BREF 2022 Q3 review – Steady Performance in Q3 2022

• BREF continues to be one of the most stable performers in Q3. Regardless of the geopolitical hurdles that many face, the company’s stock has appreciated 3.03% YTD due to strong fundamentals in its portfolio, which is able to generate steady returns even in worst case scenarios. Portfolio’s potential is still greatly undervalued.
• Total revenues increased significantly in Q2 and Q3 primarily due to the completion of the deal to sell their Bricolage Varna property. Additionally, they managed to sell the agricultural lands near Veliko Tarnovo. The Bricolage Varna exit recorded 3.6% CAGR not accounting for the rent revenue through the years. Both deals generated a very comfortable cash pillow of over EUR 7.5mln (EUR 6.8mln from Bricolage Varna and EUR 0.7mln from Veliko Tarnovo).
• This outcome allows the management to concentrate on the more important opportunities ahead associated with their Sofia office locations and gives them the cash to meet any unexpected expenditures that may arise or secure future dividend payouts.
• Rental revenues increased 39% YoY to BGN 5,273 thousand compared to last year’s Q3 of BGN 5,100 thousand. BREF management has been very active to find replacements to the main tenants, which they lost in Q4 2021. Because of the outflow, the occupancy rate at their Kambanite site dropped to 33% by year end. However, the signings with TEU Bulgaria (shipping and forwarding) and Neterra (internet service provider, networking and cloud services) increased the occupancy rate to 55% via 5-year rental agreements.
• The Synergy Tower operational schedule is on track and no delays are reported. Once lent at 95%, total rental revenue to the fund will more than double. Currently, negotiations are underway for a large portion of the GLA with a government backed institution.
• BREF signed a new lease agreement for a period of 10 years for a restaurant in its Synergy Tower office building in Sofia Tech Park and the total leased area is about 712 sq.m. Now the occupancy rate of the building reaches 26.56%.
• With a current market price of BGN 2.04 we see the stock as greatly undervalued with 69% potential from the NAV of BGN 3.46 (derived from BGN 112,848,000 equity and 34,641,925 outstanding shares).

Full review can be downloaded here.