» Final 2008 Results

Final 2008 Results

Posted on: 12 February 2009


Preliminary results for the year ended 31 December 2008

New Europe Property Investments PLC ("NEPI" or the "Company"), the holding company of a group of companies (the "Group") that forms a closed-ended property income fund, announces its preliminary results for the year ended 31 December 2008.

HIGHLIGHTS
  • Invested €86,813,247 by year end 2008, establishing exposure to 29 buildings in Romania and Germany and over 160 tenants by April 2008.
  • Property portfolio valued at €85,142,170 as at 31 December 2008.
  • Distributable earnings of 14.72 € cents per share in respect of the 2008 financial year.
  • Additional five year loan facility of €7.3 million secured with Alpha Bank on 3 October 2008.
  • Adjusted NAV per share of 1.98 as at 31 December 2008, constant since December 2007.
  • Vacancy down 19% from 23,300 vacant square meters as at acquisition date to 18,900 square meters at year end 2008.

PROSPECTS

This is believed to be an advantageous time to operate a real estate fund primarily targeted at Romania for the following reasons:

  • the relative immaturity of the Romanian property market provides an excellent opportunity for real estate investment and the active management of assets to increase their value;
  • the occurrence of the 'debt crisis' has improved the investment environment in Romania and Europe as a whole, in that fewer investors are currently active in the real estate market;
  • Romania is experiencing high demand for sophisticated office, retail and industrial property on a scale which significantly outstrips current supply;
  • strong economic performance in Romania has attracted regional developers and investors;
  • the recent accession of Romania to the EU has encouraged economic stability and will continue to support economic growth and convergence of Romania's economy towards European standards;
  • there is an expected boom in public investment in Romania due to access to EU funding;
  • there is progress with institutional reforms including infrastructure and banking reforms and a sell-off of non-core properties in entities that were privatised;
  • rental agreements are hard currency (Euro) based, at yields that are attractive by comparison to other European countries;
  • rental escalations in Romania are currently higher than Euro denominated Western European countries; and
  • there are rising inflows of foreign direct investment into Romania.

The company has established a solid base and is seeking to take advantage of unique investment opportunities that are crystallising in its markets due to the economic difficulties that started to unfold in the latter half of 2008.

Chairman's report

The Company was incorporated on 23 July 2007 and admitted to the AIM market of the London Stock Exchange on 22 August 2007 with capital commitments of €53 million. The immediate objective of the Group was to create a diversified property related rental income stream that would provide its shareholders with stable absolute returns. The Group achieved this by following its two acquisitions in 2007 (the Flanco Portfolio and Rasnov industrial facility) with two further acquisitions concluded by April 2008 (the Raiffeisen portfolio and the Premium portfolio). As a result, the Group now has invested €86.8 million in Romania and Germany, has exposure to 29 properties and more than 160 tenants. The acquisition of the Raiffeisen portfolio has been consolidated for the full period and the German acquisition has been proportionately consolidated with effect from 14 April 2008.

The Company has embarked on a secondary listing of its shares on the Alternative Exchange ("AltX") of the JSE Limited ("JSE") in South Africa. This process has taken significantly longer than expected as a result of regulatory technicalities. However the Company has obtained informal approvals required in order to complete the secondary listing, expected to be concluded early in 2009. The secondary listing should improve the depth of the shareholder base, facilitate further trade in the Company's shares and the intention is that it will provide a further source of capital in the future.

Prospects

The Company has established a solid base and is seeking to take advantage of unique investment opportunities that are crystallising in its markets, due to the economic difficulties that started to unfold in the latter half of 2008.

COMBINED DIRECTORS' AND INVESTMENT ADVISORS' REPORT

The Company's strategy is to provide investors with a long term investment opportunity with stable Euro based investment returns derived from properties initially in Romania, but later also in other Central and Eastern European countries that are recent entrants of the EU or are considered to be on the accession path. This is achieved by making investments in properties which have been carefully selected based on analysis performed by the Investment Advisor.

The Group has to date invested primarily in the high quality office, retail and industrial property market in Romania. In addition the Group acquired six investment properties located in Germany in a joint venture with CIREF Europe Limited on an opportunistic basis.

Given the extraordinary events that have unfolded in the global macro-economic environment in the latter half of 2008, the Group has started to re-focus its efforts to take advantage of the investment opportunities that have arisen from this. To this end, the Group put in place additional debt finance facilities and intends to conclude the disposal of one property in its portfolio during the first half of 2009 (by excercising a put option it has in relation to this property).

Investment policy

The Group's investment policy is to seek exposure to high quality, income producing office, retail and industrial properties. Property investment transactions include, but are not limited to, sale and leaseback transactions and acquisitions of single properties or portfolios of properties. The Group seeks to achieve a wide exposure to different tenants in order to diversify risk. The current property portfolio includes 29 properties and more than 160 tenants.

Investment opportunities are also sought in development property (which may include establishing joint ventures with developers) to the extent to which these investments can be structured to allocate the majority of the development risk and/or risks related to leasing the assets to the developer or another third party. As at the date of this report, the Group has not invested in development property.

Up to five percent of the Group's investments may be in land which is yet to be developed and up to a further five percent of the group's investments may be in assets that are not income producing at the time of acquisition, but which can be converted and/or refurbished post acquisition to become income producing. The Group holds no investment in land that can be developed other than in Rasnov. This land with a total area in excess of 2,500 square meters was acquired as part of the industrial property located in Rasnov. There is no current intention to start development projects on the land.

Portfolio details

The Group's property portfolio is valued at €85,142,170 as at 31 December 2008 and consists of 29 properties with a rentable area of 87,000 square meters (this figure includes 50% of the rentable area in relation to the German portfolio as the Group owns a 50% interest therein). The Romanian portfolio was valued by DTZ Echinox Consulting S.R.L., and the German portfolio was valued by Dr. Lübke GmbH. The Group's policy is to revalue its portfolio on an annual basis.

The Flanco portfolio

The Flanco portfolio was acquired in 2007 and consists of three high street retail locations and one big-box retail property in four Romanian cities. The portfolio is rented to five tenants and the weighted average remaining lease period in relation to the portfolio as at 31 December 2008 was 6.6 years. The tenants include Banca Comerciala Romana (Romania's largest banking group), Piraeus Bank (a large Greek banking group), Flanco (a Romanian national white goods retailer), US Food Network (the operators of the KFC and Pizza Hut franchises in Romania) and Aura Gaming (an international gaming operator).

The Rasnov Industrial facility
The Rasnov Industrial facility was acquired in 2007 and consists of 23,040 square meters of industrial space in Rasnov, Romania. The industrial facility is rented to the Picanol Group, an international group specialising in the development, production and sales of weaving machines and technology for the textile industry and Hi-Lo Sisteme de Depozitare SRL, a subsidiary of the UK's second largest manufacturer of pallet racking and heavy duty shelving systems. There were in excess of 6 years and 14 years left at year end in relation to the lease periods of Picanol and Hi-Lo, respectively.

The Hi-Lo group was recently acquired by Constructor Group AS, a leading pan-European manufacturer and provider of industrial and commercial storage solutions. Constructor Group has indicated that it wishes to replace Hi-Lo's holding company as rental guarantor. If completed, this is likely to lead to a release of a two year rental guarantee held by the Group in the form of an interest free cash deposit.

As at 31 December 2008 3,400 square meters of the Rasnov Industrial facility were vacant. The Group had payment obligations to Hi-Lo that were dependent on a number of conditions, including inter alia, the completion by Hi-Lo of the renovation of the vacant space and the introduction of an acceptable tenant by 12 December 2008. As at 12 December 2008, the renovation of the vacant space was still ongoing with the result that the Group has no obligation to make any further payments to Hi-Lo in relation to the vacant space.

The Raiffeisen portfolio

The Raiffeisen portfolio, which consists of 18 properties situated in various cities in Romania, was effectively acquired on 1 January 2008. The buildings comprise 47,380 square meters of rentable space, of which 32,352 square meters are currently subject to lease agreements and 4,800 square meters are currently under refurbishment. The Raiffeisen banking group is the largest tenant in the portfolio, occupying 26,246 square meters of space until 2014. The remainder of the rented space is occupied by smaller tenants for which the vendor has provided a four year rental guarantee. The vendor provided a three year rental guarantee in relation to vacant space and space under refurbishment. The Group has the right to sell the Constanta property (6,697 square meters, including 1,400 square meters of vacant space) back to the seller and has excercised this right subsequent to the 2008 year end as it is of the view that the capital that will be released as a result can be put to better use in the current economic environment. It is expected that the sale will be concluded by the end of May for a price of €5,764,300.

To the extent that the vacant space as at acquisition date does not generate €885,000 of annualised net rental income by February 2011, the seller will have to make a capital repayment of up to €1.75 million to the Group. If the rental income exceeds €885,000 as at this date, the Group will have to make a capital payment proportionate to the rental revenues in excess of the initially agreed amount, but up to a maximum of €4 million.

The Premium Portfolio

The Group concluded an agreement on 14 April 2008 to acquire 50 percent of the issued share capital of CIREF NEPI Holdings Limited, which in turn acquired the share capital of CIREF Europe Management Limited. The latter became the Company's partner in two German SPVs on 8 April 2008, which jointly acquired a portfolio comprising four retail centres, a medical office facility and a mixed use retail and residential property.

The retail centres are situated in Leipzig, Bruckmuehl, Eilenberg and Frankfurt and include a total rentable area of 24,106 square meters. The medical centre (with a total rentable area of 2,027 square meters) is located in Munich and the mixed retail and residential property (with a total rentable area of 10,111 square meters) is located in Moelln. The portfolio is rented to over 100 tenants that include Joseph Schneider GmbH, Rewe Deutscher Supermarket, Plus Warenhadelsgesellschaft, Norma and several medical professionals' practices. The weighted average remaining lease period in relation to the portfolio as at 31 December 2008 was 4 years.

Market overview

In the context of the global credit squeeze, the unfolding global economic difficulties and rising financing costs a number of large investors that dominated the central and east European investment market (including the Romanian market) in the past few years reduced their investment programs or in some cases have announced disposal programs for their portfolios. As a result, there is an abundance of development projects and income producing assets available for investment relative to the number of investors interested in these. However, the lack of favourable financing on one hand and the mismatch between buyers' and sellers' expectations on the other resulted in a "wait and see" approach by many investors and property owners. The resulting transaction inactivity creates uncertainty concerning the value of the assets; however, the acquisition yields are generally accepted to have expanded across all sectors of the market, especially for secondary properties for which it is more difficult to secure debt finance.

Despite the current economic slowdown Romanian GDP growth is forecasted to remain positive in 2009 after a record estimated increase of 7.9 percent in 2008. The Romanian property market is expected to exhibit strong fundamentals, except for the residential market. First, most Romanian cities continue to lack adequate property infrastructure with industrial, retail and office stock per inhabitant significantly below its neighbouring countries and European averages. Second, many developers had to suspend their existing projects and postpone their development pipelines mainly due to problems with funding.

Some developers are expanding their property management capacities anticipating longer holding periods for the operational properties. Even taking into account a probable slowdown in occupier demand, the constrained supply is expected to maintain a favourable supply-demand balance for property owners, especially in the prime product segment of the market.

The liquidity squeeze claimed its toll on the German property market. Leveraged investors are under pressure to sell, while the once cash rich (and modestly leveraged) German open ended funds experienced cash outflows in the last quarter of 2008 and are not expected to become active buyers in the short run. As a result the investment volumes in 2008 have decreased compared to the previous year, while the transaction yields have increased. The economic slowdown in Germany is expected generally to spill over in take-up levels and occupancy rates.

Cash rich investors are expected to benefit from the existing market circumstances by achieving increased returns on capital and having a wider choice of quality income producing and development properties.

Financial results

Rental and related income, property operating expenses, advisory fees and administrative expenses as well as operating cash flows for the 2008 financial year are in line with expectations.

Three non-cash items negatively affect the Group's consolidated income statement for the year. First, a fair value adjustment of €1,671,077 was made to reflect a net reduction in the open market values of the Group's properties based on a fair value for Constanta property assumed to be equal to the option exercise price and the valuations obtained from DTZ Equinox Consulting S.R.L. and Dr. Lubke GmbH for the other 28 properties. Second, the results include a fair value adjustment of €699,301 for movements in the value of financial instruments due to a €575,303 decrease in the value of the interest rate swap in relation to the Nord LB loan and €123,998 decrease in the value of the interest rate cap in relation to the Alpha Bank loans. Third, a deferred tax in amount of €1,204,029 was accrued during the year. The deferred tax accounts for the tax that would be incurred should the assets be disposed of by the Romanian subsidiaries. Given that for tax purposes the historical values of properties are carried in Romanian Leu while the property market values are expressed in € terms, any depreciation of the Romanian Leu leads to an increase in deferred tax which explains also the increase in deferred tax during the year.

The exchange gain recorded in the consolidated Group income statement results from the weakening in the Romanian Leu. In accordance with IFRS the Romanian subsidiaries are accounted for in Leu with the result that a movement in the value of the currency gives rise to movements in the recorded Leu value of assets and liabilities of the subsidiaries that are consolidated. In substance, the Group's income is € denominated, as are its assets and liabilities.

The combination of the above mentioned adjustments led to a net accounting profit for the year of €1,469,350. Distributable earnings for the financial year amount to €4,144,943. This figure is arrived at by adjusting the accounting profit to eliminate the fair value adjustments, the exchange gain and the deferred tax expense recorded as well as adjustments required due to the issue of shares in terms of the Investment Advisor share incentive scheme (accounted for as treasury shares).

As the deferred tax liability and accounting treatment in relation to the Investor Advisor share incentive scheme can give rise to an understatement in the Group's Net Asset Value, the Board has decided to report also an Adjusted Net Asset Value figure, which is €1.98 per share (2007: €1.98 per share).

Dividend

With consideration to the 2008 interim dividend paid by the Company in amount of 7.48 € cents per share, the Board has decided to recommend a year-end dividend of 7.24 € cents per share, bringing the total recommended distribution to 14.72 € cents per share in respect of the 2008 financial period.

Prospects

NEPI has created a solid foundation since its inception. It is NEPI's intention in 2009 to capitalise on investment opportunities at levels of attractiveness that have not been available in the recent past.

Balance sheet at 31 December 2008

31 Dec 2008
31 Dec 2007

ASSETS

Non-current assets

87,533,635
21,718,364

Investment property

85,142,170

21,718,364

Investment property at fair value

3

78,627,504

21,718,364

Investment property under development

3

6,514,666

-

Goodwill

2,386,463

-

Investments in subsidiaries

-

-

Loans to subsidiaries

-

-

Financial assets at fair value through profit or loss

5,002

-

Current assets
6,190,203
33,793,900

Trade and other receivables

1,771,356

142,793

Cash and cash equivalents

4,418,847

33,651,107

Total assets
93,723,838
55,512,264
EQUITY AND LIABILITIES
Total equity attributable to equity holders
51,397,909
53,053,519

Share capital

4

267,950

267,950

Share premium

4

52,487,190

52,487,190

Share based payment reserve

5

81,841

-

Currency translation reserve

(757,686)

22,633

Accumulated profit

(681,386)

275,746

Non-current liabilities
37,195,489
56,767

Loans and borrowings

6

32,750,804

-

Financial liabilities at fair value through profit or loss

575,303

-

Deferred tax liabilities

3,869,382

56,767

Current liabilities
5,130,440
2,401,978

Trade and other payables

7

3,268,082

2,401,978

Loans and borrowings

6

1,862,358

-

Total equity and liabilities
93,723,838
55,512,264
NAV per share
1.92
1.98
Adjusted NAV per share (28,150,000 shares)

9

1.98
1.98
Income Statement for the period ended 31 December 2008
31 Dec 2008
31 Dec 2007

Net rental and related income

6,315,183
322,017

Contractual rental income and expense recoveries

7,713,486

343,790

Property operating expenses

(1,398,303)

(21,773)

Share based payments

(81,841)

-

Investment advisory fees

(571,137)

(101,528)

Administrative expenses

(498,656)

(142,107)

Foreign exchange gain

1,144,227

-

Fair value adjustment on investment property

(1,671,077)

-

Profit before net finance expense
4,636,699
78,382

Finance income

275,930

329,854

Finance expense

(2,239,250)

(74,492)

Net finance (expense)/income
(1,963,320)
255,362
Earnings before tax
2,673,379
333,744

Tax

(1,204,029)

(57,998)

Earnings after tax
1,469,350
275,746

Basic weighted average earnings per share (€ cents)

8

5.48

1.88

Diluted weighted average earnings per share (€ cents)

8

5.33

1.88

Distributable earnings per share (cents)

8

14.72

1.24

Headline earnings per share

8.08

N/A

Diluted headline earnings per share

7.86

N/A

Statement of Changes in Equity for the period ended 31 December 2008

Share capital

Share premium

Share based payments reserve

Currency translation reserves

Retained earnings

Total
Opening balance 1 January 2008
267,950
52,487,190
-
22,633
275,746
53,053,519

Share based payments reserve

-

-

81,841

-

-

81,841

Dividend distribution

(2,426,482)

(2,426,482)

Total recognised income and expense

-
-
-
(780,319)
1,469,350
689,031

currency translation reserve

-
-
-

(780,319)

-

(780,319)

profit for the period

-

-

-

-

1,469,350

1,469,350

Closing balance 31 December 2008
267,950
52,487,190
81,841
(757,686)
(681,386)
51,397,909
Cash Flow Statement for the period ended 31 December 2008
Group
Group
31 Dec 2008
31 Dec 2007
OPERATING ACTIVITIES

Earnings before tax

1,469,350

333,744

Adjustments for:

Fair value of derivative instruments

570,301

-

Fair value adjustments on investment property

1,671,077

-

Share based payments

81,841

-

Net finance expense

1,963,320

(255,362)

Foreign exchange gain

(1,144,227)

Corporate tax charge and deferred tax

1,204,029

(1,231)

Operating profit before changes in working capital
5,815,691
77,151

(Increase) in trade and other receivables

(1,219,480)

(142,793)

(Decrease) / Increase in trade and other payables

(430,680)

2,401,978

Interest paid

(839,299)

(74,492)

Interest received

275,930

329,854

Cash flows from operating activities
3,602,162
2,591,698

INVESTING ACTIVITIES

Acquisition of investment property

(22,465,661)

(21,718,364)

Payments for acquisition of subsidiaries less cash acquired

(27,198,062)

-

Cash flows from investing activities
(49,663,723)
(21,718,364)

FINANCING ACTIVITIES

Proceeds from share issuance

-

52,755,140

Proceeds from bank borrowings

20,348,000

-

Repayment of borrowings

(1,177,853)

-

Payment of dividends

(2,426,482)

-

Cash flows from financing activities
16,743,665
52,755,140

Net (decrease) / increase in cash and cash equivalents
(29,317,896)
33,628,474

Cash and cash equivalents brought forward

33,651,107

-

Translation effect on cash and cash equivalents

85,636

22,633

Cash and cash equivalents carried forward
4,418,847
33,651,107
Notes to the annual financial statements

For the period ended 31 December 2008

1. General

New Europe Property Investments PLC is a company on 23 July 2007. The Company is listed on the AIM market of the London Stock Exchange. The Group includes the Company and its wholly owned subsidiaries.

2. Accounting policies

The financial statements have been prepared in accordance with applicable Isle of Man law and International Financial Reporting Standards (IFRS). The principal accounting policies applied in the preparation of the financial information set out in this announcement are set out in the Company's full financial statements for the period ended 31 December 2008.

3. Investment property
Group
Group
31 Dec 2008
31 Dec 2007

Movement in investment property is as follows:

Carrying value at beginning of period

21,718,364

-

Additions from business combination

36,473,582

-

Assets under development acquired through business combination

6,514,666

-

Additions

22,106,635

21,718,364

Fair value adjustment

(1,671,077)

-

Carrying value at period end
85,142,170
21,718,364

Investment property is carried at fair value which is assessed on an annual basis. The Group obtained annual independent appraisal reports from DTZ Echinox Romania S.R.L and Dr Lubke GmbH which are members of RICS (Royal Institution of Chartered Surveyors). The fair value of investment property is based on the year end appraisal reports except for the property located in Constanta for which the put option value is deemed to be the fair value. The Group has the right to sell the Constanta property back to the seller (has a put option on Constanta building). It is estimated that the sale will be concluded by the end of May 2009 for a price of €5,764,300.

A fair value adjustment was made in accordance with the Group accounting policies to assess fair values on an annual basis.

The current book value of assets under development includes two buildings under refurbishment in Constanta and Brasov, part of the portfolio held by General Investment S.R.L.

The Group's investment properties at the end of the reporting period included office, retail and industrial properties and an immaterial amount of residential property in Germany.

4. Share capital and share premium
Share capital
Share premium
€0.01/share

Authorised on 23 August 2007

150,000,000 ordinary shares of € 0.01 each

1,500,000
-

Issued during the year

26,795,000 ordinary shares at € 0.01 each*

267,950

53,322,050

Listing cost

-

( 834 860)

Brought forward from 31 December 2007
267,950
52,487,190
-
-
Carried forward as at 31 December 2008
267,950
52,487,190

* The issued share capital figure presented excludes shares in terms of the share based payment scheme set out in note 5.

The ordinary shares carry the right to vote at general meetings, the right to dividends and the right to the surplus assets of the Group on a winding-up.

The ordinary shares carry pre-emption rights as well as transfer rights as indicated in the Company's Admission Document published at the time of admission to the AIM Market of the London Stock Exchange.

5. Share based payments

On 6 June 2008 the Group implemented a share incentive scheme that entitles key individuals to acquire shares in the Company.

The purpose of the scheme is to align the interests of directors and key individuals of the Investment Advisor with those of shareholders of the Company. This is achieved by the Company making loans available to allow shares to be purchased by participants in the scheme, the repayment of which can be made in part out of the dividends payable on the shares.

20 percent of the shares initially subscribed for by each participant vest annually.

The Company offers to each participant the immediate right to subscribe for the relevant number of shares at their then market value together with a loan to fund such subscription. Each loan carries interest at the weighted average rate at which the Company is able to borrow money from its bankers. Each loan is repayable in full together with interest ten years after its relevant subscription date, but can be repaid earlier.

The Company's recourse against each participant is limited to the shares issued in terms of the scheme. The Company has security interests over the shares held in the scheme by each participant. The security interests secure the repayment of all principal and interest in respect of each loan made by the Company to each participant under the scheme.

Pending repayment of the loan in respect of the shares subscribed for by a participant, the dividends on such shares will be applied towards payment of interest on that loan. If the dividend amount on the shares exceeds the amount required for the interest payment then the excess will be paid to the participant otherwise the shortfall will be paid by the participant to the Company.

The Group has accounted for the scheme as a share option scheme.

1,355,000 shares were issued as part of the share based payments scheme, at a price of €2.18 each. There were no shares in issue at the end of the previous financial year and there were approximately 35,000 shares available for issue in terms of the scheme as at 31 December 2008.

The Group is entitled to interest of € 100,807 in respect of the loans granted to participants using the Group's weighted average cost of debt capital. The interest will be settled from dividend distributions and was not accrued in the Income Statement.

Assumptions used in relation to the shares issued pursuant to the scheme
6 Jun 08

Fair value at grant date (per share)

€0.451

Share price at grant date

€2.25

Weighted average exercise price

€2.18

Expected volatility (weighted average)

10%

Expected dividend

0.07%

Option life

5 years

Risk free interest rate (based on government bond)

4.7900%

The amount of €81,841 represents the pro-rata amount of the fair value of the options at grant date, in relation to the 208 days of the reporting period during which the share scheme shares were in issue.

6. Loans and borrowings

During the period, the Group contracted bank loan facility agreements with Nord LB Bank and Alpha Bank Romania S.A. for an aggregate amount of € 28,895,000. Of that amount, €9,207,000 was available for draw-down as at 31 December 2008. A loan from EuroHypo AG for an amount of €15,000,000 has been taken over as a result of the acquisition of General Investment S.R.L. and General Building Management S.R.L.

The facility agreements concluded with Nord LB bear interest at a fixed rate of 5.17% as a result of a swap concluded with the Nord LB Bank fixing the reference rate of the loan.

The facility agreements concluded with Alpha Bank Romania S.A. bear interest at a floating rate of one month Euribor plus 1.9% p.a. and 2.5%, respectively. The Group has capped its Euribor interest rate risk to 4.7% by purchasing a derivative financial instrument to cover a notional amount of €7.6 million related to a floating interest rate loan facilities concluded with Alpha Bank Romania S.A.. As of 31 December 2008 the fair value of the derivative financial instrument amounted to €5,002.

The loan from EuroHypo AG bears interest at a fixed rate of 6.20% per annum.

In addition to the bank loans, the Group also obtained financing from the vendors of the German portfolio amounting to €853,281 for a period of five years. Of this amount € 250,000 bears interest at a fixed interest rate of 6% p.a. while the balance does not attract interest.

The repayment profile of the group's outstanding loans is set out in the table below.

Loans and borrowings
Due within one year
Due within two to five years
Due after five years

Alpha Bank Romania S.A. revolving credit facilities

-

4,593,000

1,100,000

Nord LB bank loan

140,135

13,873,374

-

EuroHypo AG

1,096,063

4,149,213

8,181,936

Vendor finance

-

853,281

-

Accrued interest on Alpha Bank Romania S.A.

22,362

-

-

Accrued interest on Nord LB loan

386,536

-

-

Accrued interest on Eurohypo AG loan

213,615

-

-

Accrued interest on vendor finance

3,647

-

-

TOTAL
1,862,358
23,468,868
9,281,936

As a result of the loan contract concluded with EuroHypo AG, first ranking security interests were created over the real estate properties of General Investment S.R.L. in favour of Eurohypo AG together with a prohibition to sell, encumber or lease the real estate properties, through mortgage agreements concluded for each individual property. In addition the following security agreements have been concluded in relation to the loan:

  • Pledge agreement over the bank accounts of General Investment S.R.L.;
  • General security agreement over the assets owned by General Investment S.R.L.;
  • Assignment of rental receivable to EuroHypo AG; and
  • Personal guarantee agreement between EuroHypo AG (as lender) and the Company (as first guarantor).

Covenants

  • Debt service ratio min 120%; and
  • Loan to value ratio max 70%.

The Alpha Bank Romania SA loans have been secured as follows:

  • Mortgage over the land and building located in Rasnov and the land and buildings in the Flanco portfolio;
  • Pledge agreement over the bank accounts of NEPI Bucharest One S.R.L. and NEPI Bucharest Two S.R.L opened with Alpha Bank Romania S.A.;
  • Real movable security over the shares of NEPI Bucharest One S.R.L. and NEPI Bucharest Two S.R.L; and
  • Corporate guarantee issued by the Company.

Covenants

  • Loan to value ratio max 60% in case of Nepi Bucharest Two S.R.L; and
  • Loan to value ratio max 65% in case of Nepi Bucharest One S.R.L.
7. Trade and other payables
Group
Group
31 Dec 2008
31 Dec 2007

Payable for assets under construction

344,730

2,139,139

Property related payables

109,109

147,492

Advances from tenants

771,235

73,410

Administrative and secretarial accrued expenses

245,055

-

Accrued management fee

220,591

33,804

Taxes and other related liabilities

-

(9,622)

Tenant deposit

1,558,708

17,755

Payments received in advance other than rent

18,654

-

Accrued expenses

-

-

3,268,082
2,401,978
8. Earnings per share

The calculation of basic earnings per share as at 31 Dec 2008 was based on the profit attributable to ordinary equity holders of €1,469,350 (2007: €275,746) and the weighted average number of 26,795,000 (2007:14,686,514) ordinary shares in issue during the period (excluding the share scheme shares).

The calculation of diluted earnings per share as at 31 December 2008 was based on the profit attributable to ordinary equity holders of € 1,469,350 (2007: €275,746) and the weighted average number of 27,568,206 (2007: 14,686,514) ordinary shares in issue during the period (including the share scheme shares).

The calculation of distributable earnings per share was based on earnings after tax adjusted as shown in the table below to arrive at the distributable earnings of € 4,144,350 (2007: €332,513) and the number of shares in issue at 31 Dec 2008:

Group
31 Dec 2008
Group
31 Dec 2007
Distributable earnings
4,144,943
332,513

Earnings after tax

1,469,350

275,746

Unrealised foreign exchange gains

(1,144,227)

-

Share based payment fair value

81,841

-

Interest receivables from key employees

100,807

-

Fair value adjustments on investment property

1,671,077

-

Net change in fair value of financial assets and liabilities

699,301

-

Amortisation of the premium paid for derivative instrument

(24,963)

-

Share issue cum distribution

87,728

-

Deferred tax expense /(income)

1,204,029

56,767

Number of shares in issue at end of period

28,150,000

26,795,000

Distributable earnings per share (€ cents)
14.72
1.24
Number
Weighted

Date

Event

of shares

% of period

Average

01/01/2008

existing shares

26,795,000

43.01%

11,525,521

06/06/2008

share issue*

28,150,000

56.99%

16,042,685

31/12/2008

period end

27,568,206

* 1,355,000 shares were issued as part of the share option scheme and are accounted for as treasury shares.

9. Net asset value per share
Group
31 Dec 2008
Group
31 Dec 2007
Adjusted net assets value
55,834,728
53,110,286

Net asset value in balance sheet

51,397,909

53,053,519

Value of shares issued in the share scheme

2,953,900

-

Deferred tax

3,869,382

56,767

Goodwill

(2,386,463)

-

Number of shares in issue at end of period

28,150,000

26,795,000

Net asset value per share
1.92
1.98
Adjusted Net assets value per share
1.98
1.98
10. Subsequent events

The Group has the right, in the form of a put option, to sell Constanta property back to the vendor. The Group has exercised this option and expects payment by May 2009.

11. Extract from the Group's statutory accounts

The financial information presented in this preliminary announcement does not constitute statutory accounts within the meaning of the Companies Act 2006. The information has however been extracted from the Group's statutory accounts for the year ended 31 December 2008 which were approved by the Board on 11 February 2009 and on which the Group's auditors have given an unqualified opinion.