European Convergence Develop. CoPLC Shareholder Update (4532K)
30 Juillet 2013 - 11:02AM
UK Regulatory
TIDMECDC
RNS Number : 4532K
European Convergence Develop. CoPLC
30 July 2013
ECDC plc
Shareholder Update July 2013
European Convergence Development Company PLC ("ECDC"
or "The Company")
The Manager presents its latest Shareholder Update
report covering the three month period 1(st) April
2013 to 30(th) June 2013. This report is intended
to update investors on progress over the last three
months and is not intended to deal with the financial
statements of the Company.
Economic Overview BULGARIA
Bulgaria held early parliamentary elections on 12(th)
May and a new Government took office on 29(th) May,
supported by the Bulgarian socialists, a party of
ethnic minorities and the nationalist party in Bulgaria.
From 14(th) June numerous protests have been and are
continuing to be held throughout major cities in Bulgaria
calling for the resignation of the new Government.
The spark that ignited the demonstrations was the
appointment of a controversial media mogul with a
negative public image as head of the powerful national
security agency. The demonstrations are ongoing.
The Gross Domestic Product (GDP) of Bulgaria expanded
0.4% year-on-year in quarter 1 and 0.1%quarter-on-quarter.
Quarter on quarter growth has remained at 0.1% or
less for the last seven quarters and the World Bank
recently reduced its GDP growth for 2013 and 2014
to 1.2% and 2.1% Unemployment in quarter 1 increased
to 13.8% from 12.4% at the end of 2012 and represents
one of highest rates over the last 10 years. Industrial
production declined 6% year on year in May, both exports
and imports fell in May whilst the current account
deficit was EUR120 million. Inflation in June increased
to 2.6% after two months of 2.0% inflation
At the end of April net FDI amounted to a meagre EUR
408.5 million (1.0% of GDP) which was worse than the
low figure of EUR 895.2 million recorded for the same
period for 2012 (2.3% of GDP). In addition to the
struggling Bulgarian economy and limited global appetite
for risk, FDI was affected since February by the unstable
political situation in Bulgaria. At the end of April
2013, the consolidated budget deficit stood at BGN
286.4 million (EUR143 million) on a cash basis (-0.4%
of GDP), while general government debt, including
government guaranteed debt, amounted to 18%of GDP.
Both the deficit and the government debt compare favourably
to other EU countries and the Government has announced
that it will be placing an amended budget before the
Senate in an attempt to drive growth.
ROMANIA
Economic activity remained on an upward trend in quarter
1. GDP expanded by 0.6% quarter on quarter and 2.2%
on an annualised basis. The increase in GDP stemmed
from the positive growth in industrial production
and there is a good chance that this will be maintained
in coming quarters. On the demand side growth came
from a significant increase in exports. Total consumption
decline 0.5% with household consumption declining
0.6%. Analysts estimate around 2% GDP growth for 2013.
In May exports were slightly down on April at EUR4,020
million but represented the third month in a row when
exports exceeded EUR4,000 million since quarter 3,
2011. Imports also declined in May from EUR4,700 million
in April to EUR4,520 million. According to current
estimates, in quarter 1 the foreign trade deficit
achieved its lowest level since 2000 (starting point
of last business cycle) at around 3.0% of GDP. Year
on year Industrial production, which has climbed consistently
over the last four months declined 1.2% in May compare
to May 2012. Inflation in June was 5.37% and has remained
around this level for the last four months indicating
no real inflationary pressure in the system. Interest
rates remained on hold at 5.0%. Retail sales declined
3.25% year on year and just under 3.0% month on month
in May. Consumer spending in quarter 1 declined ROM
125 million quarter on quarter but was almost the
same as the previous year comparison.
The International Monetary Fund (IMF) completed their
seventh and eighth reviews of Romania's performance
under its economic program supported by a 24-month
Stand-By Arrangement (SBA). The favourable outlook
and consequent approval by the IMF allowed the funds
available for Romania to increase to EUR3,571.68 million.
The arrangement is viewed by the Romanian authorities
as precautionary and not intended to be drawn down.
Property Market Bulgaria
Overview Retail
There are no significant changes in the retail market
in Bulgaria in quarter 2 2013 as no Shopping centres
were open for trading during the period and the country's
shopping centre stock remained at 704,000 sqm. As
previously reported, there are three shopping centres
with a total GLA of over 120,000 sqm, which are scheduled
for completion by the end of 2013 and early 2014.
The expected average lettable area per 1,000 inhabitants
for the country after the opening of the scheduled
Retail centres will increase to approximately 115
sqm compared to 247 sqm for Europe as a whole and
200 sqm for CEE. In quarter 2 2013, the shopping centre
stock per capita in Plovdiv, where Galleria Plovdiv
is located, was less than 200 sqm per 1,000 inhabitants,
while the comparable figure for Rousse, where Mega
Mall Rousse is located, was approximately 300 sqm
per 1,000 inhabitants.
Quarter 2 of 2013 brought no surprises on the demand
site. The retail market remained pro-tenant orientated
due to the increasing availability of modern retail
space and low turnovers.
The investment market remained stagnant with no property
investments undertaken in the quarter 2 of 2013.
Romania
No notable transactions were reported in the second
quarter of 2013 though there are several commercial
real estate projects in advanced stages of negotiation,
predominantly in the retail sector. As JLL reports,
timelines remain lengthy and they expect to see closing
only in the letter part of the year. NEPI was again
one of the most active investors securing several
sites and announcing further developments plans following
an additional capital raise.
Commercial Office
In the first half of the year total investment volume
in Romania was approximately EUR62 million represented
by one transaction reported last quarter, the sale
of Lakeview to NEPI. This was the largest institutional
transaction in the office sector in Bucharest since
2010. To put this investment volume into context,
the similar figure for Poland was EUR970 million and
for Slovakia it was twice Romania.
In Quarter 1 72,000sqm of office space was delivered
in 3 buildings: Sky Tower, Floreasca Office and West
Gate H5, taking the total modern office stock in Bucharest
over the 2 million sqm mark. Over 2013 the pipeline
for the remainder of 2013 is estimated at approximately
50,000 sqm, taking the estimated yearend total above
120,000 sqm, more than 2.5 times the supply delivered
in 2012.
In Quarter 1 take up is estimated at 63,000 sqm with
over 59 transactions completed. It is to be noted
that that only 3% were represented by pre-leases,
the rest being new leases and renewals.
Prime headline rent remained unchanged to the end
of quarter 1 at EUR 18.50 per sqm per month. These
levels are expected to soften slightly. Incentive
packages are still common practice although the value
will vary significantly depending on the type of space
being let. Overall vacancy rate is estimated at 16%
but with significant variations depending on submarket
and property type, with Pipera North and Baneasa reaching
more than 35%. As a change from previous quarters
a number of new developments totalling up to c. 170,000
sqm have been announced in the Barbu Vacarescu sub-market,
all aiming to be delivered within a 12-18 months period.
Only Portland Trust is currently building its Floreasca
Park at a rapid pace. Developers such as Skanska,
Ioanis Papalekas, and Nusco have secured building
sites and are currently going through the building
approval process. For 2014, the supply is estimated
at about 150,000sqm.
The specification of new buildings is improving and
most developers are looking for energy efficient and
green certificated buildings, following both occupier
and investor interest for such improvements.
Retail
Food and fashion retailers continue to be very active
on all fronts with Auchan and Cora (among hypermarkets),
Mega Image and Carrefour Express (among supermarkets)
and Lidl (among discounters) aggressively expanding
their networks in Bucharest and in top regional cities.
As mentioned before the purchase of the Real operations
by Auchan will bring a new dynamic into the market.
Fashion retailers are concentrating on existing schemes
given the scarcity of new pipeline being developed.
Prime shopping centre rents are quoted between EUR60-70
per sqm per month as rental levels continue to be
stable. Prime high street units are in the same range,
but a forecast to soften over the next 6-12 considering
the availability of numerous units along main retail
streets.
After significant openings during the last few years,
according to Jones Lang LaSalle (JLL) the estimated
deliveries for 2013 are only set to reach about 120,000sqm
in 5 projects in 2013 and 65,000 in 3 projects in
2014. The main projects looking to be developed in
the near future are: Promenada Mall (part of the Raiffeisen
Evolution Sky Tower complex), AFI Palace Ploiesti,
the extension of the Anchor Group projects (Bucuresti
Mall and Plaza Romania), the NEPI and Cora projects
in Brasov and the Corall in Constanta.
Development Projects Galleria Plovdiv
Bulgaria At the beginning of quarter 2 the overall occupancy
of the Mall had remained approximately 75% of the
lettable area. The higher occupancy levels were expected
to trigger certain thresholds for major tenants to
start making rental payments which has not been the
case and negotiations are ongoing with the majority
of these tenants which is negatively affecting the
cash flow position of the development SPV.
Despite the achieved increase in occupancy, additional
leasing continues to be difficult and is highly dependent
upon the successful implementation of the leasing
strategy developed by the international consultant.
During the period the interim contract with the international
consultant was extended by a further two months. During
this period, it is hoped that the negotiations with
the Bank will progress and a long term contract negotiated
with the international consultant, which will allow
the implementation of the strategy.
In line with the strategy, the initial negotiations
with several international tenants continued. The
signing of such tenants will be heavily dependent
upon the availability of fitting out contributions
to new tenant, as well as meeting their demands for
co-tenancy presence of other international brands.
This makes letting of new areas even more challenging
and somewhat uncertain.
The discussions with the bank to restructure the banking
facility have slowed but it is hoped that they will
be resumed in the next quarter as any further delays
may negatively impact the project. The facility continues
to be in default and any further equity injection
by the project company will be subject to strict conditions
and will require the formal sanction by the Directors
of ECDC.
The shareholders have provided very limited temporary
funding to support the international consultant in
quarter 2.
At the end of the reported period the centre manager
left the project and the shareholders are considering
various options to address this issue. The day to
day operations are presently carried out by the technical
manager.
The Mall has been unable to meet all of its operational
obligations from the collected rental and service
charge income, which has led to increasing overdue
payments to service providers and the fiscal authorities.
Unless the bank restructuring is resolved quickly
and fresh cash made available to cover operational
needs, the company faces serious liquidity problems
and even foreclosure risks, which threaten its operations.
Mega Mall Rousse
During quarter 2, occupancy dropped from 60% to 56%
following the closure of the anchor children's toy
operator Hippoland. As reported, the management team
immediately started initial talks with another operator
in order to secure an adequate replacement. Advanced
negotiations with a bank and café operator on
the ground floor are in progress, with lease agreements
under discussions. During quarter 2 the management
team secured a replacement café operator for
the first floor which is expected to improve the rent
collection. Leasing is still proving to be extremely
difficult and as previously announced, is highly dependent
upon the provision of fit-out contributions.
As previously reported, the bank has initiated a series
of aggressive actions culminating in making of the
whole facility payable end of April 2013. The Manager
and representatives of the partner have held meetings
with the Bank and discussed various options going
forward. Agreeing terms with the Bank is paramount,
as otherwise the viability of the Project will be
severely undermined, especially given overdue liabilities
which pose some foreclosure risks.
Trade Centre Sliven
During the quarter the operating company distributed
the retained profits enabling our Partner to repay
the majority of his outstanding loan. In total ECDC
received BGN 876K (c. EUR 438K) of which c. BGN 485K
(c. EUR 243K) represented loan repayment and the balance
- a distribution.
As previously announced, there has been no change
in the position regarding the development itself and
the Manager is considering various alternatives for
the site.
Bourgas Retail Park
There has been no further progress made with this
development.
Development Projects Cascade
Romania The building is fully leased and generating income
in line with the budget. All the financial obligations
of the company are up to date with there are no outstanding
debtors.
With the completion of the leasing process the partner
has managed to position the building as one of the
premier office products in the Bucharest real estate
market. There is continued interest in the building
by potential tenants, with inquiries being addressed
and managed by the building's management team.
In accordance with the most recent loan agreement
the company has made use of its option and paid down
some additional debt on the first anniversary.
Oradea and Iasi Shopping Centres
Further to the Cypriot crisis reported in the last
shareholder update, the restructuring of the loans
for both Iasi and Oradea is still pending. It is expected
that the current situation will continue for a few
more months until a solution is found for the current
loan book of Bank of Cyprus Romania.
The other banks in the syndicate are providing support
for daily operations although the banks are often
prioritizing repayments of interest and bank related
fees in front of service charge related expenses.
AREOF has announced at the beginning of June that
the Oradea loan facility is in default and that pending
remedy of the default, the banks will continue to
sweep the accounts at the expense of service charge
which will put pressure on the cash flow. An additional
threat to the operations of AREOF came with the announcement
made by NEPI that it is in advanced negotiations for
the purchase of part of the bank debt in another shopping
centre owned by AREOF, namely Sibiu Shopping City.
Given the debt facility expiry in November this year,
it is anticipated that NEPI wish to push for the full
purchase of the debt and attempt to take over the
asset. Although not directly impacting the investments
in Iasi and Oradea, if NEPI are successful in achieving
its objective it could significantly weaken AREOF's
position thereby threatening the security of ECDC's
investment. Various solutions and courses of action
are currently evaluated by AREOF in finding a favourable
outcome to this threat including a legal claim through
the Romanian courts against NEPI as to the practices
used in seeking to acquire part of the bank debt.
AREOF has remedied the default occurred under the
Sibiu 2 loan agreement by making a EUR 1m cash injection
in the company in the beginning of May.
Oradea Shopping Centre
ERA Oradea has consistently increased traffic every
month this year recording a 40% increase in traffic
for May year on year. Carrefour reported a 20% increase
in sales year on year in May following a 6% decline
for April. The late Easter accounted for most of this
increase, together with a range of attractive marketing
events designed to generate traffic and sales growth.
As Easter is traditionally a time for purchasing new
clothes, it is not surprising that fashion and footwear
retailers traded higher for May. The increased expenditure
for food, electrical and fashion was at the expense
of furniture retailers, where sales declined significantly.
Another large furniture tenant was secured and there
are ongoing negotiations with a large fashion retailer
following Sprider's recent closure of their store
due to the company's insolvency in Greece.
Letting activity remains competitive given the existence
of the three other shopping centres in the city. The
absence of available tenant fit out facility is significantly
limiting possible transactions, as this remains an
important influencing factor under the current tenant
favourable market conditions.
Iasi Shopping Centre
Monthly traffic remains consistently lower year on
year, due mainly to the retail competition within
Iasi. The City council has embarked on a number of
major road improvement works simultaneously throughout
the city which has reduced the number of people willing
to drive to the centre. April's marketing activities
and promotions repeated March's success and produced
a 20% month on month traffic increase. This was also
true for the first half of May for the Easter campaign
period. The improved weather from early April has
also helped.
Retailer sales increased with the improved footfall
but the late Easter delayed the peak sales period.
The very warm weather in early May helped drive sales
for shoes, accessories, cosmetic, toys and children's
clothes.
New and interesting sales promotions, gifts, prizes
and giveaways are largely driving the increased customer
traffic and sales. Marketing budgets have increased
to ensure that campaigns are being extensively marketed
throughout the city. Surprisingly after the Easter
campaigns finished, traffic and sales declined for
the second half of May producing an overall monthly
footfall decline against April. Clearly increased
marketing activities and increased expenditure will
have to be maintained for the next 12 months to maintain
and increase visitor numbers.
Sprider closed their store in May, for the reason
mentioned above and will be replaced by a discount
fashion tenant trading as San Francisco. This unit
will be selling end of range items at discounted prices
and it is anticipated that this will be an attractive
draw for customers. Further lettings to Tiffany (tailors
98 sqm), Dry Cleaners (98 sqm), Schneider (fashion
129 sqm), were signed and Divanissimi (furniture 284
sqm) is opening next month.
Investor Relations
Tel: + 44 (0)20 7518 2100 Fax: + 44 (0)20 7518 2199
Email: marketing@charlemagnecapital.com Website: www.charlemagnecapital.com
Issued by Charlemagne Capital (UK) Limited, 39 St
James's Street, London SW1A 1JD
A company authorised and regulated by the Financial
Conduct Authority
The purpose of this document is to provide a mere
legal and tax outline of the structure proposed. This
document cannot be regarded as a fully comprehensive
report or as a binding legal and tax opinion since
it has been prepared solely for information purposes.
Therefore, investors willing to obtain the comfort
they may deem necessary as to the application of the
above-mentioned tax advantages in order to invest
into this structure should seek and rely on its own
independent advice. This document does not constitute
an offer to sell or solicitation of an offer to buy
shares in the Company and subscriptions for shares
in the Company may only be made on the terms and subject
to the conditions (and risk factors) contained in
the prospectus of the Company. Potential investors
should carefully read the prospectus to be issued
by the Company which contains significant additional
information needed to evaluate an investment in the
Company. This document has not been approved by a
competent supervisory authority and no supervisory
authority has consented to the issue of this document.
The information in this document/financial promotion
is confidential and it should not be distributed or
passed on, directly or indirectly, by the recipient
to any other person without the prior written consent
of Charlemagne Capital (UK) Limited. This document
and shares in the Company shall not be distributed,
offered or sold in any jurisdiction in which such
distribution, offer or sale would be unlawful and
until the requirements of such jurisdiction have been
satisfied. This document is not intended for public
use or distribution. The purchase of shares in the
Company constitutes a high risk investment and investors
may lose a substantial portion or even all of the
money they invest in the Company. An investment in
the Company is, therefore, suitable only for financially
sophisticated investors who are capable of evaluating
the risks and merits of such investment and who have
sufficient resources to bear any loss that might result
from such investment. If you are in any doubt about
the contents of this document you should consult an
independent financial adviser. Investors in the Company
should note that: past performance should not be seen
as an indication of future performance; investments
denominated in foreign currencies result in the risk
of loss from currency movements as well as movements
in the value, price or income derived from the investments
themselves; and there are additional risks associated
with investments (made directly or through investment
vehicles which invest) in emerging or developing markets.
Charlemagne Capital (UK) Limited does not guarantee
the accuracy, adequacy or completeness of any information
contained herein and is not responsible for any omissions
or for the results obtained from such information.
The information is indicative only and is for background
purposes and is subject to material updating, revision,
amendment and verification. All quoted returns are
illustrative. No representation or warranty, express
or implied, is made as to the matters stated in this
document and no liability whatsoever is accepted by
Charlemagne Capital (UK) Limited or any other person
in relation thereto.
==============================================================================
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCWGURPMUPWURU
Eur.Conv.Dev (LSE:ECDC)
Graphique Historique de l'Action
De Oct 2024 à Nov 2024
Eur.Conv.Dev (LSE:ECDC)
Graphique Historique de l'Action
De Nov 2023 à Nov 2024
