Third Quarter 2012 Trading Update
09 Novembre 2012 - 7:00AM
GlobeNewswire
Eastern Property Holdings Limited (EPH) / Third Quarter 2012
Trading Update . Processed and transmitted by Thomson Reuters ONE.
The issuer is solely responsible for the content of this
announcement.
FINANCIAL
HIGHLIGHTS
- Strong performance of wholly-owned and
minority-held rental assets.
- All significant YoY variations in the Company's
income statement are positive.
- Though real estate assets have not been appraised
as of 30 September 2012, strong performance of rental assets and
significant progress on the Arbat development projects indicate
stable to-slightly higher valuations.
- Assuming unchanged real estate values, NAV would
be slightly higher than at 30 June 2012.
ASSET
UPDATE
Arbat:
-
Arbat 1 has advanced to façade and
engineering works, with completion expected in 1H13.
-
Though temporarily stopped due to
concerns of preservationists, work on Arbat 2 has been resumed.
Petrovsky
Fort:
Magistral'naya:
Inkonika
Parking:
Geneva
House:
Berlin
House:
Significant
financial events and changes for Q3
2012 are as follows:
Income
- Rental
Income
In the nine months ended 30 September 2012, our wholly-owned rental
properties generated Gross Rental Income of $5.71 million and Net
Rental Income of $4.25 million.
On a Like for Like (LfL) basis, and adjusting for a one-off payment
at Petrovsky Fort in 2011, gross rental income is up 13.7% and net
rental income up 16.2% YoY.
- Interest
Income
The Company generated $5.86 million of interest income in the first
nine months of 2012, compared to $3.07 million for the comparable
period in 2011. The increase is due to additional lending for
construction of the Arbat projects and interest earned on liquid
bond investments.
- Gain on Increased
Ownership
In 2011 EPH negotiated an increased equity stake in the Arbat
Projects in conjunction with providing additional construction
financing. Increasing the Company's stake in the Projects from 50%
to 60%, at no charge to EPH, generated a profit, part of which was
recognized in 4Q11 and part in 1Q12. For the period under review,
EPH recognized a gain of $1.40 million (9M11: $0).
- Other
Income
EPH recognized $0.75 million of other income due to the removal of
a provision for liabilities on the Arbat projects (2011:$0.06
million).
- Net Foreign Exchange
Gain
Moderate and favorable fluctuation between the Russian ruble and
US$ generated a $2.04 million exchange rate gain for the first nine
months of 2012. For the same period in 2011 the Company recognized
a $13.20 million loss due to a strong negative movement in the
exchange rate in the first half of the year.
Expenses
- Professional and
Administration Fees
The Company paid $1.38 million in professional and administration
fees in the first nine months of 2012; roughly half the $2.58
million paid in the same period a year earlier. Exceptionally high
fees in 2011 were primarily due to legal and consulting fees in
conjunction with transactions, delivery and leasing of Geneva
House, and shareholder requests for changes to the Company's
articles and corporate governance.
- Impairment of Development
Property
EPH carries the Arbat apartment premises at cost while under
construction. If cost is below the most recent appraised value, an
impairment is recognized. At 30 September 2011, the Arbat projects
were impaired by $2.05 million. A test for impairment at 30
September 2012, which is made against the appraisal dated 31 May
2012, results in an impairment of $0.70 million. Management
believes, however, that construction progress and the reduced time
remaining until delivery of the projects would lead to a
significantly higher appraisal if done for 30 September 2012, and
that it is likely that no impairment would actually be
required.
- Finance
Costs
Finance costs were $2.23 million in the first nine months of 2012,
compared to $6.07 million a year earlier. The difference is due to
the sale of majority stakes in Berlin and Geneva Houses which were
each leveraged prior to the sale.
- Net Loss from
Sale
Transaction costs incurred in the sale of majority stakes in Berlin
and Geneva House in 2011 generated a loss of $2.19 million. No
corresponding loss was generated in the first nine months of
2012.
- Income
Taxes
In 2011 the Company wrote off a tax credit deemed to be unusable in
the foreseeable future, resulting in most of the $4.81 million
expense recognized for the period. For the first nine months of
2012, the Company recognized an income tax credit of $0.32
million.
Balance Sheet
Assets
- Loans and
Receivables
EPH's loans and receivables increased due to both additional
lending to its joint venture projects and accrual of interest on
existing project loans. To the extent that a borrower is partially
owned by EPH, loans are eliminated in consolidation. This means
that 60% of project financing for the Arbat Projects is classified
as investment in the projects, and 40% as lending.
Loans and receivables amounted to $67.96 million as of 30 September
2012, of which $53.85 million is principal, and $14.11 million is
accrued interest. As of 31 December 2011, loans and receivables
amounted to $51.28 million.
With the exception of small amounts lent to Inkonika Parking and to
the holding company of Berlin House for the Company's pro-rata 10%
share of the repayment of bank debt on the property, all 2012
lending has been for construction of the Arbat Projects.
- Liquid
Assets
EPH has been holding significant cash balances since the
Berlin/Geneva House transaction in order to fund construction on
Arbat, pending bank construction financing.
Given the unattractive rates available on bank deposits, and the
generally predictable nature of construction spending, the Company
has invested funds being held available for construction spending
on the Arbat projects into individual corporate bonds of high
rating and short to medium duration.
For the purpose of this trading update, cash and traded bonds have
been combined and classified as Liquid Assets.
As of 30 September 2012 the Company held $45.84 million of liquid
assets. As of 31 December 2011, the Company held $76.81 million of
liquid assets.£
The $30.97 million reduction in the Company's liquid assets in the
last 9 months has been primarily due to use of cash to fund Arbat
construction and repay the Company's 10% pro-rata share of the
Aareal Bank loan secured by Berlin House.
- Assets Under Development
(at cost)
Assets under development have increased from $76.62 million at 31
December 2011 to $89.42 million at 30 September 2012. The $12.81
million increase is the result of increased construction spending
and strengthening of the RUB against the US$, reduced by an
impairment of $0.70 million.
Liabilities
- Loans from Banks (LT &
ST)
EPH's only third party debt is a loan from UniCredit Bank secured
by Petrovsky Fort. The outstanding balance of the loan at reporting
date was $34.90 million, down $1.35 million from $36.25 million at
31 December 2011. The reduction is due to amortization during the
last 9 months.
*********
Eastern
Property Holdings Ltd. is an SIX Swiss Exchange-listed
real estate development and investment company focusing on Russia.
The company holds interests in office, residential, retail and
parking properties and developments, principally in Moscow and St.
Petersburg. EPH is managed by Valartis International Ltd. a
wholly-owned subsidiary of Valartis Group AG. Additional
information on Eastern Property Holdings is available by contacting
Terry Olin, Tel: +41 22 716 1035, or by visiting the company's
website: www.easternpropertyholdings.com.
*********
Media release including key figures
(PDF)
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The owner of this announcement warrants that:
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(ii) they are solely responsible for the content, accuracy and
originality of the
information contained therein.
Source: Eastern Property Holdings Limited (EPH) via Thomson Reuters
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