CPI PROPERTY GROUP - Comments on Recent Events

EQS-News: CPI PROPERTY GROUP / Key word(s): Real Estate
CPI PROPERTY GROUP - Comments on Recent Events

31.05.2024 / 10:03 CET/CEST
The issuer is solely responsible for the content of this announcement.

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CPI Property Group
(société anonyme)
40, rue de la Vallée
L-2661 Luxembourg
R.C.S. Luxembourg: B 102 254

Press Release - Corporate News

Luxembourg, 31 May 2024

CPI PROPERTY GROUP - Comments on Recent Events

CPI PROPERTY GROUP ("CPIPG" or the "Group"), a leading European landlord,
has prepared the following update for our stakeholders.

Over the past five years, CPIPG has been resilient through COVID-19,
unwarranted concerns about the CEE region following the invasion of Ukraine,
higher interest rates, negative sentiment around the real estate sector,
baseless litigation, and increasingly ridiculous attacks from a short
seller.

The Group understands that these events have been challenging for rating
agencies, bondholders, and banks to absorb. CPIPG has been transparent,
accessible, and open about areas where we can and will improve. We have also
highlighted our many accomplishments and the quality of our real estate
portfolio.

CPIPG remains focused on delivering for our stakeholders. The Group cares
deeply about our reputation.

Unexpected Downgrade by S&P

In a surprise move today, S&P Global Ratings ("S&P") downgraded CPIPG's
rating from BBB- to BB+ with a negative outlook. CPIPG has always maintained
an active dialogue with our rating agencies. In many cases, we speak weekly.
The Group had no indication a downgrade was coming; indeed, S&P was made
aware of our recent bond issuance plans well in advance and assigned a BBB-
rating to the transaction.

S&P's decision is disappointing to CPIPG. At year-end 2023, our credit
metrics were within S&P's rating guidance. Our business plans clearly
indicate that the Group will remain within the thresholds for an investment
grade rating. We recently outlined to our rating agencies the additional
steps that CPIPG will take within months around disposals, minority equity,
debt repayment, capital structure, and governance. Furthermore, our efforts
to simplify the group by preparing for the squeeze-out of S IMMO by
IMMOFINANZ are positive for bondholders. The Group's operational performance
remains strong, reflected in positive like-for-like rental growth.

The immediate impact of S&P's downgrade is not significant. CPIPG estimates
interest expense will increase by about EUR3 million in 2024 and between EUR10
to EUR20 million in 2025, depending on the pace of debt repayment. None of the
Group's financing arrangements contain any cancellation options or similar
provisions, and therefore CPIPG's liquidity position is unaffected.

CPIPG will work to regain investment grade ratings as soon as reasonably
possible. In the meantime, we will focus on liquidity, deleveraging,
liability management, simplification, and our reputation.

Short Seller

Like a tipsy cousin at Christmas who simply will not leave, our short seller
has returned with yet another "research report" focused on acquisitions in
London several years ago. Incredibly, our short seller is freely able to use
terms like "money laundering" without providing any actual evidence to
support such a claim.

Metrogate

Metrogate is a 21,700 square foot freehold property in Kensington which is
leased to a student accommodation provider. In Q2 2020, the owner of
Metrogate, Laroche Investment Limited, agreed to sell the property to Pisach
Residential Limited at a price significantly below market value because the
tenant had stopped paying rent due to COVID restrictions. The closing
process was elongated due to the backdrop at the time. Prior to the
completion date, Pisach began marketing a 50% stake in the property to other
investors at a higher price, because the tenant had resumed paying rent.
Metrogate Melrose Investments Limited, one of the investors approached by
Pisach, subsequently approached CPIPG about a potential purchase; we, in
turn, decided to buy a 100% stake. CPIPG saw a potential opportunity to
redevelop the properties, which are in a prime Kensington location, into
residences. CPIPG paid £19.5 million for the property, or £900 per square
foot, which any experienced investor knows is a good entry point for
freehold residential property in Kensington.

The transaction underwent a full and robust legal due diligence (CPIPG was
advised by law firm Memery Crystal). Any allegation that the transaction was
inappropriate is baseless and unfounded.

As CPIPG embarked on our disposal strategy from August 2022, we earmarked
Metrogate for sale given its modest size, potential investor interest and
high probability of completion. The sale price in 2024 was equal to CPIPG's
reported book value as of 31 Dec 2023, which was lower than the initial
acquisition price as a result of softer UK real estate prices since the
acquisition date. The buyer of Metrogate, who is an experienced investor in
the local market, was represented by a top-tier UK law firm, Mischon de
Reya, which confirmed that the buyer is not a politically exposed or
sanctioned person.

Buxmead

This was a very successful acquisition for CPIPG. Buxmead is a luxury
property consisting of 20 apartments in Hampstead developed by Harrison
Varma, which has a long reputation for developing residential properties in
North London. The development was initially successful, with nine apartments
sold at more than £2,000 per square foot. However, sales slowed in the
post-Brexit environment and Harrison Varma began to experience difficulties
with development loans provided by a leading UK bank.

As a result, the bank required the developer to conduct an open market
tender (via Savills) for the sale of the remaining 11 apartments. This was a
competitive process, and CPIPG was selected as the winning bidder. CPIPG had
nothing to do with any of the original investors on the site, and any
allegation of linkage to inappropriate dealings or money laundering is
without merit. CPIPG was represented by CMS on the purchase, who conducted a
full due diligence. The purchase price was financed by CPIPG with a bridge
loan provided by Barclays and Deutsche Bank, as outlined in our press
release on 17 December 2018, which was subsequently repaid.

At the point of acquisition, the individual units were mostly shell and core
and not ready for rental or sale. The units required further capital
investments of several million pounds, which took a further two years to
finalise. Thus, the purchase price was indeed about £1,000 per square foot,
significantly lower than the other fully completed units, as identified by
our short seller. That is because CPIPG got exceptional value by bailing out
a troubled developer and their lender. CPIPG is in the process of selling
the Buxmead apartments; one of the units was recently sold for 7% above the
2023 book value, or about £1,900 per square foot.

Continued Progress on Disposals

On Tuesday, the Group's subsidiary, S IMMO AG, announced the disposal of
several commercial and residential assets across German cities for a total
transaction volume of EUR255 million.

Year-to-date, CPIPG has closed more than EUR600 million of disposals (EUR340
million in Q1 2024), including assets in Germany, Poland, Romania, Italy,
and Dubai. CPIPG has also signed more than EUR600 million in further disposals
(including the recent S IMMO announcement) that will close in the coming
months. Cash received by the Group will be primarily used to reduce
leverage.

The Group will provide more details on our performance, liquidity and other
important topics in our Q1 earnings release later this evening. We are
available to speak to any investor who wishes to discuss CPIPG or these
events in more detail.

For further information, please contact:

Investor Relations
Moritz Mayer
Manager, Capital Markets
m.mayer@cpipg.com

For more on CPI Property Group, visit our website: www.cpipg.com

Follow us on X (CPIPG_SA) and LinkedIn


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31.05.2024 CET/CEST Dissemination of a Corporate News, transmitted by EQS
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   Language:       English
   Company:        CPI PROPERTY GROUP
                   40, rue de la Vallée
                   L-2661 Luxembourg
                   Luxemburg
   Phone:          +352 264 767 1
   Fax:            +352 264 767 67
   E-mail:         contact@cpipg.com
   Internet:       www.cpipg.com
   ISIN:           LU0251710041
   WKN:            A0JL4D
   Listed:         Regulated Market in Frankfurt (General Standard);
                   Regulated Unofficial Market in Dusseldorf, Stuttgart
   EQS News ID:    1915489

End of News EQS News Service
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1915489 31.05.2024 CET/CEST