Investment Acquisition and Further Cautionary
Posted on: 5 October 2009
New Europe Property Investments plc, the Central and Eastern European property investment company which has a primary listing on the AIM market of the London Stock Exchange and a secondary listing on the Alternative Exchange of the JSE Limited, announces a further investment for a total estimated debt free price of approximately €63 million, subject to working capital adjustments, which will be settled in a combination of cash (partly funded with a new debt facility) and the issue of ordinary shares in NEPI ("Vendor Shares").
The Company has concluded a sale and purchase agreement ("SPA") to acquire the shares in the holding company of the European Retail Park in Braila ("ERP Braila") from BelRom, a leading retail developer in Romania ("the Acquisition"). NEPI has also agreed an acquisition debt funding facility from KBC Bank for an amount of €113 million of which €40 million will be used to pay down existing debt on ERP Braila. The facility is repayable at the end of 2014, with capital amortisation starting in 2011. As a result, the balance of the consideration payable for the shares is approximately €23 million, comprising a mixture of cash payable from the Company's own resources and the issue of Vendor Shares at a price of €2.026 per share. The precise cash and share mixture is at the discretion of the Company and will be confirmed in due course, but of the Vendor Shares, 3,587,148 will be subject to a lock-in agreement and will be held in escrow.
The Acquisition will become effective from the date on which the Vendor Shares will be admitted to trading on AIM and the JSE Limited which is expected to be no later than 19 October 2009.
Braila is a city of over 200,000 people in Eastern Romania, approximately 201 km from Bucharest and with a port on the Danube River. ERP Braila has convenient access from the national road which forms one of its boundaries and benefits from a core catchment area of over 159,000 people, with a total catchment area of over 290,000 people given its close proximity to the city of Galati, with a population of approximately 300,000 and only one, smaller scale shopping centre.
ERP Braila is a 143,000 square metre site with approximately 53,000 square metres of gross lettable area and a 60,000 square metre customer parking area comprising 1,250 parking spaces. The retail park already has opened stores for two of its three main anchor tenants: Carrefour Hypermarket and Bricostore DIY. There is also a 6,900 square metre showroom and store for a Romanian furniture retailer, Staer, which is in the process of completion as well as a multiple-screen cinema development that is expected to be completed by mid 2010.
The SPA provides for a guarantee of Net Operating Income ("NOI") levels to be achieved by the property from the vendors for the next three years and a price adjustment mechanism should the NOI at the end of the guarantee period (31 December 2012) be less than the agreed 2009 NOI target, adjusted for indexation. The NOI figures represent "normalised NOI" as at the date of the memorandum of understanding entered into during June 2009, based on the completed centre and disregarding temporary tenant discounts. The NOI guarantee is €5.88 million in respect of the 2009 financial year. The performance guarantee is secured against and limited to the value of the Vendor Shares and related dividends which are issued to and retained by the vendors in escrow. The Acquisition is expected to improve distributable earnings per share.
For purposes of compliance with the JSE Limited Listings Requirements, the Company advises shareholders that NEPI remains in negotiations to acquire certain other retail assets in Romania, which if successfully concluded may also have a material effect on NEPI's financial position and consequently on the price of the Company's shares. No certainty can be given that these negotiations will be concluded successfully. Accordingly, shareholders are advised to continue to exercise caution when dealing in their NEPI shares until further announcements are made in this respect.