Close to EUR 8 Mn Net Profit in 2024 Graphisoft Park

Graphisoft Park that includes industrial and office facilities in Budapest produced in 2024 a pro forma net profit EUR 7.96 million, which – in line with its previous forecast – exceeds the exceptionally high result of the previous year – which is also due to one-off items – by approximately EUR 100,000, or 1%, the company has announced on the website of the Budapest Stock Exchange.

As the executive summary of the report points out, this stable result is partly due to the strong tenant base of the office park: the vacancy rate typical of the Budapest office market in recent years did not occur in Graphisoft Park, which – despite the decreasing rate of rent indexation – ensured a favorable development of rental revenue. In
addition, some tenants who reduced their leased area before the expiration of the contract paid one-off compensation, which also has a positive impact on this year's net profit, but this will of course be absent from the results of the following periods. Based on all of this, the Board of Directors plans to propose to the General Meeting a dividend payment of around EUR 7.2 million, corresponding to 90% of the pro forma profit for 2024, that is approximately 71 euro cents per ordinary share.

The occupancy rate of Graphisoft Park at the end of 2024 is 94%, which is a 1% decrease compared to the first half of the year, but it is still significantly higher than the current average of 86% for the Budapest office market. The current uncertain economic environment and the demand for hybrid working have a noticeable impact on the office market; in addition to the decrease in demand for office space, the demands for the function of rental properties are also constantly changing, which is why the flexibility of
landlords plays a key role. However, it can be stated that Graphisoft Park tenants typically commit to a longer period of time compared to the national average. This is due, on the one hand, to the unique natural features of the park, the environment created by the technological and IT focus, and, on the other hand, to the ability to flexibly adapt to changing tenant needs.

In the second half of the year, the Park renewed its lease agreements with two of its major tenants, SAP Hungary Ltd. for another 10 years, and with the software company Graphisoft SE for another 5 years, which increased the average remaining lease term (WAULT) to almost 5 years. In February 2025, another major tenant extended its lease agreement of 3.500 m2 for an additional 5 years, contributing to increasing the value of WAULT. The figure that reflects the commitment of the Park's tenants even better is the average lease term in the Park calculated with the starting date of all current tenants’ earliest lease agreements, which is still stable at over 15 years.

"Despite the above, for 2025, we are prudent in line with our previous forecasts. Due to the challenges of the real estate market and the effects of the unfavorable economic environment, we are forecasting a certain degree of vacancy and tenant risk, and we are also counting on continuous developments in line with our ESG goals and their cost impact. On the other hand, we do not count on extraordinary compensation to be paid due to early contract terminations, so overall, based on our current estimates, a net result of EUR 7 million is expected, which is less than this year's result," the document says.

In addition to the South Park building delivered in 2019, a nearly 4,000 m² office building can be built, for which the Company has a valid building permit. This development opportunity - given the high occupancy rate of the office park - provides flexibility to handle future tenant changes and creates an opportunity to implement minor growth needs of existing tenants. The Company will decide on the launch of the project later, taking into account tenant needs and also the building and construction conditions.

However, based on current office market trends, no significant increase in demand for offices is expected in the near future, so the Company has come to the conclusion – as announced on May 13, 2024 – to examine the possibility of developing residential and related service units in the southern development area. Graphisoft Park has therefore concluded a cooperation agreement with Synergy Construction Hungary Ltd. to explore the possibilities. Following the completion of the assessment, the partner company will also have the opportunity – expectedly in the second quarter of 2025 – to purchase the area or the project company that owns it, under the conditions specified in the Cooperation Agreement.