BREF 2023 Q1 review – Revenue Slump YoY, but Post-Period Events Bring a More Positive Outlook

• Total revenues are BGN 1.96 mln, down from BGN 3.1 mln for Q1 2022. 98% is rental income. This decline could be attributed to BGN 0.2mln smaller rental income (because of the leave of a key tenant from the office building Kanbanite in Q1 2022) and lack of property sales (vs BGN 0.8 mln in Q1 2022). Expectations point towards revenue growth due to post-Q1 events outlined in the latter part of this report.
• Expenses have witnessed a significant rise of nearly 69% YoY. The main drivers were repair and maintenance costs, which surged from BGN 193 thousand in Q1 2022 to BGN 497 thousand in 2023.
• Despite the increase in operating expenses, there was a significant 32% decrease in total expenses (From BGN 1.89mln in Q1 2022 to BGN 1.28mln). This reduction can be attributed to the decline in interest expense by BGN 55 thousand YoY and the value of sold properties in Q1 2022, which amounted to BGN 797 thousand.
• The decrease in total revenue outpaced the decrease in total expenses, which resulted in a net profit of BGN 686 thousand, reflecting a 42% decline compared to the previous year.
• Total assets experienced a YoY growth of 6.4%, while net debt decreased by 6.3%. The company reduced its long-term debt by -3.67% (equivalent to BGN 1.13 million).
• The company completed construction of a new office building in Sofia Tech Park. Furthermore, BREF also obtained permission to use the remaining unoccupied premises. In the upcoming quarters, the building costs will primarily focus on finishing works related to the leased areas’ reconstruction. At the end of the period the invested funds in the project, excluding commissions for leased areas were BGN 76,4 mln. The projected funds for office finishing costs for future tenants amount to approximately BGN 3 million. To cover these expenses, the company will utilize its existing internal resources.

Notable events that happened after Q1:

• BREF has signed an additional lease agreement with “ROBERT BOSH” EOOD for more office space in the new Synergy Tower building at Sofia Tech Park. The rental period is valid until the end of the main lease agreement, and the leased area is 2723.54 sq.m. What’s more is that the firm has successfully finalized lease agreements for most of the commercial spaces located on the ground floor of the building.
• In April 2023, the company relocated its management company, MNI OOD, to Synergy Tower, utilizing 429 square meters of office space. That way the occupancy rate of Synergy Tower now stands at 39.72% , with occupied office areas accounting for 37.45%. This is a positive development given that the occupancy rate in Q4 2022 was 26%.
• The Company sold 3 apartments and 1 garage in Borovets (Sequoia 2).

Full review can be viewed here.