Secure Property Development & Invest PLC/ Index: AIM / Epic: SPDI / Sector: Real Estate

28 June 2017

Secure Property Development & Investment PLC ('SPDI' or 'the Company')

2016 Audited Annual Results

 

Secure Property Development & Investment PLC, the AIM quoted South Eastern European focused property company, is pleased to announce its full year audited financial results for the year ended 31 December 2016.

 

Financial Highlights

Diversified portfolio of South Eastern European prime income producing properties; the majority of which are let to blue chip tenants and continue to provide a cash flow generative platform:

·     8% increase in operating income to €6.4 million (2015: €5.9 million) thanks to active portfolio management

·     EBITDA from operations sustained at the same positive level as 2015 at ~€2.5 million in 2016, due to Nestle break fee and reduced corporate and property costs

Significant asset backing behind the Company:

·     Net Equity of €38.9 million as at 31 December 2016 (31 December 2016: €42.5 million) - reduction due to sale of non-core assets

·     In GBP / share terms, 6% increase in net asset value per share to 37p (2015: 35p) (mostly due to Sterling depreciation) - circa 100% premium to current share price

Successful management of portfolio costs:

·     13% reduction in administrative expenses to €2.6 million (2015: €3 million) - in line with strategy to reduce corporate costs by ~30% by 2017 vis a vis 2015

·     16% reduction in interest costs ~€3.2 million (2015: ~€3.7m) - expected to decrease further in 2017 towards ~€2.5m following Terminal Brovary sale and repayment of the EBRD ~€12 million debt

·     12% reduction in operational gearing to 46% (2015: 52%)

 

Operational Highlights

Active management of portfolio to maximise income and capital appreciation of each asset:

·     Secured 100% occupancy for the Brovary Terminal in Ukraine following signing of fixed four-year lease agreement generating ~US$150,000 of Net Operating Income per month -sale of the asset was completed post period end (see below)

·     Sale of the Linda residential portfolio in Bucharest for €660,000 gross - successfully negotiated settlement of associated debt at a 26% haircut

·     Successful refinancing of retail property in Romania which included an extension of the lease to Praktiker, the blue chip regional DIY retailer, for an additional 5 years until 2025

·     €1.4 million cash settlement reached with Nestle on the early termination of its lease on the Innovations Logistics Terminal in Romania - equivalent to eighteen months of rent, and up to two years when other gains are taken into account

 

Post Period End Highlights

·     Completion of the sale of Brovary Terminal at a Gross Asset Value of over €16 million generating a profit for SPDI of ~€2.7 million and a cash inflow of more than €3 million

·     Signing of lease agreement with Aquila srl, a large Romanian logistics operator, for 5,740 sqm of space in the Innovations Logistics Park in Bucharest, with an annual rent of ~€300,000

·     Received over €100,000 net of VAT for the provision of asset management services to a third party in Romania

·     Issue of new ordinary shares to the Non-Executive Directors of the Company who were in office in 2015 in lieu of fees accrued in 2015 at £0.35 per share, a 100% premium to the previous closing share price on 12 May 2017 -   d emonstrating strong support

 

Lambros G. Anagnostopoulos, Chief Executive Officer, said, "SPDI's strategy to acquire prime real estate at attractive prices in selected South Eastern European countries we favour, is underpinned by strong asset management that allows us to extract income and generate value from all our assets.  Following a series of acquisitions in 2014 and 2015, the year under review was a period during which the active management of our properties would come to the fore, by consolidating our property portfolio, streamlining our operating structure and costs and focusing on generating value of core and non-core assets alike. 

 

"An 8% increase in full year net operating income to €6.4 million demonstrates the progress we have made, even during a consolidation period.  Today our core portfolio of prime real estate in selected South Eastern European countries not only provides exposure to a region that is enjoying rapid growth thanks to its growing economies and the standards of living of their residents, its strategic importance in terms of continental trade flows and the ongoing yield compression play, but also a highly cash generative and asset backed platform.  We intend to take full advantage of this to not only continue our corporate and cost consolidation but also to acquire additional properties that match our criteria in the year ahead and beyond, as we look to transform SPDI into a leading London listed property company focused on selected Emerging European countries."

 

* * ENDS * *

 

Copies of the Annual report and Accounts are being posted to Shareholders today and are available on the Company's website at www.secure-property.eu

 

For further information please visit www.secure-property.eu or contact:

 

Lambros Anagnostopoulos Constantinos Bitros	SPDI	Tel: +357 22 030783
Andrew Emmott Ritchie Balmer	Strand Hanson Limited	Tel: +44 (0) 20 7409 3494
Jon Belliss Elliot Hance	Beaufort Securities Limited	Tel: +44 (0) 20 7382 8300
Lottie Brocklehurst Frank Buhagiar	St Brides Partners Ltd	Tel: +44 (0) 20 7236 1177

Notes to Editors

Secure Property Development and Investment plc is an AIM listed property development and investment company focused on the South East European markets.  The Company's strategy is focused on generating healthy investment returns principally derived from: the operation of income generating commercial properties and capital appreciation through investment in high yield real estate assets.  The Company is focused primarily on commercial and industrial property in populous locations with blue chip tenants on long term rental contracts.  The Company's senior management consists of a team of executives that possess extensive experience in managing real estate companies both in the private and the publicly listed sector, in various European countries.

 

1.    Chairman's Statement

 

While 2016 was in many respects a year of consolidation, we are hopeful that 2017 will be a year of growth. SPDI's strategy for the past few years has been to capitalise on favorable market dynamics of Romania, Bulgaria and selectively Greece while reducing exposure to Ukraine. In 2016 with the agreed profitable sale of the Group's principal Ukrainian asset, Terminal Brovary, we achieved a major goal consistent with this allocation strategy, generating cash for new investments planned in target countries in 2017. 

 

During the year the favorable fundamentals of our target markets continued to prevail, and as economic growth picked up across the Eurozone in the latter part of 2016 and early 2017, we remain convinced that will continue to lead to even faster economic growth in Romania and Bulgaria, with a more stable outlook for Greece. 

 

Property markets in our region have continued to experience a steady yield compression as the global search for yield has forced funds to deploy new allocations of cash to these markets as the more established CEE (Poland, Czech, Hungary) property markets have become increasingly crowded with foreign buyers. 

 

The Board remains confident that SPDI is in the right place, at the right time. We are grateful to our shareholders for their continued support in 2016, and look forward capitalising upon the significant opportunities that we can see for the Group in 2017.

 

Paul Ensor

 

Chairman of the Board

 

2.      Letter to the Shareholders

                                                                                                                                                                                27 June 2017

Dear Shareholders,

 

2016 has been a year of active portfolio management, as we continue with our strategy to transform SPDI into a leading London listed property company focused on selected South East European countries.  In early 2017, our Company secured both a profitable exit from its main Ukraine income producing asset (Terminal Brovary) and a cash generating agreement based on the departure of the main tenant in its Romanian logistics terminal (the Innovations Park). The result of the two deals was to generate substantial cash and profits, albeit with a reduction of the income producing capacity of the Company at the same time. Finalising these deals took up most of 2016 and, as a result, the Company not only had to wait both for the cash inflow to be realised, but, more importantly, to roll out the next steps of our growth strategy that were to follow completion of the two deals.  With the two deals completed, we are now ready for 2017 and beyond and look forward to the remainder of the year with optimism.

 

Underpinning our confidence is the continuing progress being made by the markets in which the Company is active.  In 2016, Romania maintained its position as the fastest growing economy of the European Union and saw property prices rise across all sectors. While property development picked up for the first time since the crisis that hit Europe in 2008/9, the Company managed to sell an increased number of non-core residential assets as the South Eastern European property market improved markedly.

 

Greece experienced a normalisation of its economic indices along with its relations with its lenders (the EU, the ECB and the IMF) hinting to a possible pick up of the economic cycle that has been lacking in recent years. Meanwhile, Ukraine's economy proved resilient despite relations with Russia remaining tense.  The local residential market in particular saw a substantial pick-up in development activity.

 

In addition to an increased pace of sales of non-core residential units in both Romania and Bulgaria, the Company fully let the Brovary terminal, the occupancy of which had been impacted by the war and the resulting 70% + depreciation of the local currency (UAH) in Ukraine, and eventually succeeded in selling it for a substantial profit.  On the other hand, it was unable to market the space vacated by Nestle in the Terminal Innovations Logistics Park in Bucharest due to complications with the lease termination deal linked with the lending bank. Ultimately, the Company agreed with Nestle to effect their departure in August 2016, at a fee equal to eighteen months' rent. However, the extended period it took for the lending bank to sign off on the deal meant marketing the Innovation's empty space was not possible during the year. In parallel, a bigger deal with Blue House, the property private equity group from whom SPDI acquired two buildings in 2015, was shelved. Although SPDI had also secured an option to buy the remaining stake of the property bought in 2015 in Bulgaria, the Company decided not to exercise that option and to return the 20% stake in the Sofia office building Autounion, choosing to consolidate its assets in the faster growing Romania instead.

 

Finally, the Company continued generating value from its existing assets via refinancings, including the Praktiker let property in Romania.  Here the tenant agreed to extend its lease by five additional years to 2025, while the lending bank agreed to a refinancing scheme that extends the maturity of the loan, and reduces the annual amortisation by ~70%.

 

2016 saw SPDI consolidate and prepare for the next phase of growth in 2017 and beyond. Despite the impressive results of the last three years, there is much more to go for, particularly in growing our net operating income to where we want it to be.  SPDI's Directors and Management remain focussed on achieving this so that 2017 can be yet another trend setting year for SPDI.

 

Best regards,

Lambros G. Anagnostopoulos

Chief Executive Officer

 

3.    Management Report

 

3.1.         Corporate Overview & Financial Performance

 

In 2016 the Company's management focused on executing a) the profitable sale of its logistics Terminal Brovary in Ukraine and b) the cash generating termination of Nestle's lease agreement for its logistics Innovations Terminal. In parallel, the Company picked up the pace of disposing of non-core assets to take advantage of rising market prices; restructured the operations and financing of core assets to generate further value; and prepared the ground for the next phase of growth by creating a strong pipeline of potential acquisitions.

 

The political instability in Ukraine appears to have tapered off, even though the country still experiences some war like conditions on its border with Russia in the East. As the economy demonstrated signs of improvement, the Company not only managed to fully let its main logistics asset in the country (which it later sold) but also entertained sale proposals with a view to reducing its presence in this region of South East Europe which has been in constant turmoil since 2014.

 

Greece continues to be in an adverse economic situation of austerity and debt. As the current staff review   ¹ has been successfully completed in mid-June 2017, the ensuing agreement with the EU, the IMF and the ESM will facilitate the country's return to economic normality that will allow GDP growth. Should the current debt be reduced in terms of the Net Present Value sometime in the near future, this will further enhance the potential for growth and will stimulate the country's productive force after 10 years of recession during which 30% of the GDP has been lost.

 

During 2016, the Company proceeded with capitalizing various shareholder loans that have been provided by itself and its minority partners to Green Lake in the past.

 

At the same time, the Company devoted significant time and effort in restructuring its debt to long term, an effort that is expected to bear fruits within 2017, while the sale of Terminal Brovary will result in further deleveraging of the Company. At the same time, the said sale will bring the annual average cost of servicing the debt down to ~4.7% as the EBRD loan was the most expensive loan for the Company.

 

Going forward, the said transaction will also facilitate the simplification of the annual financial reporting as the Ukrainian foreign exchange variation (and to a far lesser degree the EUR/USD one) that has been having a considerable effect on the annual results will practically be taken out of the equation.

 

In 2016, the Company continued optimizing its corporate structure by merging or closing down low activity SPV corporate entities, an effort that will continue in 2017.

 

Taking advantage of its recently installed new ERP system, based on Microsoft Dynamics (Navision), the Company expects 2017 to show both the real-time monitoring of income and expenses across all countries as well as a reduction in operating expenses related to such tasks.

As management was focused on executing the two main deals, the sale of Terminal Brovary and closing the Nestle departure from the Innovations Park, and in view of the pending reduction in Net Operating Income as a result of the former, it allocated time to plan for a more efficient cost structure. Being active in four countries, registered in a fifth (Cyprus) and listed in a sixth one (UK), the Company has a cost base that can be deemed to be misaligned with the size of its property asset portfolio. As such Management, together with the Board, planned and commissioned a restructuring plan that would see the corporate costs of the Company drop in 2017 by ~30% vis a vis 2015 to no more than €2m. A number of senior executives decided to contribute to such effort by deferring part of their salary, while the directors decided to relinquish their own.  Consequently, the Company continues to benefit from high quality human assets despite its income pool shrinking following the sale of its key income generating asset.

 

The Company enjoys the support of a large number of active experienced directors who have been guiding the Company without receiving any monetary remuneration.

 

SPDI increased operating income by ~10% in 2016, even though its primary Ukrainian asset, Terminal Brovary, was partially empty in the first quarter of the year.  An increase in non-core asset sales as well as the settlement with Nestle for breaking its contract at Innovations warehouse, more than compensated for such lost income, while EoS Business Park in Romania and GED warehouse in Greece recorded stable income. The Company also managed to extend the Praktiker lease for another 5 years, stabilising the asset, albeit at a lower annual rental income. As a result, the Company's annual operating income² (including non-core asset sales) increased by ~8% to €6.4m in 2016 compared with €5.9m in 2015.

 

In terms of the income stemming from SPDI's core income producing assets, the Company recorded ~€6m including the Nestle break fee (of an aggregate ~€1.7 or 18 months of rental income plus 3 months guarantee) vs €5.2m in 2015.

 

EBITDA from operations remained at the same levels with 2015 to ~€2.5m in 2016, mainly as a result of the Nestle break fee as well as of the reduced corporate and property costs and even though the Company has lost its income from Autounion.

 

Interest costs were reduced by 16% to ~€3.2m vs ~€3.7m in 2015 and are expected to further decrease towards ~€2.5m following completion of the Terminal Brovary sale and the ensuing repayment of the EBRD ~€12m debt which will bring the average debt servicing cost to ~4.7% in 2017.

 

[1]Current staff review is the official designation of the paper prepared by the staff of the 3 institutions that is submitted to Eurogroup for approval.

 

2 The operating income does not include the % participation by the Company of the operating income of the properties that the Company maintains a minority participation in, which is reported as income from associates, but includes net income resulting from on-going sales of residential assets (sales income minus the cost of the asset sold).

 

 

 

 

 

EUR	2016	2015
Rental, Utilities, Management  & Sale of electricity  Income	6.070.940	5.448.960
Income from Sale of Asset less Cost of properties sold	283.934	537.560
Income from Operations of Investments	6.354.874	5.986.520
Asset operating expenses	(992.441)	(1.124.583)
Net Operating Income from Investments	5.362.433	4.861.937
Share of profits from associates (ex revaluation)	247.720	166.863
Net Income from Available for Sale assets (ex revaluation)	(485.529)	485.529
Total Income	5.124.624	5.514.329
Administration expenses	(2.614.188)	(3.013.942)
Operating Result (EBITDA)	2.510.436	2.500.387
Finance costs, net	(3.181.625)	(3.771.100)
Income tax expense	(174.315)	(80.188)
Operating Result after finance and tax expenses for the year	(845.504)	(1.350.901)
Other income / (expenses), net	(1.304.304)	653.856
Other finance (costs) / income and interest write off	595.917	(603.495)
Gain realized on acquisition of subsidiaries	-	2.181.834
Fair Value (Losses) from investments	(36.549)	(6.935.306)
Disposal of Autounion	(206.491)
Foreign exchange losses, net	(1.700.333)	(10.659.602)
Result  for the year	(3.497.264)	(16.713.614)

 

 

Excluding a) the revaluation losses attributable mostly to the situation in Ukraine, b) the foreign exchange losses (related to the EBRD Terminal Brovary loan or the intercompany loans that have been affected on paper by the devaluation of the UAH) and c) any one off gains/losses, costs or impairments/provisions related to the properties acquired during the previous period the table above compares the performance of the last 2 operating periods with operating result after finance expenses and tax  being improved by 37% from minus €1.3m to a negative €850k.

 

3.2.         Property Holdings

The Company's portfolio at year end consists of commercial income producing and residential properties in Romania, Greece, Bulgaria and Ukraine as well as land plots in Ukraine, Bulgaria and Romania.

 

Commercial Property	Location	Key Features
GED Logistics Terminal	Athens, Greece	Gross Leasable Area:	17,756 sqm
		Anchor Tenant:	Kuehne + Nagel and GE Dimitriou SA
		Occupancy Rate:	100%
EOS Business Park	Bucharest, Romania	Gross Leasable Area:	3,386 sqm
		Anchor Tenant:	Danone Romania lease runs to 2026
		Occupancy Rate:	100%
Praktiker Craiova	Craiova, Romania	Gross Leasable Area:	9,385 sqm
		Anchor Tenant:	Praktiker lease runs to 2025
		Occupancy Rate:	100%
Delenco (SPDI has a 24.35% interest)	Bucharest, Romania	Gross Leasable Area:	10,280 sqm
		Anchor Tenant:	ANCOM (Romanian telecoms regulator)
		Occupancy Rate:	100%
Innovations Terminal Logistic Park	Bucharest, Romania	Gross Leasable Area:	16,570 sqm
		Anchor Tenant:	Aquila srl (large Romanian logistics operator)
		Occupancy Rate:	~60% (25% at year end)
Terminal Brovary	Kiev, Ukraine	Gross Leasable Area:	49,180 sqm
(Sale completed in January 2017)		Anchor Tenant:	Rozetka UA (leading Ukrainian internet retailer)
		Occupancy Rate:	100%

 

Land & Residential  Assets	Location	Key Features
Bela Logistic Centre	Odessa, Ukraine	Plot of land  (~ th. sqm):	224
Kiyanovskiy Lane	Kiev, Ukraine	Plot of land  (~ th. sqm):	6
Tsymlyanskiy Lane	Kiev, Ukraine	Plot of land  (~ th. sqm):	4
Balabino project	Zaporozhye, Ukraine	Plot of land  (~ th. sqm):	264
Rozny Lane	Kiev, Ukraine	Plot of land  (~ th. sqm):	420
Pantelimon Lake	Bucharest, Romania	Plot of land  (~ th. sqm):	40
Boyana Land	Sofia, Bulgaria	Plot of land  (~ th. sqm):	20
Green Lake land (SPDI has a ~44% interest)	Bucharest, Romania	Plot of land  (~ th. sqm):	40
Romfelt, Linda, Monaco, Blooming, Green Lake, Boyana	Romania & Bulgaria	Sold units during 2016:	62
Romfelt, Monaco,Blooming, Green Lake, Boyana	Romania & Bulgaria	Available units (end 2016):	166

 

Autounion consists of 19,476 sqm of gross leasable office area, situated in a prime business area near the International Airport of Sofia. The BREEAM-certified building was completed in 2008 and is fully leased to Eurohold, one of the largest Bulgarian insurance companies, until 2027.  The Company has returned its 20% holding to the seller Bluehouse Capital as part of settling the amounts owning under the redeemable convertible shares issued to Bluehouse Capital following the acquisition of Praktiker in 2015. The Company is still in negotiation with Bluehouse Capital as to whether any further amount is payable and the method of payment.

 

Linda Residence is a residential complex located in Bucharest, Sector 3, close to subway transportation which connects the project to all areas in Bucharest in less than 30 minutes, where the Company owned 22 apartments (2,165 sqm) at the end of 2015. During 2016, the Company sold all of the apartments with the proceeds from the sale being ~€660,000 and repaid the associated debt at a 26% discount which generated a net cash flow for the Company of ~€450,000.

 

In 2016, the Company's accredited valuers, namely CBRE Ukraine for the Ukrainian Assets, and Real Act for the Romanian, Bulgarian and Greek Assets remained appointed. The valuations have been carried out by the appraisers on the basis of Market Value in accordance with the current Practice Statements contained within the Royal Institution of Chartered Surveyors ("RICS") Valuation - Professional Standards (2014) (the "Red Book") and is also compliant with the International Valuation Standards (IVS).

 

At the year-end, and following the increase in the pace of selling non-core assets, the Company's participation in property assets was valued at ~€100m.  Excluding Terminal Brovary which was successfully sold early 2017, the remaining assets are valued at ~€85m. It should be noted that in most cases the fair value of the Company's properties has increased as a result of improving market conditions while the decrease of the Innovations valuation due to its high vacancy at year end was countered by the recognition of Terminal Brovary at its agreed sale value.

 

In recent years, following the successful implementation of the Company's strategy, SPDI's portfolio became even more diversified in terms of geography as well as asset class. At the end of the reporting period, taking into account the % participation in the properties that the Company holds directly, Romania is the prime country of operations (47%) in terms of Gross Asset Value, which following the sale of Terminal Brovary has increased further to 55% of the Company's GAV with the exposure to Ukraine being reduced to 14%.

 

	Gross Asset Value
EURm/%	2016 (ex Brovary)		2016
Ukraine	12	14%	27	27%
Greece	17	19%	17	17%
Romania	46	55%	46	47%
Bulgaria	10	12%	10	10%
Total	85	100%	100	100%

 

In respect of the Company's rental income generation capacity, Romania is the prime source with 51%. Excluding Terminal Brovary in the Ukraine, NOI sources are split between Greece (34%) and Romania (66%).

 

	Annualised Net Operating Income**
EURm	2016*		2016		2015		2014		2013
Ukraine	0,0	0%	1,3	23%	1,8	25%	2,4	40%	2,7	100%
Greece	1,5	34%	1,5	26%	1,5	21%	1,5	25%
Romania	2,8	66%	2,8	51%	3,2	45%	2,1	35%
Bulgaria	0,0	0%	0,0	0%	0,6	8%		0%
Total	4,3	100%	5,5	100%	7,0	100%	6,0	100%	2,7	100%

 

2016* figure excludes Terminal Brovary

**Annualised Net Operating Income includes NOI from Terminal Brovary logistics, Innovations logistics, GED logistics park, EOS office building, Praktiker retail center, Residential units as well as Delenco office building (in which the Company has ~24.35% participation)

 

The table below summarises the main financial position of each of the Company's assets (representing the Company's participation in each asset) at the end of the reporting period.

 

		2016
		€m
Property	Country	GAV*	Debt (principal)*	NAV
Innovations	Rom	11,0	7,3	3,7
Eos	Rom	6,9	4,8	2,1
Delenco	Rom	6,1	0,8	5,2
Praktiker	Rom	7,5	4,5	3,0
GED  logistics	Gr	16,5	11,7	4,8
Terminal Brovary	Ukr	14,9	11,6	3,3
Residential units	Rom & Bul	11,4	7,1	4,3
Land banking	Rom & Ukr & Bul	25,9	6,2	19,7
Total  Value		100,1	54	46
Other balance sheet items, net **				-7,3
Net Asset Value total				38,9
Mcap 31/12/2016 (Share price at £0,15)				15,8
Mcap 26/6/2017 (Share price at £0,20)				21,4
Discount as of the reporting date vs NAV 31/12/2016				-59%
* Reflects the Company's participation at each asset
**Refer to balance sheet and related notes of the financial statements

 

The Net Equity attributable to the shareholders as at 31 December 2016 stood at ~€38.9m vs €42.5m in 2015, with the decrease attributed mostly to one off items for the Company. Following the sale of Terminal Brovary, the highest income generating property asset, the Company has now fewer income producing assets than in 2016 generating less income than in 2016. The Company has an operational structure capable of managing many more assets and needs to grow its property base accordingly.

 

The NAV per share as at 31 December 2016 stood at GBP 0.37 and the discount of the Market Value vis a vis the Company's NAV increased to 59% at year end.

 

3.3.         Financial and Risk Management

 

The Group's overall bank principal debt exposure at the end of the reporting period was ~€53m (including only property assets fully owned by the Company) and comprised the following:

 

a)    €11.6m construction debt due to EBRD in respect of Terminal Brovary. This loan is denominated in US$ and stands at ~$12m at the end of the reporting period. This debt was taken out of the Company's balance sheet as the sale of Terminal Brovary was effected in January 2017.

b)   €3.8m finance lease of the EOS business park with Alpha Bank Leasing Romania and a €1m facility received by First Phase from Alpha Bank Romania.

c)    €7.3m finance lease of the Innovations park with Bank of Piraeus Romania.

d)   €11.7m debt financing of the GED Logistics park and photovoltaic with Eurobank.

e)    €4.5m debt financing of the Praktiker Craiova with Marfin Bank Romania.

f)    €7.1m being the Company's portion on the residential portfolio debt financing.

g)    €6.2m being the Company's portion on land plot related debt financing in Romania and Bulgaria.

Overall, the Group's Loan to Value ratio at the end of 2016 stood at 46%.

 

Throughout 2016 the Company focused on managing and preserving liquidity through cash flow optimisation so as to secure the Company's future.  With the sale of Terminal Brovary and the closure of the Nestle / Bank of Piraeus negotiation for the break of the former's contract at Innovation, the Company is to focus more on expanding its asset base so as to establish growth.

 

3.4.         2017 and beyond

 

At the start of 2017, SPDI effected the closing of the two major deals it pursued last year. As a result, it has less involvement in Ukraine and generates less operating income overall. Consequently 2017 is the year that SPDI will focus on picking up its growth pace, as was evident in 2014/15, in order to pursue the shareholders' and directors' vision to become a large institutional and professionally managed regional property company. With the directors and management committed to succeeding, in an environment that shows signs of substantial improvement, 2017, promises to be the year of breakthrough, during which SPDI will manage to realise the opportunities it has identified.

 

4.    Regional Economic Developments ¹

 

4.1.         Romania

Economic growth in Romania accelerated further, from 3.8% in 2015 to 4.8% in 2016, amongst the highest in the European Union (EU), on the back of domestic demand. The contribution of private consumption to growth was higher than expected, on the back of improved income prospects driven by low inflation and wage hikes, as well as fiscal easing. Consumption will be pushed further up by the wage hike for the entire health sector and cut in employees' social security contribution by mid-2017. Private investments had a positive contribution to growth, on the back of historically low cost of funding and improved industrial confidence and this continues into 2017. Government spending is likely to remain subdued due to the end of the previous EU-funding period, despite higher staff costs. Meanwhile, slightly improved economic prospects of Romania's trade partners should support further net exports. Overall, growth is forecasted to reach 3.8% in 2017.

 

In terms of risks the focus has now shifted to the budget execution, which may put the government on a collision course with EU institutions. The consolidated government balance in cash terms switched to a marginal deficit in February down from a marginal surplus in January 2017 with total revenues down by -1.4% yoy in Jan-Feb compared to the full year target of +13.9% a trend which may continue as further tax cuts have come into force since the beginning of the year. At the same time, total expenditures have started expanding as the budget implementation incorporated the ruling coalition's electoral program for further generous hikes. According to the latest IMF forecast, the fiscal deficit is expected to increase to 3.7% of GDP in 2017 and further up to 3.9% in 2018.

 

The National Bank of Romania stands out in the region for proactively encouraging NPL sales and write-offs. Also, previous threats to financial stability from potentially damaging laws have lessened after recent decisions of the constitutional court. While overall credit growth has been sluggish, mortgage lending has grown primarily due to the government's Prima Casa guarantee program.

 

Romania has made considerable gains in the fight against corruption. Lower corruption and strong institutions are associated with multiple economic benefits: it helps raise tax collections, improve the allocation of scarce public resources, and attract both domestic and foreign investment. Maintaining the momentum will require effective implementation of the national anti-corruption strategy, preventing conflict of interest in public procurement, and strengthening the management of seized assets.

 

1 Sources: World Bank Group, Eurostat, EBRD, National Bank of Greece, Elstat, Eurobank Research, and Economic Research Division, National Institute of Statistics- Romania, National Statistical Institute -Republic of Bulgaria, National Institute of Statistics - Ukraine, SigmaBleyzer.

 

Macroeconomic data and forecasts
	2012	2013	2014	2015	2016e
GDP (EUR bn)	131,8	142,2	149,3	160	170
Population (mn)	20	19,9	19,9	19,9	19,9
Real GDP (y-o-y %)	0,7	3,4	2,9	3,8	4,8
CPI (average, y-o-y %)	3,4	4	1,1	-0,7	-1,6
Unemployment rate (%)	7	7,1	6,8	6,7	5,9
Net FDI (EUR bn)	2,2	2,6	2,5	3,0	3,9
Sources : IMF, National Sources, Eurobank EFG, Eurostat, EBRD

 

4.2.         Bulgaria

 

Following a 3.6% nominal growth in 2015, driven by net exports, the Bulgarian economy grew by 3.4% in 2016, with a shift of growth drivers towards domestic demand. While private consumption grew on the back of 10.5% in minimum wage increase as of January 2016 and better labour market conditions, government spending remained subdued due to transition to the new EU funds programming period. In 2017, domestic demand will remain as the driver of growth, supported by improved income prospects, on the back of almost 9.5% hike in minimum wages and wage improvement for teachers as of 2017, as well as lower cost of funding, on the back of financial sector stabilization. However, the contribution of net exports to growth will remain limited due to strong domestic demand. Overall, growth is expected to stand above 3.0% in 2017.

 

Bulgaria's external and fiscal position is strong, the banking sector capital position is solid and the buffers (fiscal and foreign exchange reserves) are sizeable. Budget execution outperformed the target by a wide margin in 2016 (+1.6% of GDP surplus vs. a target of a - 2.0% deficit). The current account balance is in surplus for the fourth consecutive year. Sustained labor market improvement coupled with positive real wage growth supported final consumption recovery throughout 2016. The unemployment rate declined further to 7.1% in 2016 as the economy adds new jobs in the areas of specialized services. Eurobank's GDP growth forecast for 2017 stands currently at 3.3%, above the recently released BNB quarterly economic review forecast of 2.8%.

 

Macroeconomic data and forecasts
	2012	2013	2014	2015	2016e
GDP (EUR bn)	39,7	41	42	44	46,5
Population (mn)	7,3	7,3	7,2	7,3	7,3
Real GDP (y-o-y %)	0,8	0,9	1,7	2,9	3,4
CPI (average, y-o-y %)	3	1,4	-1,6	-1,1	-0,8
Unemployment rate (%)	12,3	12,9	11,5	10	7,1
Net FDI (EUR bn)	1,2	1,1	1,2	1,6	0,7
Sources : IMF, National Sources, Eurobank EFG, Eurostat

 

4.3.         Greece

 

The Greek economy experienced a marginal nominal GDP drop in 2016, partly as a result of base effects from the upturn in consumer spending in the first half of 2015. The only positive signs in 2016 have been the contribution of gross fixed capital formation to growth and the yet record year for tourism with tourist arrivals growing 7.6% yoy but other parts of the national accounts, including private consumption, government consumption and net exports, turned downwards again.

 

Regarding Greece's 2017 growth outlook, it is surrounded by a very high degree of uncertainty, not least because of the delays encountered in reaching a staff level agreement on the 2nd programme review. In any case, the markets are growing increasingly concerned about the future and the uncertainty has already started to take its toll on the domestic economy. Therefore, a swift agreement with official creditors is key for averting a renewed deterioration in domestic economic conditions, amid heightening market jitters ahead of the heavy debt service payments falling due in July 2017. Against this backdrop, current forecasts for real GDP growth this year fall within the 1.5%-2.0% range, contingent on the assumed timeline for securing an agreement on the pending programme review.

 

Macroeconomic data and forecasts
	2012	2013	2014	2015	2016e
GDP (EUR bn)	193,4	182,1	179,1	176	177
Population (mn)	11,1	11	11	10,9	10,9
Real GDP (y-o-y %)	-6,6	-3,9	0,7	-0,2	-0,1
CPI (average, y-o-y %)	3	-0,9	-1,4	-1,7	0
Unemployment rate (%)	24,5	27,5	26,6	24,6	23,4
Net FDI (EUR bn)	1,35	1,6	1	0	0
Sources : IMF, National Sources, Eurobank EFG, European Commission, EBRD

 

4.4.         Ukraine

Ukraine's economy experienced growth in 2016 after around 16% cumulative real GDP contraction in the past two years. However, the pace of recovery was slower than anticipated amid weak reform momentum in the aftermath of a government reshuffle as well as lack of foreign investment. Helped by a low comparison base of the previous year, GDP grew by an estimated 0.8% yoy in the first half of 2016. Inflation declined (from 48.7% yoy in 2015 to 7.9% yoy in September 2016) on the back of exchange rate stabilisation, subdued domestic demand and prudent fiscal and monetary policies.

 

After a year-long delay, the IMF completed the second programme review on 14 September 2016 and released a US$ 1 billion tranche. This helped to restore calm in the foreign exchange market and cleared the way for international assistance from other donors. Tight capital controls introduced in 2014-2015 remain mostly in place, although the National Bank of Ukraine continued their gradual relaxation. EBRD forecasts GDP growth for 2017 at 2.0%.

 

 

Macroeconomic data and forecasts
	2012	2013	2014	2015	2016
GDP (USD bn)	176,2	177,4	127,6	98	93,3
Population (mn)	45,6	45,5	42,7	42,5	42,5
Real GDP (y-o-y %)	0,2	0	-6	-9,9	2,3
CPI (average, y-o-y %)	0,6	-0,2	24,9	43,3	12,4
Unemployment rate (%)	7,5	7,4	10,5	9,4	9,7
Net FDI (USD bn)	6,6	3,3	0,2	2,3	3,2
Sources : IMF, National Sources, European Commission, Oxford Economics, SigmaBleyzer, EBRD

 

5.    Real Estate Market Developments  ¹

 

5.1.         Romania

2016 maintained a comfortable market liquidity, marking a total investment volume of €910m, up from €820m in 2015. Although the growing investment activity has already put pressure on pricing, the risk-return yield that Romania offers remains very attractive both by Eurozone and CEE standards. The current yield levels are 7.5% for office, 7% for retail and slightly below 9% for industrial.

 

New deliveries of industrial spaces during 2015 stood at 150,000 sqm, and the market remained very bullish in 2016 as well. During 2016, new deliveries stood at 350,000 sqm, of which 60% were in Bucharest. By early 2017, the total stock of industrial space stood at 3,000,000 sqm.

 

Total take-up of industrial spaces during 2016 stood at 350,000 sqm, of which approximately 60,000 sqm were geared towards speculative developments. The largest generator of demand is the FMCG (Fast Moving Consumer Goods) sector (in the past 2 years, their demand reached approx. 200,000 sqm in the main cities of Romania), followed by e-commerce, electro-IT companies, and logistics companies. The vacancy rate in Bucharest has decreased to 2% by the end of 2016 (down from 5% in the previous year), while the vacancy rate for the rest of the country stood at 5%. This decline in the vacancy rate is remarkable when taking into account the large volume of new deliveries. Market rates for logistics remained broadly unchanged during 2016, ranging between 3.8 €/sqm and 4.25 €/sqm.

 

The stock of modern office spaces in Bucharest reached 2.1m sqm, after registering new deliveries of 230,000 sqm during 2016. In fact, the volume of new deliveries marks the fastest pace of expansion since 2009 and is 112% more than the yearly average of deliveries in the post-crisis period.

1 Sources : Danos Research, Eurobank, Jones Lang LaSalle, DTZ Research, CBRE Research, Colliers International, Cushman & Wakefield, MBL Research.

 

In terms of geographical distribution, the highest contributors to the stock are Floreasca-Barbu Vacarescu (42% of total deliveries), Dimitrie Pompeiu (26% of total deliveries) and the Central West Area (24% of total deliveries). In total, these zones accounted for 92% of the total deliveries in the market.

 

Total take-up in the market for 2016 reached 369,000 sqm, up by 52% from the previous year. IT and BPO/SSC (Business Process Outsourcing and Shared Service Center) were the main drivers behind this expansion and accounted for a total of 50% of the transactions. It is clear that tenants continue to have the upper-hand. Net take-up during 2016 reached 166,600 sqm, which covers 73% of the area delivered to the market in the same period. We expect supply to continue outpacing demand during 2017 as well, which will invariably increase competition in the market.

 

Rental rates for Class A office space are ranging from €10/sqm/month in North Pipera to €18/sqm/month in a prime CBD like Piata Victoriei.

 

2016 saw the delivery of a series of new retail projects, with Bucharest acting as the main point of attention for developers. Total deliveries of new stock stood at 240,000 sqm of GLA, out of which Bucharest accounted for more than 40%.

 

There are no new projects announced for delivery in Bucharest during 2017 - 2018. Within this period, we expect the existing shopping centers to focus on consolidating their market position in order to maximize the centers' attraction. Several shopping centers already announced extensions aimed at creating additional space for anchor tenants and/or entertainment areas.

 

Overall, Bucharest's ratio of retail stock increased from 573 sqm per 1,000 capita in 2015 and currently stands at 626 sqm per 1,000 capita, however still behind the CEE markets.

 

Rent levels remained broadly unchanged (€55-65/sqm/month) in 2016, as the market was able to absorb organically the newly released supply in retail centers. Although the performance of the retailers continued to increase in 2016, they were rather conservative during the negotiation process and signed contracts for constant base rent levels, compensating with turnover rents in the case of very successful locations.

 

2016 was the best year in terms of residential market performance in the past 10 years, continuing a trend that began in 2015, when the market showed clear signs of revival. The apartment supply in Bucharest has decreased to 7,000-8,000 units, 35% lower than in 2015, and most of this is represented by projects finalized before 2015. There was a 20% increase in deliveries in 2016.

 

Most demand is still generated through the Prima Casa program, for mass market dwellings, however due to economic improvements and wage growth, there is also increased demand in the mid-market segment. In addition, in 2016 there was a clear switch of preferences towards new apartments rather than older ones. Second-hand apartments still account for the majority of transactions, as their locations and general infrastructure are often preferable to new apartments and they are generally more affordable.

 

Prices started to pick up in Bucharest, especially for old apartments, although prices for new apartments were relatively stable at €800-1,000/usable sqm for mass market apartments and €1,000-1,700/usable sqm for mid-market apartments.

 

5.2.         Bulgaria

 

The total value of completed investment deals in 2016 was slightly above €262m. The biggest share of investment volume involved hotels (27%), followed by industrial and logistics space (20%), the third position is split between office and retail properties (18%).

 

Total stock of class A and B office space in nearing the 2,000,000 sqm mark, expected to be surpassed in 2017. Vacancy rate is 10-12% as the take up rate has increased in 2016, due to demand from IT and the services sectors. Rental levels remain stable at €12-13/sqm from class A buildings and €7-8 for class B. As another 115-150,000 sqm of class A building are coming to the market, rents may phase a downward pressure throughout 2017, but as demand is strong, such reduction will be temporary.

 

In 2016 Sofia residential market experienced a 5% increase in the number of completed residential projects. Total supply reached 7,048 units (apartments, row or single houses), concentrated in 57 projects. The neighborhoods in the southern parts of Sofia and at the foot of the Vitosha Mountain remained the most popular.

 

The trend towards pre-sales continued over the year. The share of these transactions grew significantly from 37% in 2015 to 57% in 2016. Insufficient supply of completed quality residential product saw this pre-sale proportion grow. The higher level of comfort that buyers now have when buying real estate from experienced developers added to the momentum.

 

Asking prices for mid-plus and high-end residential units registered a 9% yoy growth in 2016. These were in the range of € 900 - 1,550 per sqm including VAT, depending on the characteristics of the compound and the specific negotiated terms.

 

5.3.         Greece

The markets are under strain due to the ongoing uncertainty in which they operate, as a result of the protracted negotiations for the completion of the 2nd review of the bailout programme as well as the sharp increase in the tax burden in 2017. This is reflected in the weakening of the economic climate and the sharp drop in consumer confidence, in February 2017.

 

The industrial market in Greece had a relatively good year in spite of the weak economic climate. According to the latest study of National Bank of Greece, the logistics sector proved resilient in the crisis bringing its contribution to GDP to 2.9% in 2016 from 2.5% in 2008 and showing signs of convergence with European standards.

 

Prime rents were stable in Q1 2017 at €4.0/sqm/month with significant increase in demand for high quality space which is in major shortage especially of large warehouses that meet the requirements of occupiers in terms of quality.

 

Focusing on the future outlook of the industry, the momentum would be maintained and demand for industry services is expected to grow over the next five years (based on increased trend of outsourcing). At the same time, expected favorable impact of a series of external factors that would act as accelerators for the industry over the next five years - mainly participation in wider networks 4PL and the upscale presence of COSCO.

 

5.4.         Ukraine

2016 was characterised by an increase in the number of office lease transactions in Grade ? and ? business centers. Due to a steady increase in the demand for high quality office spaces vacancy levels dropped by 3,1% compared to the previous year.

 

Some of the main trends for the warehouse market in Kyiv region in 2016 were: a mild growth in demand among tenants, a slight increase in the number of large purchase deals, as well as a moderate reduction in vacancy rates and their stabilization.

 

6.    Property Assets

 

6.1.         GED Logistics center , Athens Greece

The 17,756 sqm complex that consists of industrial and office space is situated on a 44,268 sqm land plot in the West Attica Industrial Area (Aspropyrgos). It is located at exit 4 of Attiki Odos (the Athens ring road) and is 20 minutes from the port of Piraeus (where COSCO runs a container port handling ~4m containers a year) and the National Road connecting Athens to the north of the country. The roof of the warehouse buildings house a photovoltaic park of 1,000KWp.

 

The buildings are characterized by high construction quality and state-of-the-art security measures. The complex includes 100 car parking spaces, as well as two central gateways (south and west).

The complex at the end of 2016 is 100% occupied, with the major tenant (approximately 70%) being the German transportation and logistics company Kuehne + Nagel.

 

6.2.         EOS Business Park - Danone headquarters, Romania

The park consists of 5,000 sqm of land including a class "A" office building of 3,386 sqm GLA and 90 parking places. It is located next to the Danone factory, in the North-Eastern part of Bucharest with access to the Colentina Road and the Fundeni Road. The Park is very close to Bucharest's ring road and the DN 2 national road (E60 and E85) and is also served by public transportation. The park is highly energy efficient.

The Company acquired the office building in November 2014. The complex is fully let to Danone Romania, the French multinational food company, until 2026.

 

6.3.         Praktiker Retail Center, Romania

The retail park consists of 21,860 sqm of land including a retail BigBox of 9,385 sqm GLA and 280 parking places. It is located in Craiova, on one of the main arteries of the city, along with most of the DIY companies. Craiova is an important city for the Romanian automotive industry as Ford bought the Daewoo facilities in 2007 and produces two of its models from there. Ford is committed to continue investing and it is completing a brand new engine production facility.

 

As at year-end, the complex is fully let to Praktiker Romania, a regional DIY retailer, until 2020 and the Company negotiated the extension of the Praktiker lease agreement until December 2025 for an annual rent of ~€600,000, which was effected in July 2016. SPDI renegotiated the outstanding debt facility in H1 2016 and managed the outflows to match the timing and magnitude of the inflows.  

 

6.4.         Delenco office building, Romania

The property is a 10,280 sqm office building, which consists of two underground levels, a ground floor and ten above-ground floors. The building is strategically located in the very centre of Bucharest, close to three main squares of the city: Unirii, Alba Iulia and Muncii, only 300m from the metro station.

 

The Company acquired 24.35% of the property in May 2015. At the end of 2016, the building is 100% let, with ANCOM (the Romanian Telecommunications Regulator) being the anchor tenant (70% of GLA).

 

6.5.         Innovations Logistics Park, Romania

The Park incorporates approximately 8,470 sqm of multipurpose warehousing space, 6,395 sqm of cold storage and 1,705 sqm of office space. It is located in the area of Clinceni, south west of Bucharest centre, 200m from the city's ring road and 6km from Bucharest-Pitesti (A1) highway. Its construction was completed in 2008 and was tenant specific.  It comprises four separate warehouses, two of which offer cold storage.

 

The Company signed with Nestle Ice Cream an agreement vacating the premises, in July 2016.  Such agreement was effected in August 2016 for a €1.4m cash settlement payable by Nestle, which represents approximately 18 months of rent plus the three months' rental guarantee deposits and certain fixed assets that Nestle had installed in the premises. At the same time, the Company was in extensive discussions through 2016 with the lender of the property, Piraeus Bank Leasing, in order to review the sale and leaseback agreement following the settlement with Nestle finally managing to strike an agreement in February 2017. Based on the amended agreement the Innovations Park is subject to a sale and lease Back for a period of nine years and during this period SPDI is free to lease out spaces of the Innovations Park at its own discretion. In April 2017, the Company signed a lease agreement with Aquila srl, a large Romanian logistics operator, for 5,740 sqm of ambient space in the warehouse, which produces an annual rent payable by Aquila of~€300,000.  As at the issuance date of this report the terminal is 60% leased.

 

6.6.         Terminal Brovary Logistic Park, Ukraine

The Brovary Logistic Park consists of a 49,180 sqm GLA Class A warehouse and associated office space. The building has large facades to the Brovary ring road, at the intersection of the Brovary (?-95/?-01 highway) and Borispol ring roads. It is located 10 km from the Kiev city border and 5 km from Borispol international airport.

 

The building is divided into six independent sections (each at least 6,400 sqm), with internal clear ceiling of 12m height and industrial flooring constructed with an anti-dust overlay quartz finish. The terminal accommodates 90 parking spaces for cars and trucks, as well as 24 hour security.

 

In May 2016 the Company fully leased the warehouse space to Rozetka UA, the leading Ukrainian internet retailer. In September 2016, the Company signed a sale and purchase agreement with Temania Enterprises Ltd (company related to Rozetka UA) for the sale of its Terminal Brovary warehouse at a gross asset value of over US$16 million (before the deduction of the outstanding EBRD). The sale was completed successfully at the end of January 2017, generating for the Company a net cash inflow of over US$3m.

 

6.7.         Residential portfolio

·     Romfelt Plaza (Doamna Ghica), Bucharest, Romania

Romfelt Plaza is a residential complex located in Bucharest, Sector 2, relatively close to the city center, easily accessible by public transport and nearby supporting facilities and green areas.

 

During 2016 two units were sold and at the end of 2016, 18 apartments were available while 13 of them were rented, indicating an occupancy rate of 72%.

 

·     Monaco Towers, Bucharest, Romania

Monaco Towers is a residential complex located in South Bucharest, Sector 4, enjoying good car access due to the large boulevards, public transportation, and a shopping mall (Sun Plaza) reachable within a short driving distance or easily accessible by subway.

 

During 2016 four units were sold and at the end of 2016, 22 apartments were available while 9 of them were rented, indicating an occupancy rate of 41%.

 

·     Blooming House, Bucharest, Romania

Blooming House is a residential development project located in Bucharest, Sector 3, a residential area with the biggest development and property value growth in Bucharest, offering a number of supporting facilities such as access to Vitan Mall, kindergartens, café, schools and public transportation (both bus and tram).

 

During 2016 seven units were sold and at the end of 2016, 15 apartments were available while 6 of them were rented, indicating an occupancy rate of 40%.

 

·     Green Lake, Bucharest, Romania

A residential compound of 40,500 sqm GBA, which consists of apartments and villas, situated on the banks of Grivita Lake, in the northern part of the Romanian capital - the only residential property in Bucharest with a 200 meter frontage to a lake. The compound also includes facilities such as one of Bucharest's leading private schools (International School for Primary Education), outdoor sports courts and a mini-market. Additionally Green Lake includes land plots totaling 40,360 sqm. SPDI owns ~43% of this property asset portfolio.

 

At the end of 2015 the portfolio consisted of 40 unsold apartments plus 37 unsold villas. During 2016, six apartments and villas were sold while at the end of 2016, of the 71 units that were unsold 26 of them were let (occupancy rate of ~37%).

 

·     Boyana Residence, Sofia, Bulgaria

A residential compound, which consisted at acquisition date (May 2015) of 67 apartments plus 83 underground parking slots developed on a land surface of 5,700 sqm, situated in the Boyana high end suburb of Sofia, at the foot of Vitosha mountain with Gross Buildable Area ("GBA") totaling to 11,400 sqm. The complex includes adjacent land plots with building permits under renewal to develop GBA of 21,851 sqm.

 

During 2016, twenty one apartments were sold, with 40 units remaining unsold at the end of 2016.

 

6.8.         Land Assets

 

·     Aisi Bela - Bela Logistic Center, Odessa, Ukraine

The site consists of a 22.4 Ha plot of land with zoning allowance to construct up to 103,000 sqm GBA industrial properties and is situated on the main Kiev - Odessa highway, 20km from Odessa port, in an area of high demand for logistics and distribution warehousing.

 

The Company does not intend to recommence construction in the near future.

 

·     Kiyanovskiy Lane - Kiev, Ukraine

The property consists of 0.55 Ha of land located at Kiyanovskiy Lane, near Kiev city centre. It is destined for the development of business to luxury residences with beautiful protected views overlooking the scenic Dnipro River, St. Michaels' Spires and historic Podil.

 

Discussions with local developers who approached the Company in order to explore possibilities of value generation are in progress.

 

·     Tsymlyanskiy Lane - Kiev, Ukraine

The 0.36 Ha plot is located in the historic and rapidly developing Podil District in Kiev. The Company owns 55% of the plot, with one local co-investor owning the remaining 45%.

Discussions are on-going with interested parties with a view to partnering in the development of this property.

 

·     Balabino- Zaporozhye, Ukraine

The 26.38 Ha site is situated on the south entrance of Zaporozhye city, 3km away from the administrative border of Zaporozhye. It borders the Kharkov-Simferopol Highway (which connects eastern Ukraine and Crimea and runs through the two largest residential districts of the city) as well as another major artery accessing the city centre.

 

The site is zoned for retail and entertainment. Development has been put on hold.

 

·     Rozny Lane - Kiev Oblast, Kiev, Ukraine

The 42 Ha land plot located in Kiev Oblast is destined to be developed as a residential complex. Following protracted legal battle, it has been registered under the Company pursuant to a legal decision in July 2015.

 

The Company is evaluating potential commercialization options to maximize the property's value.

 

·     Delia Lebada, Romania

The site consists of a ~40,000 sqm plot of land in east Bucharest situated on the shore of Pantelimon Lake, opposite a famous Romanian hotel, the Lebada Hotel. The lake itself, having a 360 Ha surface, is the largest lake of Bucharest and accommodates many leisure activities such as fishing, cycling, walking, etc. At the back of the property there is a forest which transforms the area into a very attractive habitat for families and adds value to the residential units to be developed.

 

The construction permit, which allows for ~54,000 sqm to be built, was renewed in April 2014 but the property has been on hold.  Following the SPV owning the plot entering into an insolvency status the lending bank (Bank of Cyprus) entered into discussions   with the Company and its partners in respect to the future of the defaulted loan. Such discussions are expected to be concluded within Q3-2017 and result into an amicable solution for all involved parties.

 

 

7.    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

For the year ended 31 December 2016

	Note	2016	2015
		€	€
Income	2	6.070.940	5.448.960
Asset operating expenses	3	(992.441)	(1.124.583)
Net Operating Income		5.078.499	4.324.377
Administration expenses	4	(2.614.188)	(3.013.942)
Share of profits/(losses) from associates	14	469.248	(1.244.572)
Valuation gains/(losses) from Investment Property	5	896.793	(2.335.247)
Net loss on disposal of inventory	6	(368.907)	(51.359)
Net loss on disposal of investment property	6	(438.516)	(266.964)
Result on disposal of available for sale financial assets	18	(206.491)	-
Impairment allowance for inventory and provisions	7	(63.513)	(1.675.659)
Gain realized on acquisition of subsidiaries	13a	-	2.181.834
Other operating income/(expenses), net	8	(1.304.304)	653.856
Goodwill impairment	13b	-	(657.082)
Operating profit / (loss)		1.448.621	(2.084.758)
Finance income	9	1.153.243	63.596
Finance costs	9	(3.738.951)	(4.438.191)
Foreign exchange (loss), net	10a	(1.041.239)	(5.0 71 . 0 4 8 )
Loss before tax		(2.178.326)	(11.530.401)
Income tax expense	11	(174.315)	(80.188)
Loss for the year		(2.352.641)	(11.610.589)
Other comprehensive income
Exchange difference on I/C loans to foreign holdings	10b	(4.167.542)	(13.653.402)
Exchange difference on translation of foreign operations	22	3.508.448	8 .064.848
Available-for-sale financial assets - fair value gain	18	-	485.529
Available-for-sale financial assets - Gains recycled to loss for the year	18	(485.529)	-
Total comprehensive income for the year		(3.497.264)	(16.713.614)
Loss attributable to:
Owners of the parent		(2.363.693)	(11.015.852)
Non-controlling interests		11.052	(594.737)
		(2.352.641)	(11.610.589)
Total comprehensive income attributable to:
Owners of the parent		(3.477.567)	(15.981.196)
Non-controlling interests		(19.697)	(732.418)
		( 3.497.264 )	(16.713.614)

 

 

 

 

Earnings / (Losses) per share (Euro cent per share):		30b
Basic earnings/(losses) for the year attributable to ordinary equity owners of the parent			(0,03)	(0,16)
Diluted earnings/(losses) for the year attributable to ordinary equity owners of the parent			(0,02)	(0, 13 )

 

 

8.   CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the year ended 31 December 2016

	Note	2016	2015
		€	€
ASSETS
Non?current assets
Investment properties	12.4a	95.654.207	94.340.471
Investment properties under development	12.4b	5. 027 .986	5.125.389
Tangible and intangible assets	15	129.396	164.617
Long-term receivables and prepayments	16	351.181	352.916
Investments in associates	14	5.217.310	4.887.944
Available for sale financial assets	18	___________-	____2.783.535
		106.380.080	107.654.872
Current assets
Inventory	17	5.028.254	11.300.000
Prepayments and other current assets	19	2.778.361	4.795.223
Cash and cash equivalents	20	1.701.007	895.422
		9.507.622	16.990.645
Total assets		115.887.702	124.645.517
EQUITY AND LIABILITIES
Issued share capital	21	900.145	900.145
Share premium		122.874.268	122.874.268
Foreign currency translation reserve	22	10.161.471	6.653.023
Exchange difference on I/C loans to foreign holdings	31.3	(37.567.055)	(33.399.513)
Available for sale financial assets - fair value reserve		-	485.529
Accumulated losses		(57.444.020)	(55.080.327)
Equity attributable to equity holders of the parent		38.924.809	42.433.125
Non-controlling interests	23	7.237.827	615.527
Total equity		46.162.636	43.048.652
Non?current liabilities
Borrowings	24	16.895.155	26.263.559
Finance lease liabilities	28	11.081.379	11.273.639
Trade and other payables	25	451.123	4.672.888
Deposits from tenants	26	217.328	623.770
		28.644.985	42.833.856
Current liabilities
Borrowings	24	31.580.299	27.417.220
Trade and other payables	25	7.038.170	3.044.036
Taxes payable	27	1.147.018	822.005
Redeemable preference shares	21.6	-	6.430.536
Provisions	27	742.166	724.445
Deposits from tenants	26	271.019	132.684
Finance lease liabilities	28	301.409	192.083
		41.080.081	38.763.009
Total liabilities		69.725.066	81.596.865
Total equity and liabilities		115.887.702	124.645.517

 

Net Asset Value (NAV) € per share:	30c
Basic NAV attributable to equity holders of the parent		0,43	0,47
Diluted NAV attributable to equity holders of the parent		0,38	0, 41

 

On 27 June 2017 the Board of Directors of SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC authorised these financial statements for issue.