.

The majority of this space is second hand, only available in smaller units or in relatively tired buildings on short lease or sublease terms. These offices are less appealing to most occupiers given the ever-increasing focus we’re clearly seeing on new, high-quality workspaces focused on employee wellbeing and sustainability.

More relevant to us is an analysis of availability of new or Grade A space. Here we can clearly see that the available pipeline for the type of workspaces our customers want remains limited. There is currently a peak of 2.4 million sq ft under construction and available for delivery in 2021.

Looking forward, we can clearly see the COVID-19 impact where schemes are being delayed, with only 3.1m sq ft of space under construction and available to be delivered in 2022 and 2023 against the long-term average of 5.8 million sq ft per annum.

As a result, we saw the overall vacancy rate rise from 4% to 8.1%, but with the majority of this coming from the 95% increase in second-hand space. When looking at Grade A vacancy in isolation, the rate has risen only marginally to 2.9% against the long-term average of 2.6%. It is expected that vacancy will peak in 2021 before reducing quickly as transaction volumes recover swiftly for new workspaces and sublet space is withdrawn from the market.

In the context of falling demand and increased supply, prime rents in Central London have been remarkably resilient during 2020, reflecting that where there is customer demand for larger scale, high-quality workspaces the choices remain somewhat limited.

Headline rents declined slightly during the year. Net effective rents came under more pressure, with rent-free incentives increasing as tenants either renegotiated previously agreed deal terms or owners offered more inducements such as deferred lease start dates to secure the few deals available.

Overall, we expect prime rents in 2021 to remain stable. As tenant demand returns, it will continue to pivot into the best-in-class assets. And beyond 2021, we anticipate headline rental recovery before reaching pre-COVID-19 levels by 2023.

Investment volumes totalled £7.5 billion for the year, which was 33% down on 2019 levels and 50% down on the long-term average. Q2 and Q3 were partially weak with limited liquidity during the first lockdown, resulting in the lowest quarterly volume figures on record.

However, as a Brexit deal was formalised and before the new lockdown restrictions post summer, Q4 saw a large spike in volume with £4.3 billion transacted – broadly in line with the Q4 long-term average.

While volumes will clearly be impacted by the degree of travel restrictions in place, investors are clearly looking through the short-term occupational market indicators with a clear focus on acquiring the very highest quality future- proofed buildings with the clear ability to meet their ESG requirements.

There continues to be record levels of international capital targeting London assets of this quality, and coupled with the continued relative pricing divergence from other European gateway cities such as Paris and Berlin, we have seen prime yields remain stable through 2020 and have already started to see some indications of them actually decreasing for certain assets. As a result, we anticipate the outlook for yields is further compression throughout 2021 and beyond.

HB Reavis
Development UK
GLA
sq m
Validation ERV GDV Value Change Investment
2020
2018 2019 2020
Projects under construction 13,274 57.8 151.0 153.6 11.7 260.4 2.6 23.4
Projects in preparation 140,266 246.0 337.4 447.6 122.8 2,763.3 110.2 18.9
Total 2020 153,540 303.8 488.4 601.2 134.5 3,023.7 112.8 42.3
Total Pipeline for 2021 153,540 303.8 488.4 601.2 134.5 3,023.7 112.8 42.3
Changes in UK Development Property Value (€m)
700
600
500
400
300
200
100
0
488.4
42.3
-11.0
81.5
601.2
0.0
601.2
2019
Investment
Yield shift
Accrued profit
2020
Completions
Pipeline 2021

Germany

From the CEO
Well. 2020. What a journey!

Over the course of the year, we organised a couple of very popular bike tours. On these tours, the road could suddenly turn surprisingly bumpy. Similarly, in our business, after several years of relative stability, we suddenly found ourselves in a turbulent environment that heavily impacted our daily operations.

I’m happy to say that the Berlin team coped with the new challenges extremely well. We continued construction on DSTRCT.Berlin without any interruption. The team even grew – to almost 40 professionals.

Marcel Sedlak
Marcel Sedlak


Where some saw the current events as a threat to our market, we saw an opportunity. If companies are to meet their business targets in the coming years, they’ll need high quality and healthy workspaces more than ever.

Therefore, we intensified our acquisition activities in Berlin, and should start to see tangible results in H1 2021.

More and more, HB Reavis is being recognised in Germany as THE provider of modern workspaces driven by wellbeing and technology.

We look forward to 2021 as the year DSTRCT.Berlin is completed. So let me use this opportunity to thank everyone in our Berlin team for their efforts during last year. At the same time, I would like to give huge credit to our growing network of business partners for their trust and close cooperation.

The economy
Germany’s economy hasn’t been immune to the consequences of the COVID-19 pandemic. It affected – in principle – all sectors and put the economy into a recession comparable with the economic and financial crisis in 2008 and 2009. GDP declined by 5% after ten years of continuous growth.

However, in comparison to other countries, the results were better than originally expected. Thanks to the robust flow of government subsidies on many fronts, the country managed to stabilise key economic pillars in the second half of 2020. The federal government expects around 3% GDP growth in 2021.

The federal goverment
expects around
3% GDP
growth
in 2021


Nevertheless, the pandemic has had an impact on the German labour market. 14 years of steady increases in employment ended, with unemployment rising 0.9% to 5.9%. Part-time employees and the self-employed were hit particularly hard.

On the other hand, the government’s broad programme (Kurzarbeit) helped to keep a significant part of the economically active population employed. With the recovery expected to start in the second half of 2021 and throughout 2022, the labour market should return to more positive dynamics before the end of the year.

The market
Despite the pandemic, in general, the German real estate market proved relatively robust in 2020, in terms of both investment and leasing. Transactions totalled €59.2 billion, with over half conducted in the top 7 cities: Berlin, Dusseldorf, Frankfurt, Hamburg, Koln, Munich and Stuttgart. Investment yields remained relatively sharp with midterm forecasts set to strengthen even further.

The office leasing market was mostly driven by uncertainty among tenants, resulting in slower decisions to move or expand operations. Office take-up in the top 7 cities totalled approx. 2.6 million sq m compared to 3.9 million sq m in 2019 – a 35.3% decline.

Once again, the highest take up for 2020 was recorded in Berlin, with a better-than-expected 734,000 sq m total (-28.7% compared to 2019). This still met the 10-year average.


Germany’s office vacancy rate rose from a historic low of 2.9% (2019) to 3.5%. – so office space still remains scarce, especially in Berlin where the vacancy rate remains at a low level at 2.4%.

The significant growth of office rent seen in the last couple of years slowed down in 2020. However, averages still rose in several cities: Berlin 9%, Frankfurt 8% and Munich 7%. In particular, Berlin’s prime rent reached €41.00 per sq m. Only Frankfurt recorded a higher prime level with €45.00 per sq m.

Optimistic signs of recovery as well as GDP growth are expected to gradually translate into positive real estate market dynamics during 2021.

Data sources:

Colliers International
City Survey
Büro- und Investmentmärkte im Überblick 2020/2021 (Top 7 Cities)

Bulwiengesa
https://www.bulwiengesa.de/sites/default/files/bulwiengesa_immobilienindex_pm_2021_dt_0.pdf https://www.bulwiengesa.de/sites/default/files/immobilienindex_2021_0.pdf

Our performance
Our first German project, DSTRCT.Berlin, remained our focus for the whole year. The development team, together with our construction and procurement colleagues, managed to deliver construction and related works according to plan – worth over €50 million.

We continued to strengthen DSTRCT.Berlin’s wellbeing philosophy, enhancing the campus with unique features such as a large-scale bike garage solution, an attractive art concept and extensive greenery.

On the leasing side – with Matthias Goßmann as our new Head of Leasing – we built a robust active pipeline of over 50,000 sq m GLA plus several ongoing leads. These should see further progress in Q1 2021.


Our German pipeline is a key focus for the company’s strategy – and we’re pleased to say our efforts led to two exclusive acquisition negotiations towards the end of the year.

Looking back, 2020 was not lacking business success.

We continued to build on our solid base and developed our team, our portfolio and our partner network to support further growth in the German market.

HB Reavis
Development DE
GLA
sq m
Validation ERV GDV Value Change Investment
2020
2018 2019 2020
Projects under construction 48,535 87.8 167.5 240.3 14.1 398.5 72.8 42.7
Projects in preparation 40,480 4.2 4.5 6.0 8.6 197.8 1.5 0.0
Total 2020 89,015 92.0 172.0 246.3 22.7 596.3 74.3 42.7
Total Pipeline for 2021 89,015 92.0 172.0 246.3 22.7 596.3 74.3 42.7
Changes in German Development Property Value (€m)
300
250
200
150
100
50
0
172.0
42.7
23.0
8.6
246.3
0.0
246.3
2019
Investment
Yield shift
Accrued profit
2020
Completions
Pipeline 2021

Slovakia

From the CEO
It’s natural that I’m not the only one describing 2020 as a year of challenges. There is no industry or single person who was not affected by the pandemic. But despite this, we’ve taken many great steps forward.

We managed to finish the reconstruction of Mlynske Nivy Street, a complex task because of crucial project modifications and dynamically changing restrictions.

On account of COVID-19, we had to postpone the opening of Nivy Station. However, the situation in fact strengthened our relationships with our business partners. We used the additional time to modify some elements of the final project, thanks to which, we look forward to offering a future-proofed project – a real game changer – in August 2021.

The year also brought a change in perspective for offices, where workplaces are no longer seen as just a space between walls. Now, the focus is on employees as human beings rather than numbers in a company’s budget.

Rene Popik
Rene Popik


This has resulted in greater interest in our services, especially Qubes, Origameo and Symbiosy. Our offer of flexibility, effective cooperation and smart technology has made us more attractive to companies looking for healthy, productive spaces that support wellbeing.

It’s proof of our philosophy to build sustainable projects within the city district and great motivation for the future.

Last but not least, I’m very proud of the BREEAM Communities certification at the ‘Excellent’ level we received for the New Nivy zone – the first ever in Slovakia and one of just four worldwide.

The economy
Slovakia is one of the most open export-oriented economies, with close ties to the German economy. Although services account for almost 66% of GDP, it relies on the automotive and electronics industries, which dominate exports.

In fact, Slovakia is the world’s largest producer of cars per capita, with four manufacturers in the west of the country building over one million cars a year. Investors are driven by the availability of the cheap and well-educated workforce and government incentives.

The outbreak of COVID-19 and the consequent slowdown in production and consumption caused GDP to drop 5.1% in Q1 and 12.1% in Q2, rebounding partially with a 2.4% drop in Q3. The estimated GDP contraction for 2020 amounted to 6.3%.


The large volatility in GDP was down to the openness of the local economy, which depends heavily on the demand and performance of its main economic partners, mainly Germany.

The economy is expected to grow by 7.4% in 2021 with a revival from the negative effects of the pandemic. Actual performance will depend on whether there are additional lockdowns and how much demand there is from export partners. Unemployment is expected to grow to 8% from a record low of 4.9% in 2019.

The second wave of COVID-19 continues to hamper the economy. The mass testing programmes that were implemented in early November only brought a temporary drop in infection rates.

Still, the economy continues to fare better than during the first lockdown.

Retail sales dipped 1.2% month-on-month in October but stayed above pre-pandemic levels. Services turnover fell 0.8%, although November likely saw a much steeper fall as lockdown restrictions took their toll on contact-intensive consumption. This is all the more worrying because these areas had still not recovered from the first wave – accommodation and food were 23% below pre-pandemic levels.

Retail sales dipped 1.2% month-on-month in October but stayed above pre-pandemic levels. Services turnover fell 0.8%, although November likely saw a much steeper fall as lockdown restrictions took their toll on contact-intensive consumption. This is all the more worrying because these areas had still not recovered from the first wave – accommodation and food were 23% below pre-pandemic levels.

Confidence in services dropped sharply by 17% to -28.7% in November, but had reclaimed half of the fall by April 2021.

Averaged across all sectors, the economy grew 11.6% in Q3 compared to 2019. Consumption grew by 5.9%, while investment expanded by 9%. Exports grew by 37.2% on the back of strong external demand. This was reflected in a strong Q3 for industrial production, which rose 31.6%.

Overall, the economy remained 2.8% smaller in Q3 relative to pre-pandemic levels, mainly due to a sharp drop in investment in H1. Oxford Economics expects capital expenditure to recover fully only once the uncertainty around the pandemic dissipates.

Industry was set to remain a bright spot during the winter. Following the strong Q3, it rose a further 3.8% month-on-month in October – well above pre-pandemic levels – and entered the latest lockdown with solid momentum.

Unfortunately, consumption was set to drive a fall in Q4 – the contact-intensive services sector was essentially shut down. Consumer confidence remains subdued and, worryingly, unemployment is expected to rise.

On the upside, Q3 data proved that consumers are willing to spend their excess funds once the virus is contained.

Less directly exposed to the pandemic and buoyed by strengthening external demand, industrial production rose 3.6% in October while industrial confidence and volumes of domestic and export order books made solid gains in November.

The market
The changes in global economic activity have not yet impacted H1 investment volumes in Slovakia. Both industrial and office sectors recorded relatively average volumes, comparable with the last three years.

We estimate the market traded around €400 million-worth of space, surpassing the first half of 2019. This relatively high volume, especially in Q1, is a consequence of slipped deals from the end of 2019. In fact, the number of deals actually decreased – but their average size was approx. €50 million, in part due to large industrial transactions.

Volume-wise, the largest office transaction was our sale of Twin City B to one of its investment fund structures. This prime scheme, located in the CBD, is anchored by Swiss Re with an above market standard WAULT. Neighbouring Twin City Tower, mostly leased to Amazon, was acquired by South Korean institutional capital in 2019.


The industrial sector, especially logistics and warehousing, has been increasing its share of overall investment volumes over recent years. The pandemic strengthened this trend.

We expect 2021 to see a number of smaller transactions take place, in particular retail parks. Anchored by a food retailer and boasting the right tenant mix and a strategic location, these assets will prove to be resilient, tradeable and liquid as their KPIs bounce back swiftly following the loosening of pandemic regulations.

Our expectations are that the second half of the year will mostly depend on a few factors such as the likelihood of another COVID-19 wave, macroeconomic data and the economic outlook for 2021.

Resources: JLL, Cushman & Wakefield

Our performance
2020 was quite a challenging year for us as we were delivering the tallest office building in Slovakia with more than 32,000 sq m onto the Slovak market and continued to build a new retail destination with a leasable area of 70,000 sq m. We were also actively managing COVID-19 impacts that had a considerable impact on the real estate and construction environment.

Yet, Nivy Tower has found its place on the market. Our unique strategy, anchored by the Workspace as a Service concept, has been an unmitigated success and proved its value, especially with the service portfolio of Origameo and the new workspace option Qubes providing a fully-serviced and flexible option for SME and corporate project teams.

Nivy Tower has not only become a home for international companies like Resco and CAPCO, but also for startups Akular and Wolt who have settled into the HubHub coworking network. Closed deals for Nivy Tower have reached 14,000 sq m in total in 2020.


With regard to retail leasing, Nivy Station retained 3/4 occupancy though the year, with our leasing team keeping 99% of signed tenants and also acquiring new ones despite the critical situation.

In 2020, we started the demolition of Apollo I and excavation works for a new scheme – New Apollo*. After more than three years of assessment, the New Nivy zone acquired BREEAM Communities certification at the ‘Excellent’ level – making it the first certified area in CEE region.

2020 was also a considerable success for our project team on the revitalisation and reconstruction of 500 metres of important city infrastructure which reopened after two years and a €40 million investment.

* The New Apollo project was as of 31.12. 2020 owned by a related party outside of the Group. The current owner intends for HB Reavis to develop the project and that the ownership will be transferred to the Group during 2021.

HB Reavis
Development SK
GLA
sq m
Validation ERV GDV Value Change Investment
2020
2018 2019 2020
Projects completed 32,470 36.8 107.5 102.6 6.8 124.1 -5.0 6.3
Projects under construction 102,160 120.4 219.7 269.8 22.5 345.1 50.1 60.1
Projects in preparation 421,639 88.8 137.6 142.1 51.7 1,369.9 4.5 5.2
Total 2020 556,269 246.0 464.8 514.5 81.0 1,839.1 49.5 71.6
Total Pipeline for 2021 523,799 209.2 357.3 411.9 74.2 1,715.0 54.6 65.3
Changes in Slovak Development Property Value (€m)
600
500
400
300
200
100
0
464.8
71.6
-14.2
-7.9
514.5
-102.6
411.9
2019
Investment
Yield shift
Accrued profit
2020
Completions
Pipeline 2021

Poland

From the CEO
The global pandemic brought many unexpected situations into the business, and we will be seeing its impact over the long term. We’re putting all our efforts into ensuring we emerge stronger from this crisis.

HB Reavis is well-positioned to face the current crisis given all our Polish projects under construction have committed bank financing in place. Even in the period of immediate uncertainty over the outbreak of the pandemic in Poland, we were able to adapt our response, introduce safety procedures on construction sites and in our offices, and continue works with minor delays.

Strong demand for downtown Warsaw offices meant that most of our new buildings were leased prior to opening, as was the case with our Varso 1 and Varso 2. However, companies are now taking more time to carefully analyse their office needs.

The lockdowns demonstrated that working from home is not an ideal response to every profession or person. People need spaces to focus on work, interact with colleagues and collaborate in a user- friendly environment.

With our tenants continuing to move in and launch their operations in Varso Place in mid- 2020, we focused our More by HB Reavis efforts on their work environment safety. These included contactless technology, designs that allowed for greater social distancing and smart solutions.

Peter Pecnik
Peter Pecnik


One of the elements we provide is our Symbiosy platform, which helps to control work environment conditions and room occupancy, as well as office traffic flow and the distance between users. The pandemic has shown that we were right to make health and wellbeing the focus of our long term strategy and introduce solutions that are now sought after by employers.

The new paradigm accelerated trends in using offices on more flexible terms, all while boosting productivity and being compatible with a work style that involves greater mobility and remote work. At HB Reavis, we are well-equipped to respond with our flexi leasing and coworking offering, providing clients with HubHub and Qubes solutions.

The recent sale of Postepu 14 shows how a strategy built on wellbeing, technology, services and sustainable design increased the resilience of our portfolio, even during something as tumultuous as the COVID-19 pandemic.

I would like to thank each of our employees, clients and business partners for their impressive effort and contributions during the pandemic-hit 2020.

The economy
The pandemic and the restrictions imposed to combat the virus resulted in a marked fall in economic activity in the first half of the year.

The general government deficit is set to deteriorate strongly in 2020 due to the economic downturn and the support measures adopted to mitigate the economic fallout of the pandemic. Private consumption, the backbone of Poland’s growth in recent years, posted a double-digit drop, as social distancing measures and low confidence took their toll.1


Real GDP declined by 2.8% in 2020 and remained below 2019 levels until the end of 2021. Economic growth is expected to resume in 2021 and 2022 in line with the assumed easing of containment measures and increased foreign demand, although the fading away of policy support could weigh on growth in early 2021.2 Investment activity is projected to recover in tandem with reduced uncertainty and increased domestic and foreign demand.

Unemployment rose to 6.2% in December 2020 from 5.2% in the same month last year. It was the highest jobless rate since April of 2018, as the number of unemployed increased by 179,600 to a near three-year high of 1.046 million.3

The property market
Despite a strong start in 2020, the year turned out to be a tumultuous year full of seismic shifts in everyday norms. The global pandemic caused uncertainty that dominated business and private activities. Poland, as in many other countries, experienced COVID-19 waves and related restrictions that influenced general business activities.

Overall, the year recorded relatively robust outcomes in the investment market, exceeding expectations from the onset of the crisis.

Investment turnover on the property market in Poland totalled €5.6 billion. This was a 30% decline on 2019, but also the third best result ever. Still, quite a few meaningful transactions were postponed and are expected to carry on in 2021.4

These positive signs were underpinned by the industrial sector. While gradually growing over the recent years, the outbreak of the pandemic accelerated its progress. And despite the trend of postponing transactions, office assets were the second most traded product.


With nearly €2 billion transacted, the sector represented 36% of the total investments. Prime office yields in Warsaw were discussed at 4.50%.5 We expect that investment in the office sector will start to recover as we go back to our workplaces following the roll-out of the vaccination program in 2021.

The Warsaw office market grew by 314,000 sq m of new supply, including 12 new developments delivered. Some 50% of the capital’s total new supply is located in the Rondo Daszyńskiego area. Warsaw reached 5.9m sq m of total office stock by the end of 20206, with our own Varso 1 and Varso 2 projects among the largest completed investments in 2020.

Office space under construction has significantly decreased compared to previous quarters. However, it still exceeds 576,000 sq m or almost 10% of the actual office stock. There is an expected scarcity of new product in coming years. This may further boost the appeal of, and competition for, space in best-in-class buildings located outside of the central parts of Warsaw.7

Gross take up

602,000 sq m
(2020)
-31% (to 2019)

Absorption

165,600 sq m
(2020)
-15% (to 2019)
Gross Demand Evolution in Warsaw (2020)
1000,00050%
800,00040%
600,00030%
400,00020%
200,00010%
00%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
New – existing
New – prelet
Expansion
Owner occupier
Renewal
Renewals share in gross take-up

Office tenant activity in Warsaw amounted to almost 602,000 sq m leased in 2020, which is approx. 276,000 sq m less than in the previous year. Moreover, tenants often decided to extend their lease for the short term, while waiting for a return to normality before making any long-term commitments.8

The slowing pace of leasing seen in the Warsaw office market, along with the high supply of new space not yet fully pre-leased resulted in a further increase in the vacancy rate, which stands at 9.9% (up 2.2%). Despite the market situation, asking rents on the Warsaw market remain stable.9

Vacancy Rate
9.9%
+2.2% (to Q4 2019)
Sublets
Over 130,000 sq m
Vacancy + Sublets
Real vacancy rate
12.1%
Sublets Structure
> 5001 sq m
2001 – 5000 sq m
1001 – 2000 sq m
501 – 1000 sq m
251 – 500 sq m
0 – 250 sq m
10,000
0
20,000
30,000
40,000

Our performance
Despite the challenging times of 2020, we delivered 74,000 sq m in two Varso Place buildings with close to a 100% occupancy rate. Proving the commercial health of our assets, we also divested Postepu 14 (34,582 sq m) to CA Immo for almost €87m.

In 2020, HB Reavis in Poland signed lease agreements for around 19,000 sq m of space. The most notable tenants obtained included Leroy Merlin (12,360 sq m) in Forest – one of the largest Warsaw office transactions that year – as well as act BSWW Legal & Tax (2,170 sq m), VISA (1,280 sq m) and Ipsen (950 sq m). We are continually negotiating with prospective tenants that are interested in leasing office space in Varso Tower and Forest.

Early in the 2020, we secured a €162 million loan to develop the Forest business campus in Warsaw from a syndicate of four banks, namely Santander Bank Polska, Bank Pekao, PKO Bank Polski and BNP Paribas Bank Polska. We also issued a €18.7m tranche of bonds in Poland that mature in December 2023.


We continue to work on the construction of Varso Tower (69,816 sq m), which has now been topped out and is planned to be completed in Q1 2022. Meanwhile, Forest’s campus-style building (23,702 sq m) have also been topped out and were practically completed in Q1 2021. The adjacent 120-metre tall tower (55,689 sq m) is gaining a new floor each week and should be ready by the beginning of 2022.

In the reporting year, there were changes to our Polish leadership team. Apart from his role as CEO for Poland, Peter Pecnik has become Group CFO and a member of the HB Reavis Group Executive Board. Maciej Olczyk has also been promoted to Deputy Country Construction Officer in Poland.

HB Reavis
Development PL
GLA
sq m
Validation ERV GDV Value Change Investment
2020
2018 2019 2020
Projects completed 74,000 217.0 389.3 404.2 20.3 435.1 14.9 34.0
Projects under construction 149,207 214.8 326.6 395.9 36.1 740.7 69.3 88.5
Projects in preparation 40,376 9.0 10.3 8.9 7.0 107.3 -1.4 0.0
Total 2020 263,583 440.8 726.2 809.0 63.4 1,283.1 82.8 122.5
Total Pipeline for 2021 189,583 223.8 336.9 404.8 43.1 848.0 67.9 88.5
Changes in Polish Development Property Value (€m)
900
800
700
600
500
400
300
200
100
0
726.2
122.5
-50.9
11.1
809.0
-404.2
404.8
2019
Investment
Yield shift
Accrued profit
2020
Completions
Pipeline 2021

Hungary

From the CEO
Even though 2020 turned out to be an extremely difficult year for everybody, HB Reavis managed to provide a working environment filled with quality and safety.

2020 also marked the opening of Agora Budapest, Agora Hub – home to companies like bp, B+N Referencia, Nowy Styl and Stada Hungary – and Agora Tower, in which Raiffeisen Bank has established its headquarters with more than 1,300 employees.

The building centre – in one of the capital’s busiest intersections – has already become one of the most pleasant spots in the downtown area of Budapest due to its friendly atmosphere and people-oriented design. These premium offices include green areas and a variety of services, all designed to nurture employees’ wellbeing.

Robert Kubinsky
Robert Kubinsky


Three of our Workspace as a Service brands – Symbiosy, More and Origameo – have successfully launched in Hungary. Now, apart from taking care of unique needs, HB Reavis actively participates in progressing technical development. For example, in Agora Hub, the workplace environment is supported by the professional data analysing technology, Symbiosy, which creates a more pleasant office experience, and it is also crucial regarding protection during the pandemic.

We’re delighted these ambitious plans have finally become reality and, despite the unusual events of 2020, that we were able to progress and look forward to the future.

Our achievements
Feedback from our employees is important to us. However, the opinion of the real estate market is significant as well. Fortunately, HB Reavis stood its ground last year.

The two newly-opened Agora Budapest buildings, Agora Tower and Agora Hub, received WELL Certification at the Gold level in the autumn. Thanks to HB Reavis’ people-oriented building standards, the buildings were able to meet stringent standards regarding the areas of clean air, water, proper lighting, healthy eating, comfort, fitness and mental health, among others.


We maintained our first place in the Property EU real estate market ranking too. And, as the largest workspace provider in the European Union, we finished as the top developer in Euromoney’s 2020 real estate market survey – in the Mixed, Office/Business, Retail/Shopping and Overall subcategories.

This is an outstanding achievement for an international workplace provider company which designs, builds and manages office buildings with a focus on wellbeing at work and productivity.

Challenges for the future
The situation created by the virus, which changed life for all of us, had to be handled with speed and efficiency. Initiating our breakthrough technologies for personal safety was therefore essential.

Symbiosy’s sensor positioning technology enabled us to track the path of any employees who tested positive, identifying potentially infected office environments. Using alert messages on mobiles, we also detected and indicated potential social distancing issues where the lack of distance could be a problem. Our workspaces have shown that we’re ready to face the challenges of the future.


Due to curfew restrictions and social distancing, we all deal with surrounding working from home. While it might have seemed comfortable at first, after a few months it turned out to be stifling. So naturally, it has only strengthened our commitment to providing exceptional experiences for employees though our offices. Using state-of-the-art techniques and solutions, we continue to put an emphasis on mental and physical wellbeing. As soon as the quarantine restrictions are suspended and employees return to our offices, we will not disappoint them.

HB Reavis
Development HU
GLA
sq m
Validation ERV GDV Value Change Investment
2020
2018 2019 2020
Projects completed 71,249 70.0 216.4 265.5 15.4 280.5 49.1 52.5
Projects in preparation 64,101 35.0 54.2 53.2 14.6 253.0 -1.0 1.0
Total 2020 135,350 105.0 270.6 318.7 30.0 533.5 48.1 53.5
Total Pipeline for 2021 64,101 35.0 54.2 53.2 14.6 253.0 -1.0 1.0
Changes in Hungarian Development Property Value (€m)
350
300
250
200
150
100
50
0
270.6
53.6
-21.2
15.8
318.7
-265.5
53.2
2019
Investment
Yield shift
Accrued profit
2020
Completions
Pipeline 2021

Board of Directors

06

In 2020, the Board of Directors adopted a standardised ESG strategy as a framework covering environmental, social and governance areas. The ambition in the field of corporate governance is to develop an organisational structure, processes and policies that follow the principles of transparency, professionalism and accountability.

HB Reavis Holding SA is not required to follow the Luxembourg ‘Ten Principles of Corporate Governances’ rules set for listed companies. Nevertheless, it has committed to comply with these requirements as much as possible. As a part of this, the number of executives and independent members of the Board of Directors have increased since January 1st, 2021.

At HB Reavis we believe
that a diversity
of opinions is key.

Our Board of Directors consists of dedicated professionals, including experts in the real estate industry and workspaces. The Executive Management consists of long-term professionals with a proven track record who oversee the running of the Group’s daily operations.

Members of the Executive Board 2020

Marian Herman

CEO

Peter Ceresnik

Member of the Executive Board

Martin Miklas

CFO
With effect from January 1st, 2021, the Executive Board has been renamed
the Executive Management and has been enriched by new members
Members of the Executive Management 2021

As of May 31, 2021.

Marian Herman

CEO Herman

Peter Ceresnik

Member of the Executive Management Peter Ceresnik

Peter Pecnik

Group CFO Pecnik

Pavel Jonczy

Member of the Executive Management Pavel Jonczy
Members of the Board of Directors

As of May 31, 2021.

Marian Herman

Director

Peter Pecnik

Director

Peter Ceresnik

Director

Pavel Jonczy

Director

Isabel Schellenberg

Director

Liviu-Constantin Rusu

Director

Peter Vazan

Director

Neil Ross

Independent Director

Melanie Koch

Independent Director

Erik van Os

Independent Director

Marija Prechtlein

Independent Director

Ivan Chrenko

Non-Executive Director

Maarten Hulshoff

Non-Executive Director

Martin Miklas

Non-Executive Director

Our people

07

2020 was unprecedented due to the COVID-19 pandemic situation. It not only significantly influenced our business perspective, but also the way we operate.

COVID-19 reality
The outbreak of the pandemic in the spring of 2020 tested our team’s readiness for unexpected situations and our ability to operate in difficult conditions. From day one of state ordered quarantines across all HB Reavis markets, we were able to switch most of our operations to remote working.

Previous investments into a cloud IT infrastructure and mobile devices for our people enabled us to perform the majority of our business activities from home. At the same time, special COVID-19 task forces in all our offices took immediate measures towards the security of our own and 3rd party employees on construction sites, as well as those who needed to stay in the office.

Our technology platform Symbiosy, with its indoor positioning functionality, provided ongoing monitoring of office density. If an employee tested positive for COVID-19, it also enabled us to track all the contacts at risk and provide employees with tests, disinfect the working space and instruct the relevant employees to go into quarantine. These measures helped us keep our offices safe, and no work-related virus transfers were reported.

Ongoing monitoring of the mood within our team showed that people preferred a hybrid work-style of time in the office environment with the flexibility to work from home. This confirms the long-term workplace strategy reflected in our employee benefits and policies that were implemented prior to the outbreak of the pandemic (individual wellbeing, workspace experience and personal flexibility).

Years with
the Company

professionals
94
0-1 year
128
1-2 years
114
2-3 years
166
3-5 years
90
5-8 years
93
8-15 years
20
15+ years
Note: Data based on external expert valuations and internal management reports.

People strategy update
As part of our Business Strategy 2025, the People strategy is one of its building blocks. The People strategy update brought refreshed aspirations in the following areas:

  • Our mindsets
  • Commitment to our success
  • Our leaders

Our mindsets
We revised our Mindsets model that defines our culture and the expected behaviours of our people: passion, entrepreneurship, professionalism, innovativeness, a focus on people and long-term relationships.

Commitment to our success
Our commitment is expressed by several key aspirations:

  • Alignment of individual/team and company goals
  • Transparency in measuring our success via individual contribution and company results
  • Team spirit and drive help us achieve our goals
  • Balancing autonomy and accountability for our actions
  • Creating opportunities to utilise our potential and constantly improve our capabilities

Our leaders
Our leaders are accountable for achieving company targets through people. A high standard of people leadership is expected and will be continually measured through internal surveys as well as our performance management system.

Our people strategy aspirations have been translated into specific actions and initiatives that will be carried out and monitored on an ongoing basis.

Compensation system review
As part of the business strategy update, we have also reviewed our compensation system. Unlike the past couple of years, we have returned back to a more merit-based philosophy with a broader use of variable components of total target compensation packages.

In practice, we provide variable components to 80% of our employee population (in contrast to 30% of employees prior to the change). Only employees holding more junior or administrative roles stay on fully fixed compensation.

We provide
variable components to
80%
of our employee
population

This step will enable our people to participate in our company’s success to a greater extent when we surpass our company goals. A variable component structure is linked both to team/company results as well as individual goals. We believe this change aligns our compensation system with the entrepreneurial mindset and nature of our culture.

ESG

08

Designing
a Responsible
Future

We've created
healthy offices that
follow responsible
principles for over
65,000
people

Now, after 27 years in business, we’ve brought together all our learnings and experience to create our ESG strategy, which is inspired by our well-established ESG framework.

blueprint

ESG is a set of standards that cover environmental, social and governance activities. It considers how a company performs as a steward of nature, examines how a company manages its relationships with employees, suppliers, customers and the community, and assesses how a company is governed.

elevator

Responsible from the very beginning
We’ve taken innovative approaches to our work before. But we want to continue raising the bar. So we’ve set ourselves new challenges, like reducing our carbon footprint and developing better building performance markers.

In turn, the BREEAM and WELL Building Standard certifications are key drivers for us: validation of our thinking, methods and solutions. In 2020 alone, we saw New Nivy in Slovakia become one of just four projects worldwide to achieve the BREEAM Communities ‘Excellent’ level. In addition, Bratislava’s Twin City Tower also received WELL Core & Shell Gold Certification.

How does our ESG strategy influence our work?

Firstly, it’s important to say that everyone – tenants, business partners, suppliers, local neighbourhoods, authorities and employees, as well as ourselves – need to take responsibility for creating spaces that work for people, communities and the planet.

Naturally, our strategy was principally developed with the people who use our premises every day in mind. A higher ESG standard reflects their values and helps them achieve their responsibility goals.

This has led us to build a formidable breadth of internal expertise around environmental responsibility, user-centric design, health and wellbeing, and community engagement.

A strategy that drills down to the everyday

Before 2020, we had been delivering exceptional solutions, but were missing a comprehensive and integrated strategy. A single-minded approach had covered all our responsibility activities, from land acquisition, through design, development, construction and finally in the asset management of our buildings.

Now, we have a framework set in stone that lays out our ESG priorities and areas of expertise. One that can be distilled into a set of actions and activities that continuously strengthen our proposition to the market.

greenery

Our ESG pillars

Environmental

With respect to nature
Our processes, policies, practices and the impact we have on the natural environment, applicable to both our buildings and our company.

Social

Taking care of people
Activities affecting both the internal and external people with whom we interact, applicable within different project phases and in the company.

Governance

The way we’re directed
Organisational structure, transparency, measures, protocols, procedures and formalised governing bodies, roles & responsibilities defining our business nature.

twin city

Our ESG areas and priorities

Under each pillar, we’ve developed a number of activities that have a long-lasting impact. But we’re always looking forward. In particular, our environmental priorities concentrate on carbon reduction and green transport, our social priorities focus on people, health and wellbeing, communities and the employee experience, and our governance priorities are our mindsets and supply chain management.

sky

A closer look at our aspirations

As we work towards our priorities, we look at the needs of our stakeholders. ESG is a crucial aspect of our work for employees, clients, end users, communities, investors and future generations.

Therefore, our ESG strategy isn’t just about the product. It covers a range of activities that are performed across our organisation – underpinning our entire approach.

enviromental

Environmental

Energy performance

Improve the way we deliver and operate buildings, helping clients to maximise energy efficiency while they use them.

Carbon reduction

Implement low carbon solutions during all project stages, including design, demolition, construction and operation in order to reduce carbon footprints.

Water consumption

Improve water efficiency through innovative building technologies and fittings.

Waste management

Encourage good design and construction practices that minimise waste across our value chain, including building operations.

Green transport

Support green transportation choices by helping the people working in our buildings and our own employees to use emission-free transportation.

Biodiversity

Create green infrastructure that increases the biodiversity around our projects.

Business Review

09

Real estate development is a very complex business. Being an international workspace provider brings even higher complexity. We make life even tougher for ourselves because our mission is to bring remarkable experiences to people through our real estate solutions.

We aim to set trends in office space solutions. We aspire to always deliver something more than clients and communities expect, something that will differentiate our projects from others. We believe this is the right way to create greater value for our partners, clients and local communities, as well as for our shareholders to achieve their projected growth and desired return.

Changes in Hungarian Development Property Value (€m)
350
300
250
200
150
100
50
0
270.6
53.6
-21.2
15.8
318.7
-265.5
53.2
2019
Investment
Yield shift
Accrued profit
2020
Completions
Pipeline 2021

The development landscape
Looking at our portfolio, the share of development in our total investment property is 65%. The increase from our targeted 50/50 split was driven by the reallocation of One Waterloo into our development arm as preparations for construction progress.

Despite the difficult investment market, we also took opportunities to divest assets valued at €325m with an eye on building a strong cash position for the near term.


In the reporting year, we focused mainly on both speeding up and growing the share of developments in the permit stage as well as making progress with our projects in the construction phase. During 2020, the portfolio value of core development property increased by €370.2m*, while properties valued at €772.3m* were completed and handed over to our asset management arm.

Product design matters
and distinguishes us in the market

During our history and through the delivery of 961,000 sq m* of leasable office space, we have accumulated significant knowledge and experience. We understand why it is so important to talk to clients, identify their needs and wishes and, moreover, incorporate these into our product design process.

Currently, we have around 140 professionals in our dedicated product design team infusing client experience and technical innovations into our products. Recently we’ve focused on the following areas:


1.
Bringing international expertise into our projects. We retained the services of highly acclaimed architectural studios such as Benoy, Foster+Partners, MAKE Architects, John Robertson Architects and Allford Hall Monaghan Morris for some of our recent flagship projects.
2.
Transforming ourselves from a fully integrated but ‘standard’ real estate developer into a Workspace as a Service (WaaS) provider. This move is a perfect umbrella for our user-centric related activities such as UX methodology, Origameo, HubHub, Symbiosy, Qubes and More.
3.
Testing project design. All of our designs are rigorously assessed, focusing on potential user experience in terms of daylight quality, interactions between dedicated office space and shared spaces (primarily on the ground floor and roof) and the effects of greenery, fresh air and thermal control.
4.
Elevating our sustainability standards and design goals to at least BREEAM ‘Excellent’. We also aspire to comply with WELL standards as soon as feasible.

Leasing and marketing
Yet again, we’ve invested significant effort and resources during the recent year into building our leasing teams across the Group. Over the last couple of years, we’ve grown our marketing capability so that we can more effectively offer these projects to our clients.

These teams consistently and efficiently use the Group’s know-how that has been accumulated over 27 years.

In terms of the numbers, facing a mix of market challenges that were significantly impacted by the COVID-19 pandemic, our leasing teams signed contracts for about 50,000 sq m of GLA*, down roughly 65% compared to 2019 (144,000 sq m signed in 2019).

TOP Deals for 2020
Forest Leroy Merlin 12,358 sq m
Agora Tower B+N Referencia Ipari 3,758 sq m
Varso 2 BSWW 2,174 sq m
Varso 2 Global payment tech company 1,283 sq m
Nivy Tower Dobry Mlyn Surany 1,216 sq m
Leasing Activity According to GLA
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
newrenewals2015
newrenewals2016
newrenewals2017
newrenewals2018
newrenewals2019
newrenewals2020
United Kingdom
Poland
Germany
Czechia
Slovakia
Hungary

Development portfolio structure
Geographically, the structure of our whole development portfolio is continuously shifting towards western countries, where the UK and Germany represent 52% of the future value in our pipeline. At year end 2020, the share of UK assets represented 44% of the whole portfolio, Poland 12%, Czechia 7%, Slovakia 25%, Hungary 4% and Germany 9%, all based on the expected gross development value.*

As far as segments are concerned, during 2020 our strategic focus on office development was reflected in a 93% share of our development portfolio value, while retail and residential accounts for 7% based on gross development value.*


Developments in the office segment continued to achieve growth, adding around €294m of value and reaching a total of €2,254m* (including completed properties before their transfer to use). In terms of the creation of the net value of the required investment to achieve the value growth, office properties contributed €85m* (net of the yield shift).

Performance of development activities
Our strategic plan is to keep our balance sheet on an even keel with the long-term share of the development portfolio of our total investment property at around 50%. Due to our divestment efforts and reallocation of One Waterloo, the share of our development portfolio (excluding One Waterloo and non-core assets) increased to 75% (2019: 69.5%).

Group Development Activity,
Moving Averages 2016 – 2020
400
350
300
250
200
150
100
50
0
178.1
152.7
77.7
230.7
304.2
369.4
357.8
235.1
369.6
303.8
212.8
301.1
Acqusitions
volume
(€m)
Constructions
investments
(€m)
Completions
(€m)
.
Land/property
exits
(€m)
2016–2018
2017–2019
2018–2020

How we manage our assets

10

In all aspects of More by HB Reavis, our in-house asset management department, we always look for innovative and practical solutions for our clients. Through property managers we foster the creation of long-term relationships focusing on the best client experience.

We also thoroughly oversee the technical operations with our facility management specialists by focusing on delivering a high quality of service, effective building management that optimises the energy spent, wellbeing and being accessible 24/7 for clients’ requests. The closeness to our clients coupled with our capabilities enabled us to implement immediate actions ensuring the safety of our premises.

2020 was also a milestone thanks to the significant growth of our managed assets. A great accomplishment of all our teams was that we opened the Agora Hub and Agora Tower buildings in Budapest with prime anchor tenants, Raiffeisen Bank and British Petroleum. In the centre of the Warsaw central business district we enlarged our portfolio with Varso 1 and Varso 2, and in Bratislava we opened Nivy Tower, the tallest building in Slovakia. With these additions, we have expanded our portfolio with another 200,000 sq m under our management.

Income producing
asset portfolio

Source: Company information as of December 2020
1Including non-core projects Centrum Bottova and Kesmark.
  Projects under asset management of HB Reavis CE REIF are not included.

City Business Center I

Nivy Tower

Bratislava

GLA: 32.5k sq m
Currently Bratislava’s highest office building, it is the latest completed project in the New Nivy zone. The project is adjacent to Nivy Station which, alongside its location, enhance its transport connectivity. The building is aspiring for BREEAM and WELL certificates.

City Business Center I

Postepu 14

Warsaw

GLA: 34.5k sq m
This sustainable A-class office building with efficient floor plate was completed in 2015 and benefits from great visibility and transport connectivity. The building was sold to CA Immo in 4Q/2020.

City Business Center I

Varso 1 & 2

Warsaw

Combined GLA: 74.0k sq m
Varso 1 and Varso 2 benefit from their close location to the core city centre, a shopping centre and a railway station. The buildings offer 74k sq m of GLA and are currently leased at 89% of their full capacity.

City Business Center I

Agora Tower & HUB

Budapest

Combined GLA: 71.3k sq m
The practical completion of the Agora Tower and Agora Hub concludes the development of the first phase. The Budapest landmark already accomodates anchor tenants BP and Raiffeisen in an area with BREEAM and WELL certificates.

City Business Center I

Apollo Business
Center III–V
 

Bratislava

Combined GLA: 48.7k sq m
Completed in 2009, the project is one of the first in Slovakia to obtain BREEAM certificates. The building offer a variety of service and are occupied at more than 90% of their available area.

A summary of the actions taken by More by HB Reavis in response to COVID-19:

  • Intensive daily support and contact with tenants to support overcoming the pandemic (both retail and office)
  • A strong focus on the health & safety of our buildings to ensure a safe return to our buildings for tenants such as: disinfection routines with an extra focus on palpable surfaces, social distancing in lifts and common areas, natural ventilation, HVAC disinfection and strict pandemic procedures in case of an identified infected person in the building
  • Contactless and touchless journeys via the Hi.Building application – from the entrance to the building to the office premises
  • Remote work (home office) service offer to support the employees of our tenants in the new daily challenges, from concierge and courier services through to online events focusing on mental health and wellbeing

City Business Center I

The Hi.Building app, a solution integrating the building’s amenities and systems:

  • Buildings operated by More by HB Reavis provide the most modern digital experience for building users. The Hi.Building platform is the one solution that lets people take advantage of all the building’s features and services. It allows users to access the building, the parking lot, common areas and lifts directly with their mobile phone. It enables the smooth management of visitors, gives people the opportunity to take advantage of concierge services, bike and e-scooter sharing, news, special offers and vibrant events.

These value-added services are to be further expanded to Agora, Varso Place and Nivy Tower, all supported by the rollout of the Hi.Building app:

  • Within our standards, in addition to property and facility management, we offer seamless and exceptional user experiences in all our assets through a rich set of amenities to building occupiers that support personal services, work-life integration, wellbeing and a sense of community. This year we decided that all our newly opened projects will offer value-added services for all our clients.
  • Our clients can enjoy bike sharing, a reception with concierge services and various experiences delivered by our dedicated service teams. Everything is at the client’s fingertips and connected via our Hi.Building platform. It’s the easiest way to join yoga classes, take part in various medical checks directly in our premises or to mix fresh smoothies with world class bartenders in the comfort of the client’s home via online streaming platforms.
  • This app serves as the main gateway to the whole building itself, from parking, elevators and building access to visitor management, providing comfortable, easy and secure solutions for our clients and their partners to move around our premises. In addition, it minimises the use of plastic cards. With this expansion of our services, we offer clients hospitality combined with innovative solutions. It doesn’t matter if they are at home or in our buildings, our home office package keeps our clients connected with a focus on wellbeing. Our teams are also here for the most ambitious clients and are able to customise our portfolio to their needs.

Divestments:

In October 2020, HB Reavis sold Postepu 14, which is located in Warsaw, to CA Immo, a real estate investment company based in Vienna. The building was almost fully leased with high quality tenants such as Astra Zeneca and Samsung.

The divestment strengthened the position of HB Reavis in Poland as a successful developer, topping up its office portfolio of 220,000 sq m by another 34,500 sq m. Postepu 14 was recognised by the new landlord for having the most state-of-the-art technologies and solid tenants who, with the assistance of the More by HB Reavis team, managed to fulfil their financial obligations in spite of the COVID-19 impact. The handover process of the property went smoothly due to professionally delivered property and facility management services from May 2015, when the use permit was granted. The More by HB Reavis team not only supervised the building’s operations, but offered wide support during the due diligence and exit processes.

In May 2020, the divestment of 20 Farringdon Street was completed. The asset was sold to a Hong Kong consortium, Tenacity Group, which operates in the UK and the Greater China region. The 8,000 sq m building was fully leased to a range of companies including The Berkeley Partnership, TMF Group, HubHub coworking and Canon UK. Divesting the asset in the middle of the UK lockdown was a huge achievement for the business. The More by HB Reavis team worked hard to ensure all rent payments were made within a timely manner in order for the sale to progress.

Investment management

11




HB Reavis’ investment management arm was founded ten years ago and is a key pillar of our strategy.

With a heritage in real estate, the team focuses on delivering exceptional long-term returns and superior client service for investors looking for value in European commercial real estate.

The business capitalises on its asset management capabilities and 27-year track record of leasing, asset management capabilities, property management and construction management. We believe that our active asset management, opportunistic trading approach and strategic decision making are the driving force behind the consistent returns we deliver to our investors.

Currently, the fund manager manages assets worth almost €800 million* across three core Central European countries (CZ, SK, HU). The flagship fund, the HB Reavis CE REIF, follows a core/core+ strategy, investing equity on behalf of over 250 high-net-worth individuals and institutional investors into a portfolio of prime investment properties with top-tier tenants in prime or strategic Slovak and Czech Republic locations.

The CE REIF fund has, since its inception in 2011, on average delivered excellent returns of 10% p.a., of which almost half has been distributed in cash to investors. These returns are the fruit of our diligent focus on maximising returns and enhancing the portfolio’s value through excellent lease management and hands-on asset management. The total assets under management grew to €345 million with an increasing number of investors trusting us to manage their wealth and funds.

The active asset management is provided by an experienced team of professionals from the HB Reavis Group – a unique value proposition that sets us apart from the competition.



* A combination of the HB Reavis Real Estate Investment Fund (with two sub-funds HB Reavis CE REIF and HB Reavis Global REIF) and the HB REAVIS Real Estate Development Fund

City Business Center I

City Business Center I

Bratislava
SK
City Business Center II

City Business Center II

Bratislava
SK
Aupark

Aupark

Hradec Kralove
CZ
TwinCity B

Twin City B

Bratislava
SK
TwinCity C

Twin City C

Bratislava
SK

Financial Review

12
€192.7m
accumulated cash
at year end 2020

Workspace as a Service features and the use of analytical workspace data are driving innovations in real estate trends. The ability to collaborate and use spaces flexibly – as well as durability and technological advances – are now key requirements for tenants.

These changes are forcing real estate players to adopt new business models, or at least new, more complex business lines. They also present new challenges for financial strategies. Our model addresses all these challenges, and we have also adjusted our financial strategy to support it – while ensuring we maintain a healthy capital structure that gives us access to both new debt and new equity when needed.

Occupancy trends are changing. Increasingly, tenants are looking for greater flexibility, driven primarily by the ever-shifting dynamics of their actual business models and new economy sectors. In competitive labour markets, tenants need attractive recruitment and retention packages beyond remuneration and monetary benefits. The actual working environment now plays an increasingly strong role in recruiting top talent.

Given this new reality, the notion of a tenant committing to a long-term and inflexible lease contract (the most attractive to traditional finance providers and investors) is being challenged.

As a major player in leasing markets, we’re seeing a clear trend towards more occupational flexibility.

This, together with the advent of another recent phenomenon in how tenants use space – the coworking platform – means there’s a growing need for more agile debt and equity funding.

Through a combination of divestments and external financing operations, we accumulated cash at year end 2020 amounting to €192.7 million. This will help us continue our robust development programme and support our growth, both in an organic manner and potentially through acquisitions, should the opportunity come our way.

In 2020, dividends paid to our shareholders reached 1.4% of NAV, reflecting the challenges of the pandemic year, in line with our financial policy guidelines.

Our financial policy formalises the key financial measures:

  • Target Gross Debt to Total Assets at 40% (maximum 45%) and Net Debt to Total Assets at 35% (maximum 40%) with an appropriate mix of non-recourse project debt and Group-level debt
  • Initial maturity of project loan financing and issued bonds to commensurate with the length of our product development cycle
  • A cash reserve target of at least 5% of total Group debt, with a special reserve build-up profile to cover future debt-bullet repayments well in advance
  • Dividend payouts in line with historical levels, up to 4% of NAV
  • Careful risk management aimed primarily at mitigating foreign exchange fluctuations for all known and estimated non-Euro exposure 12-months forward, and interest-rate risks covering 50 – 100% of the total medium to long-term debt exposure, both associated with macroeconomic and property cycles

Note: Data in the Financial Review section are based on audited consolidated financial statements, external valuations and internal management reports. All valuations in the Business Review are based on external valuations and internal management reports before IFRS adjustments and excluded non-core properties. For segment information related to non-core segment, see Note 6 in the Consolidated Financial Statements. For balances presented in the Segmental Analysis in the Consolidated Financial Statements, see Note 6 of the Consolidated Financial Statements.

How we
performed

In terms of overall performance, the financial results of 2020 were strongly driven by a frozen leasing market and more conservative leasing assumptions, which were reflected in fair market values in general having an impact on future cash flows through longer void and rent-free periods, higher discount rates and so on.

Obviously, the main driver was a revaluation loss down from €541.5m in 2019 to €41.2m over the year (including the translation of foreign operations to the presentation currency of €-70m). At €27.8m, net operating income from investment property, in line with our expectations, was down slightly (2019: €34.2m).

In terms of the operating profit, the Group recorded a loss €8.4 million. The Group balance sheet increased to almost €3.1 billion. The adjusted net asset value reached €1.514 billion. Our net debt leverage ratio remained within the targeted range of 35-40%, reaching 38.2% (32.4% in 2019).

The disposal of subsidiaries impacted our financials negatively by €16.3m (2019: €3 million). Bottom line: we achieved a total comprehensive income of €-183.8 million (2019: €388.6 million).

NET PROFIT
€-113.9m
TOTAL COMPREHENSIVE INCOME
€-183.8m
EBIT
€-71.8m
NET RENTAL INCOME
€27.8m
NET REVALUATION LOSS*
€-41.2m
NET ASSET VALUE
€1.514bn
SHAREHOLDERS’ RETURN
-11.6%
NET DEBT LEVERAGE RATIO
38.2%
*Note: Including impacts of translation reserve
€m 2016 2017 2018 2019 2020
Assets 2,112.3 2,294.8 2,349.9 3,040.3 3,097.1
Cash 316.4 279.1 173.8 122.6 192.7
Borrowings 683.0 893.0 891.5 1,106.8 1,376.8
Net Debt Leverage Ratio 17.4% 26.8% 30.5% 32.4% 38.2%
Group profit decomposition (€m)
100
50
0
-50
-100
-150
-200
27.8
28.7
-3.9
52.6
-55.3
-5.7
-8.4
-103.5
-111.9
-2.0
-113.9
-69.9
-183.8
Net rental income
Revaluation gain
Other income
Gross oper. income
Operating costs
Depreciation and amortisation
Operating profit
Financial operations
Profit before tax
Taxes
Net profit
Other comprehensive income
Total comprehensive income
Revaluation gains
(Net of yield shift)
26.7
Revaluation Gains (€m)
(Net of yield shift)
2019
404.1
2020
26.7
(incl. the translation of foreign operations to the presentation currency)
Investment Portfolio Yield (%)
2019
5.19
2020
5.08


Note: Data based on internal management reports

Revaluation gain*

The net revaluation gain on investment property, including the impact captured by the translation of foreign operations to the presentation currency), resulted in €-41.2m (2019: €541.5m). This represents a significant year-on-year drop driven by the pandemic emergency and related market lockdowns, leading to leasing activity fallouts and a development progress slowdown.

When adjusted for yield shift, the Group achieved a €26.7m (2019: €404.1m) net revaluation gain while the yield shift contributed to an overall loss of €67.9m (2019: €137.4 million).

The average investment property portfolio yield decreased by 11 basis points to 5.08% as we continued investments in lower-yield projects in the UK while divesting CEE assets.

Income producing assets, primarily driven by higher yielding Slovak assets, were valued at a 5.55% yield at the end of 2020. The average valuation yield of our development properties, now more heavily weighted to UK, Polish and German assets, was also down by 2 basis points to 4.74%.

As our strategy in the mid-term is to keep and manage our assets longer after they become mature, the growth potential for our net operating income could be higher in the coming years.

How business lines contributed
In terms of contributions made by our business lines to the overall return on shareholders’ equity, leasing and revaluation drivers impacted both the development portfolio with a ROE of -12.3% (2019: 48.8%) and income producing property with a ROE of 5.9% (2019: 16%). The ROE of our non-core portfolio lagged behind with -4% as did the cash at -3.4% at the end of 2020.

Property under Development
50%
0%
-50%
20.8%
48.8%
-14.1%
2018
2019
2020
Non-Core
0%
-50%
-100%
-3.5%
-75.7%
-4.0%
2018
2019
2020
Return to Shareholders
40%
20%
0%
-20%
8.5%
33.3%
-11.6%
2018
2019
2020
Income Producing Property
20%
10%
0%
9.0%
16.0%
4.7%
2018
2019
2020
Cash
0%
-2%
-4%
-0.8%
-1.6%
-3.4%
2018
2019
2020
*Note: Data based on external expert valuations and internal management reports

How we divest

During 2020, despite the steep slowdown on the investment markets caused by the pandemic, we managed to finalise transactions in the UK, Poland and Slovakia – successfully completing almost €325 million of divestments.

Important transactions include the divestment of 20 Farringdon Street in London, Postepu 14 in Warsaw and Twin City B in Bratislava. These sales underline the quality of assets we develop as well as our strong divesting capabilities, even during difficult times.

20 Farringdon Street

20 Farringdon Street

London
UK

The real estate industry has long been slow to adopt new trends and technologies. But, similarly to almost all other industries, COVID-19 has accelerated its interest and implementation of new innovations.

Over recent years, we have significantly invested money and time into our Workplace as a Service (WaaS) solutions that are focused on occupier flexibility and user wellbeing and productivity. And with our business model transformed and a commitment to fusing progressive solutions into our buildings, they are proving to be an attractive proposition to prospective tenants and investors.

It’s an approach that’s helping us build long-term relationships with the tenants where we can provide valuable insights and wellbeing solutions focused not only on a safe and healthy workspace environment, but also on effective utilisation and better productivity. The result is higher tenant retention and therefore also increased valuations of our properties.

We maintain close relationships with our investors, a number of which have repeatedly invested their faith and money into our real estate products.

Nonetheless, our divestment preferences are also evolving to maximise shareholders’ value and reflect the Group’s strategy.

Now, apart from standard sales,
we are also focusing on:

  • creating long-term partnerships and joint ventures with the investors who buy our projects
  • prolonging the holding period of our assets to drive value creation.

This move will prove to be critical to the realisation of our divestment strategy and to increase the shareholders’ value.

Consolidated data

13
Read Our Consolidated Financial Statement

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The purpose of the Annual Report is to provide information to the members of the Group. The Group, its directors, employees, agents or advisers do not accept or assume responsibility to any other person to whom this document is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed. The Annual Report contains certain business, financial, numerical or technical information and forward-looking statements with respect to the operations, performance and financial condition of the Group. By their nature, these statements involve uncertainty since future events and circumstances (such as successful closing of acquisitions, permitting, construction delivery, commercialisation or actual market conditions) can cause results and developments to differ from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this Annual Report. Nothing in this Annual Report should be construed as a profit forecast.

Whilst the Company has taken reasonable care to ensure that the information on this website (other than information accessed by hypertext link) is accurate at the time of last revision of the website, the Company accepts no liability for the accuracy or completeness or use of, nor any liability to update, the information contained on this website. It should not be construed as the giving of advice or the making of a recommendation and should not be relied on as the basis for any decision or action. In particular, actual results and developments may be materially different from any forecast, opinion or expectation expressed on this website. Certain information on this website is of a historical nature and may now be out of date. All historical information should be understood as speaking from the date of its first publication. Nothing on this website constitutes an invitation or offer to invest or deal in the securities of the Company. This website contains certain hypertext‑links to other websites. The Company has not reviewed, is not responsible for, and accepts no liability in respect of, any information or opinion contained on any such other website.



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