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Equest Balkan Properties plc ("EBP" / "Company")
TRADING UPDATE
Equest Balkan Properties plc, the specialist property investment company focused on commercial, retail and industrial property in South Eastern Europe and primarily Bulgaria and Romania, is pleased to issue an update its progress ahead of its interim results to be announced on 30 August 2006.
EBP's shares commenced trading on the Alternative Investment Market of the London Stock Exchange on 14 December 2005, having raised ˆ198 million to invest in, or around, the major cities of Bulgaria, Romania, Croatia, Turkey and other South Eastern European countries. It has successfully expanded its portfolio and has so far committed ˆ172 million in the region, representing 87% of the initial ˆ198 million raised. As a result of the investment programme achieved to date and a good pipeline of new projects, EBP remains on track to achieve the initial target dividend yield of 7.5% based on the IPO placing price.
The Company's investments to date are as follows:
·
The acquisition of a 70% equity interest in Aurora Property Ventures BV (“Aurora”), a newly formed property company specialising in site acquisition, development finance, ownership and management of retail assets in the Republic of Serbia, in partnership with K&K, Bulgaria's largest electronics retail group. As announced to shareholders on 1 June 2006, the interest was acquired for up to ˆ19.8 million in cash, payable over 18 months with an initial payment of ˆ6 million. Aurora has already acquired five “big box” retail development sites to accommodate the development of some 42,000 sq m of retail warehouse space. EBP anticipates receiving a net yield of circa 10% on its drawn down investment during the development phase, an un-leveraged net rental yield of 11% on completion and, following rental step-ups, an annual yield of up to 15% by the end of the fourth year after the completion of the individual retail warehouse unit.
·
Also as announced on 1 June 2006, the Company acquired the Jules Michelet Office Building (“Jules Michelet”) in central Bucharest for a debt free consideration of some ˆ7 million. The current unleveraged net yield on the acquisition after costs is 8.82% and the company expects the yield to increase in tandem with new leases for the property in January 2008. The building is currently let to The European Commission in Romania.
·
City Center Mall, a shopping centre under development in central Sofia, Bulgaria, was acquired in March 2006 for a total cash consideration of ˆ94 million, representing an unleveraged investment yield on full occupancy of approximately 9% by the end of 2007. The City Center Mall is one of the two leading retail centres in central Sofia, comprising 44,424 sq m of built area and 22,146 sq m of lettable space on six levels, with underground parking for circa 500 cars. Since opening the mall has attracted significant footfall with an estimated 25,000 visitors per day. Currently some 90% of the units have been let to both local and international retailers and the mall's management team expects to reach full occupancy by December 2006. The mall's centre management is also currently in the process of developing a plan for generating additional revenue streams in order to build the mall's full income potential and thereby achieve EBP's target unleveraged yield for this investment of approximately 9% by the end of 2007.
·
The Moldova Mall, a retail mall in central Iasi, Romania, was also acquired in March for a total cash consideration of ˆ34.5 million. This represents an unleveraged investment yield on full occupancy estimated to be in excess of 9%. The Moldova Mall shopping mall in central Iasi, Romania comprises 19,000 sq m of built area and 9,500 sq m of lettable retail space on five levels, with above-ground parking for 150 cars and the opportunity for underground parking for a further 250 cars and a land plot for developing up to 1,000 sq m of additional retail space. The mall underwent a major refurbishment and was re-opened to the public in April 2006, since when it has attracted strong footfall.
·
Serdika Hotel, Sofia, Bulgaria, currently operated as a 3 star hotel with 131 rooms in a prime location in the city centre of Sofia, was acquired in January 2006 for a cash consideration of approximately ˆ10 million, including transaction costs. Based on current market rates and the planned refurbishment programme, the anticipated rental income should meet or exceed the target yield of the Company.
·
A fully let office building totalling 3,150 sq metres in the Domenii area in central Bucharest, Romania was acquired for a cash consideration of ˆ4.75 million, including transaction costs, representing a net initial yield of approximately 9.2%. The Company intends to increase the property's rental income through a programme of active asset management initiatives including parking space rental, service charge reviews and renegotiation of rental levels in 2007 at contract expiry dates.
The Company expects to be in a position to announce a further property acquisition in the near future and is pleased to confirm that the pipeline of additional investment opportunities remains strong.
Commenting on the Company's performance, Petri Karjalainen, Managing Partner of Equest Partners Limited, EBP's Investment Adviser, said:
“The first six months for Equest Balkan Properties has been very active. We have made several substantial acquisitions in Bulgaria, Romania and Serbia, in line with our objectives presented to shareholders at the launch of EBP and, going forward, continue to have a good pipeline of new projects, many of which are in active negotiations. We are also looking to complete on some investments remaining from the exclusivity arrangements put in place for the launch of EBP. Additionally, Equest Partners, EBP's Investment Adviser, has continued to expand its property management and investment team.
“EBP has now almost completed its initial phase of investing its equity capital and is now in the process of leveraging the portfolio through debt in order to reach a portfolio size that would support the target 7.5% target initial dividend. Negotiations and progress with the lending banks is proceeding well and we expect to have the initial lending structures in place in the coming weeks.
“The Balkan region, especially Romania and Bulgaria, are approaching membership of the European Union. In tandem with this significant political development, property yields in the region have converged closer to other EU accession country yields. This development is favourable both for the prospects of the properties currently held by EBP and for the availability and cost of debt in the region. Simultaneously EBP has increased its focus on evaluating conversion or development projects in the region in order to maintain and increase its portfolio yields.
“We will present our financial figures for the first six months of EBP's activities on 30 August and, following this, look forward to meeting with our shareholders as well as with new investors who wish to invest in our region. We look forward to establishing further EBP position as the premier commercial property investment company for the South East European region.”
For further information please contact:
Equest Partners Limited
+ 44 20 7240 7600
Petri Karjalainen
Naomi Kora
Financial Dynamics
+ 44 20 7831 3113
Stephanie Highett
Ed Gascoigne-Pees
Dido Laurimore
Notes to Editors:
Equest Balkan Properties plc is a commercial property investment company focused on South Eastern Europe and primarily
Equest Partners Limited, the Company's Investment Adviser, is an independent investment management and advisory firm regulated by the FSA. Headquartered in
