Sale of Romanian Assets (8480Y)
04 Janvier 2011 - 10:17AM
UK Regulatory
TIDMEBP
RNS Number : 8480Y
East Balkan Properties PLC
04 January 2011
4 January 2011
East Balkan Properties PLC ("EBP" or the "Company")
Sale of Romanian Assets
The Board of EBP announces the sale on 31 December 2010 to
Denesol Limited of a 51% controlling interest (the "Interest") in
Balkan Properties Cooperatief U.A., which, through its subsidiaries
Union Properties SRL and Vitantis SRL ("Vitantis") is the owner of
the Vitantis Shopping Centre and through another subsidiary Rivium
Galeria Mall SRL ("Rivium") is the owner of Moldova Mall (together,
the "Assets"). The sale price for the Interest is a nominal 5
Euros, in cash.
The Board of EBP believe that due to excess related
indebtedness, the Assets, which are both located in Romania, have
no meaningful probability of delivering value to shareholders in
EBP and represent a significant cash burden to the EBP Group,
primaily due to the cost of retaining the required asset management
services. The structure of the transaction is such, however, that
EBP will eliminate the cash cost associated with the Assets whilst
retaining a 49% interest in Balkan Properties Cooperatief U.A..
The Vitantis Shopping Centre is located in southeast Bucharest
and is anchored by Carrefour, Techno-market and Praktiker. It hosts
11,362 square meters of retail shop space with tenants including
Inter Sport and DOMO. The shops are currently 82% occupied. Moldova
Mall is located in the central business district of Iasi and is
anchored by Technomarket. The mall has 9,024 square meters of
rentable area which is currently 71% occupied. In the first nine
months of 2010, principally due to declining retail sales activity
throughout Romania, the Vitantis Shopping Centre recorded a net
operating loss of Euro 1.5 million, and the Moldova Mall recorded a
net operating loss of Euro 0.5 million (both before group interest
and property valuation adjustments). Market conditions have
continued to adversely impact the operating results of the Assets
despite the best efforts of the property managers, who the Board
believes to be very competent. The Board does not expect market
conditions for these Assets to improve in the near term.
Net assets before inter-company funding of Vitantis and Rivium
as at 30 June 2010 were negative Euro 0.5 million. Within this
amount, in aggregate, the property assets were valued at Euro 56.8
million with a combined Euro 58.4m in debt at book value attached.
The debt relating specifically to Rivium , which is under a cross
collateral with Vitantis was carried at 30 June 2010 at Euro 15.5m,
which reflected the agreed reduced repayment the lending bank would
accept if the loan were to be refinanced externally. The
outstanding actual principal balance of Rivium's bank borrowings is
Euro 20.5m. This Board believes that such a refinancing is
unrealistic as the property may now be worth less than Euro
15.5m.
The Board has no reason to believe that rental growth of the
magnitude needed to generate the potential of a positive equity
contribution from the Assets for EBP is achievable. The Board
believes that the Assets are excessively over leveraged and EBP is
unable to provide the required funds to support asset management
fees and the capital expenditure requirements for the Assets.
The sale of the Interest will enable EBP (i) to eliminate
certain direct costs, including asset management fees of
approximately Euro 350,000 pa, (ii) to retain some influence for
the recovery of intercompany loans of approximately Euro 450,000,
and (iii) to participate in the long term recovery economics should
the situation in Romania improve.
The property values in the EBP's June 2010 interim accounts were
Directors' valuations whereas the December 2010 year end valuations
will be undertaken by CB Richard Ellis. The Company believes that
the 2010 year-end valuation of the Assets will, as result of the
continuing adverse market conditions referred to above, be
significantly lower than the Directors' interim valuations. In the
unlikely event that the December 2010 year end Asset valuations are
higher than expected, to the extent that they exceed the attached
bank debt, Denesol Limited will be obliged to pay additional
consideration which reflects the surplus value.
Related Party Transaction
Denesol Limited is a Cyprus entity wholly owned by George
Teleman. Pursuant to the provisions of Rule 13 of the AIM Rules,
the sale is deemed to be a related party transaction as Mr Teleman
is the director of various subsidiaries of EBP, including Vitantis
and Rivium. Mr Teleman is also a director of another Romanian
company which holds the property management contracts of all the
commercial properties owned by EBP in the region.
The Directors consider, having consulted with the Company's
nominated adviser, Arbuthnot Securities Limited, that the terms of
the sale of the Interest are fair and reasonable, insofar as the
Company's shareholders are concerned.
For further information please contact:
Michael Uhler
michael.uhler@ebp-plc.com
Tel: +49 172 183 3194
Arbuthnot Securities
Nomad and Broker
Tel: +44 20 7012 2000
Hugh Field
IOMA Fund and Investment Management Ltd
Graham Smith
grahams@iomagroup.co.im
Tel: +44 1624 681 250
This information is provided by RNS
The company news service from the London Stock Exchange
END
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