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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Eur.Conv.Dev | LSE:ECDC | London | Ordinary Share | GB00B1BJRB27 | ORD EUR0.80 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.07 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
TIDMECDC
RNS Number : 1486E
European Convergence Develop. CoPLC
07 May 2013
Hot Features
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ECDC plc
Shareholder Update 3(rd) May 2013
European Convergence Development Company PLC ("ECDC"
or "The Company")
The Manager presents its latest Shareholder Update
report covering the three month period 1(st) January
2013 to 31(st) March 2013. This report is intended
to update investors on progress over the
last three months and is not intended to deal with
the financial statements of the Company.
Economic Overview Bulgaria
The Bulgarian government resigned in February, four
months before the end of its term, after mass protests
against high power prices and falling living standards
following the introduction of austerity measures
including the freezing of wages and pensions. Half
of the population is perceived to be at risk of
being in poverty. The President has appointed an
interim government and early elections have been
scheduled for 12(th) May. The political uncertainty
has led to difficulties in
governing the country and poses more challenges
to a struggling economy.
The new Finance Minister of Bulgaria revised down
the official forecast for GDP growth in 2013 from
1.9 per cent to 1.0 per cent. As a result of the
downgrading of the 2013 forecasts, the Bulgarian
Ministry of Finance has had to reduce both its revenue
and expenditure forecasts in order to achieve the
planned budget deficit. The IMF forecast GDP growth
of 1.5 per cent against an inflation rate of 2.3
per cent for 2013
In quarter 4 GDP growth was 0.1 per cent quarter
on quarter and 0.5 per cent year on year, virtual
stagnation. Similar to the previous three quarters
of the year, growth was driven by domestic demand,
though it has decelerated each quarter as household
expenditure weakened on account of slower real wage
growth, increasing unemployment and arguably negative
consumer sentiment.
The unemployment rate at the end of quarter 4 stood
at 12.4 per cent and increased from 11.5 per cent
in quarter 3. The stronger pace of job contraction
was broadly visible in the majority of economic
industries. This is the highest unemployment registered
over the last 9 months and the second highest since
quarter 2 2004. The Ministry of Finance is forecasting
further increases in unemployment during 2013. This
expectation is reflected in February retail sales
which were 3.3 per cent down year on year retail
and 0.9 per cent down on the previous month.
The inflation rate in March fell to 2.7 per cent
from a year earlier, compared with 3.6 per cent
in February as spending on electricity and heating
fell following milder weather and consumption shrank
on high unemployment. Food prices were up by 0.4
per cent and non-food prices fell by 0.4 per cent,
while services prices were 2.1 per cent lower compared
to February. The harmonised consumer price index,
calculated by the Statistics Board for comparison
with European Union data, fell by 0.4 per cent in
March. On an annual basis, harmonised inflation
was 1.6 per cent.
At the end of 2012 net FDI amounted to meagre EUR
1 398 million (3.5% per cent of GDP), worse than
the EUR 1 746.3 million for the same period for
2011 (4.5 per cent of GDP). The low FDI trend over
recent years adds another major concern for the
recovery of the economy. Given limited global appetite
for risk, the stagnating Bulgarian economy, and
the political uncertainty, it is unlikely that FDI
will approach pre-crisis level again for some time.
At the end of February 2013, the consolidated budget
deficit stood at BGN 732.0 million (EUR366 million)
on a cash basis (-0.9 per cent of GDP), while general
government debt, including government guaranteed
debt, amounted to 17.5 per cent of GDP. Both the
deficit and the government debt compare favourably
to other EU countries.
Imports in February increased by BGN 300 million
(EUR150 million) to BNG 3,868 million (EUR1,934
million) whilst exports declined BGN 240 million
(EUR120 million) to BNG 3,239 million (EUR1,620
million) compared to January. Industrial Production
in February increased by 5.1 per cent when compared
to the same month in 2012 and represented the third
month in a row when production increased year on
year.
Romania
The nationalization and dismantling of Bank of Cyprus
and the closing of Cyprus Bank Popular (Laiki Bank),
as part of the bail out of Cyprus by the European
Union and the IMF had limited direct effect on Romania
as together both banks control 1.3 per cent of assets
according to Reuters. Nevertheless statements made
by both European and local high ranking Central
Bank officials sent out unsettling messages to larger
depositors with deposits above the EUR 100,000 guaranteed
threshold.
The events in Cyprus brought added pressure to a
banking system that last year is estimated to have
accumulated a total loss of EUR 476 million. This
is the largest loss recorded since the beginning
of the crisis in 2008. Non-performing loans (NPLs)
remained on a clear upward trajectory during 2012
(18.2 per cent at the end of the year, up from 14.3
per cent at the end of 2011). The pace in the growth
in NPLs accelerated during 2012 which was consistent
with other statistics that showed an increasing
number of companies entering the insolvency procedure
in 2012 when compared with 2011.
Romanian GDP expanded 0.4 per cent in quarter 4,
2012 compared to the previous quarter and by 1.1
per cent compared to the same quarter in 2011. The
IMF predicts real GDP growth of 1.6 per cent this
year and 2.0 per cent in 2014. The estimate is the
same as the Romanian government's 2013 prediction.
No visible improvement in economic activity is expected
in quarter 1 this year but improvement is anticipated
in the second half of this year.
In March, consumer prices were virtually unchanged
over the previous month, following a 0.3per cent
increase in February mainly because service price
increase were offset by reductions in food and non-food
items. Annual inflation climbed to 6.0 per cent
year on year in January, however it has fallen in
both February and March to 5.3 per cent. The annual
inflation rate is expected to stabilize towards
the end of the year to an estimated 4.0 per cent
which, nevertheless, is still above the Central
Bank's tolerance margin of 2.5 per cent plus or
minus 1.0 per cent.
At its recent monetary policy meeting on 5 February
the Central Bank kept the benchmark interest rate
at 5.25 per cent. The rate has remained unchanged
since March 2012. No major changes can be seen in
the Central Bank's rhetoric on inflation and economic
developments compared with the previous meeting
on 7 January.
In February, Romanian Industrial Production increased
5.4 per cent when compared to the same month in
2011. Imports in February were marginally higher
than the previous month whilst exports grew 4.7
per cent to EUR 3.873 million. Romania recorded
a Balance of Trade deficit of EUR 208 million in
February. Total Government debt represented 37.8
per cent of GDP in 2012, up from 34.7 per cent at
the end of 2011.
Romania borrowed USD 1.5bn in a 10-year Eurobond
in February. Demand for debt papers was strong while
pricing was relatively good (average yield at 4.5
per cent), reflecting a positive attitude of foreign
investors' for Romanian and Emerging Markets' debt
as well as ample liquidity in the global financial
markets.
Property Market Bulgaria
Overview Retail
Modern shopping centre stock growth was 11 per cent
in the first quarter of 2013 with the opening of
the Paradise Center (Gross Leasable Area (GLA) 80,000
sqm) in March 2013. This brought the country's shopping
centre stock to 704,000 sqm. As previously reported,
there are three other shopping centres with a total
GLA of over 120,000 sqm, which are scheduled for
completion by the end of 2013 and early 2014; two
are in Sofia and one is in the provinces.
With the opening of these malls the average lettable
area per 1,000 inhabitants will increase to approximately
115 sqm compared to 247 sqm for Europe as a whole
and 200 sqm for CEE. In quarter 1 2013, the shopping
centre stock per capita in Plovdiv, where Galleria
Plovdiv is located, was less than 200 sqm per 1000
inhabitants, while the comparable figure for Rousse,
where Mega Mall Rousse is located, was approximately
300 sqm per 1,000 inhabitants.
The overall growth of supply has influenced demand
behaviour. Retailers remained extremely cautious
and selective especially with over supplied second-tier
cities. Most retailers have limited expansion plans,
with international brands focusing mainly on Sofia
and less on major regional centres. As it was previously
reported in 2012 the overall vacancy rate in shopping
centres was around 18% of lettable area. As a consequence
of the increasing supply of organized retail stock,
rental levels are expected to experience some downward
pressure, further assisted by the negative trend
in retail sales.
The investment market remained stagnant with no
property investments undertaken in the last two
quarters.
Romania
During first quarter of 2013 the most notable transaction
was the purchase by NEPI of the Lakeview Office
building in Bucharest, which was developed and owned
by AIG Lincoln in a joint venture with Dinu Patriciu
Global Services. The deal was estimated to be worth
around EUR 60 million which represented an effective
transaction yield close to 8.7 per cent.
Office
In quarter 4 only two small office buildings totalling
c. 4,800 sqm were delivered to the market which
took the total annual office supply to 49,000sqm.
According to JLL this represents 54 per cent of
the 2011 supply and only 17 per cent of the supply
in 2010. A number of deliveries and completions
were postponed during 2012 which affected the annual
supply.
Total take up reached 77,000sqm in quarter 4, with
renewals representing 60 per cent. New leases contributed
approximately 20,000 sqm and the average area per
lease was only around 800 sqm. Only 5 out of 25
deals were more than 1,000sqm. For the full year,
take up reached 240,000sqm, slightly below take
up activity in 2011. There was a significant shift
in the nature of the space occupied with 26 per
cent represented by new leases in 2012 against 50
per cent in 2011, while lease renewals increased
from 22 per cent in 2011 to 30 per cent in 2012.
Prime headline rent remained unchanged over the
final quarter of 2012 at EUR 18.5 per sqm per month.
These levels are expected to soften slightly during
the first half of this year. Incentive packages
are still common practice although the value will
vary significantly depending on the type of space
being let. Overall vacancy rate is estimated at
16 per cent but with significant variations depending
on submarket and even by property.
Currently the 2013 office pipeline is estimated
at 130,000 - 150,000 sqm with approximately 50,000sqm
already preleased. For 2014, the supply is estimated
to increase by a further 70,000sqm - 90,000sqm.
The specification of new buildings is improving
and most developers are looking for energy efficient
and green certificated buildings, following both
occupier and investor interest for such improvements.
Retail
In the fourth quarter of 2012 the main activity
was provided by the hypermarket operators with three
new openings in Bucharest: Kaufland on Soseaua Mihai
Bravu, Cora on Soseaua Alexandriei and Auchan City
in Giulesti. Another two new openings: Ploiesti
Shopping City and Cora Bacau were registered country
wide. Including these openings the shopping centre
stock increased to 0.83 million sqm in Bucharest
and to 1.53 million sqm for the rest of the country.
International retailers continued their aggressive
expansion, taking advantage of the availability
of prime space and current market conditions. Fashion
retailers such as H&M, Inditex, Takko, Deichman,
C&A and food retailers such as Mega Image, Profi
and Carrefour were among the most active during
this period.
The take over by Auchan of the Real operations in
Eastern Europe will create the 3rd largest retailer
in the market after Metro and Kaufland, with 31
units across the country. The merger is currently
awaiting the Competition Council's green light for
completion.
Prime shopping centre rents were quoted at EUR 60-70
per sqm per month and high street units around EUR60-65
per sqm per month. Rents are expected to soften
during 2013 especially for high street units.
The supply pipeline is estimated at 132,000sqm in
2013 and 166,000 sqm in 2014. The low estimated
supply compared with previous years is materially
affected by the lack of adequate financing facilities.
Detailed Project Bulgarian Assets
Reports Bulgaria Galleria Plovdiv
At the beginning of 2013, the overall occupancy
of the Mall had increased to 76 per cent of the
lettable area from 64 per cent in December. The
higher occupancy levels are expected to trigger
certain thresholds for major tenants to start making
rental payments. The project company is currently
negotiating with the majority of these tenants.
Despite the achieved increase in occupancy, additional
leasing is still proving difficult and is highly
dependent upon the successful implementation of
the leasing strategy, developed by the international
consultant. To this end, a new long term asset management
contract which will aim to secure the implementation
of the strategy, is presently being negotiated with
the international consultant and will be one of
the conditions for the overall restructuring of
the bank facility and the provision of additional
funds by the shareholders of the project company.
In line with the strategy, the leasing team is in
initial negotiations with several international
fashion brands, which have indicated interest to
enter the scheme. The signing of such tenants will
heavily depend on the availability of the company
to make contributions to the fitting out cost of
the new tenant, as well as meeting their demands
for co-tenancy presence of other international brands.
This makes letting of new areas even more challenging
and somewhat uncertain.
The company continues to negotiate with the bank
to restructure the banking facility, which is presently
in default and any further equity injection by the
Company will be subject to strict conditions and
will require the formal sanction by the Directors
of ECDC.
The shareholders have provided very limited temporary
funding to support the project in quarter 1 mainly
for the temporary extension of the interim asset
manager until the end of April.
Unless the bank restructuring is resolved quickly,
and fresh cash injected to cover operational needs,
the project company faces potential operational
risk which will threaten the operation of the Mall.
Mega Mall Rousse
During quarter 1 2013, occupancy remained stable
but is expected to drop from 60 per cent to 56 per
cent of the GLA in April due to closing of the anchor
children's toy operator, Hippoland. The management
team immediately started initial talks with another
operator in order to secure an adequate replacement.
Leasing is still proving to be extremely difficult
and as previously announced is highly dependent
upon fit-out contributions.
The Bank unexpectedly started partial foreclosure
against receivables under lease contracts in the
last weeks of March, followed by notarized call
for debt repayment in mid-April. Such action has
not only been perceived with concerns by existing
tenants but is also expected to create difficulties
in the attracting of new retailers, thus creating
uncertainty about the viability of the project.
The initial result of this action was a substantial
drop in the rent and service charge collection rate,
which in addition to the low levels of occupancy
is expected to pose serious liquidity challenges
to the project company. The shareholders are seeking
to agree terms with the Bank, as otherwise the viability
of the Project will be severely undermined.
Trade Centre Sliven
The project company's cash is still deposited in
three banks to achieve security but at the expense
of higher interest revenue. At the annual shareholders
meeting on 16(th) April 2013 it was
agreed that the project company will make a distribution
of retained profits which will enable our partner
to significantly repay the outstanding loan to ECDC.
In total ECDC will receive BGN 876K (c.EUR 450K)
of which c. BGN 485K (c. EUR250K) represented loan
repayment and the balance a distribution.
As previously announced, there has been no change
in the position regarding the development itself
and the Manager is considering various alternatives
for the site.
Bourgas Retail Park
There has been no further progress made with this
development.
Development Projects Romanian Assets
Romania During the first quarter of 2013 the remainder of
200sqm were leased at a rent in line with the buildings
current average figures. This has led to a 100%
occupancy of the building. Rental levels achieved
were in the range quoted above for central districts
and the project company is able to meet all its
current banking obligations. All operational expenses
are fully serviced from the cash flow of the company.
The Manager and the joint venture partner are actively
looking to improve the profile of the asset through
various asset management initiatives.
Oradea and Iasi Shopping Centres
The major area of concern for the projects is the
potential fallout from the Cyprus banking bailout.
As most investors will be aware the Cyprus Government
requested a financial bailout of its banks from
the EU and IMF. The full impact of the bailout is
not fully known but at least one bank, Cyprus Bank
Popular (Laiki Bank), the second largest in the
country has been closed and effectively taken over
by Bank of Cyprus, which in turn has seen large
deposits of over 100,000 euros frozen and may be
subject to an impairment at a later date if it is
deemed necessary to meet capital adequacy requirements.
A significant portion of secured debt in Bank of
Cyprus is also expected to be written off. The original
emergency funding request to the EU/IMF was for
total funding of approximately EUR17.5 billion,
with EUR10.0 billion provided by the EU/IMF and
Cyprus funding EUR7.5 billion. However, on 11(th)
April it became evident that the amount required
had
increased to a total of EUR23.0 billion which means
that Cyprus needs to raise a total of EUR13.0 billion.
As a result the restructuring is, in practical terms
not definite.
One of the main members of the banking syndicate
financing both Iasi and Oradea is the Bank of Cyprus,
via a branch operation in Romania. As the Romanian
operation was not a registered subsidiary, on 1(st)
April the Central Bank of Cyprus imposed a 7 day
freeze on the Romania
business to see if it could be sold. The operations
have now remained suspended until a buyer can be
found for the operation.
The daily operation of the banking facility whilst
this situation remains unresolved is proving to
be difficult for Argo but the other banks in the
syndicate are providing support for the daily expenditure
however, further development financing for tenant
fit-outs or to undertake the development in Iasi
will take longer to secure and will be reliant upon
a resolution on the position of the Bank of Cyprus.
Oradea Shopping Centre
The Oradea construction bank loan facility is fully
drawn. Argo has requested a rescheduling of payments
and an interest rate reduction as part of a restructuring
package. In addition the availability period for
the standby facility of EUR1.3m required for tenant
fit out works needs to be extended. Although the
majority of terms are accepted by the lenders the
interest rate reduction appeared to be the main
issue to resolving the restructuring. This is now
overtaken by the Bank of Cyprus situation. A further
5 leases have been signed, but fit outs can only
commence when the standby facility has been reopened,
which is also impacting on further leasing activity.
Marketing activities have been successful in increasing
the foot fall at the site and the centre has been
positioned as a family oriented venue with an increasing
profile and visibility in the local community.
Iasi Shopping Centre
Competition in the City increased with the opening
of the 45,000 sqm Palas scheme in the centre of
Iasi. The Palas development attracted a number of
new retailers to the city but reduced footfall and
sales in the other shopping centres in the city.
Although footfall at the ERA development has now
returned to levels pre the Palas opening, it is
clear that sales for fashion retailers have declined.
This fact is also true for the other two main shopping
centre schemes in the City. Occupancy however remains
at 97.8 per cent, after the manager has secured
a further 21 lettings during 2012.
The Mall currently has all necessary permits necessary
to commence construction and negotiations had been
progressing with a number of contractors. However,
until the position of the Bank of Cyprus in the
syndicate is resolved, construction is unlikely
to be undertaken.
Argo Real Estate Opportunities Fund
No changes to be reported with regards to the Proton
loan status compared to the previous update.
On 12(th) April 2013, NEF 3 (Cayman) 1 Limited and
NEF 3 (Cayman) 3 Limited issued Put notices to
Argo Real Estate Opportunities Fund (AREOF) requiring
AREOF to purchase all of the respective NEF shares
and make payment of a preferred return at the expiration
of the notice period. The Put option period expires
6 months from the date of the notice.
Investor Relations
Tel: + 44 (0)20 7518 2100 Fax: + 44 (0)20 7518 2199
Email: marketing@charlemagnecapital.com Website:
www.charlemagnecapital.com
Issued by Charlemagne Capital (UK) Limited, 39 St
James's Street, London SW1A 1JD
A company authorised and regulated by the Financial
Conduct Authority
The purpose of this document is to provide a mere
legal and tax outline of the structure proposed.
This document cannot be regarded as a fully comprehensive
report or as a binding legal and tax opinion since
it has been prepared solely for information purposes.
Therefore, investors willing to obtain the comfort
they may deem necessary as to the application of
the above-mentioned tax advantages in order to invest
into this structure should seek and rely on its
own independent advice. This document does not constitute
an offer to sell or solicitation of an offer to
buy shares in the Company and subscriptions for
shares in the Company may only be made on the terms
and subject to the conditions (and risk factors)
contained in the prospectus of the Company. Potential
investors should carefully read the prospectus to
be issued by the Company which contains significant
additional information needed to evaluate an investment
in the Company. This document has not been approved
by a competent supervisory authority and no supervisory
authority has consented to the issue of this document.
The information in this document/financial promotion
is confidential and it should not be distributed
or passed on, directly or indirectly, by the recipient
to any other person without the prior written consent
of Charlemagne Capital (UK) Limited. This document
and shares in the Company shall not be distributed,
offered or sold in any jurisdiction in which such
distribution, offer or sale would be unlawful and
until the requirements of such jurisdiction have
been satisfied. This document is not intended for
public use or distribution. The purchase of shares
in the Company constitutes a high risk investment
and investors may lose a substantial portion or
even all of the money they invest in the Company.
An investment in the Company is, therefore, suitable
only for financially sophisticated investors who
are capable of evaluating the risks and merits of
such investment and who have sufficient resources
to bear any loss that might result from such investment.
If you are in any doubt about the contents of this
document you should consult an independent financial
adviser. Investors in the Company should note that:
past performance should not be seen as an indication
of future performance; investments denominated in
foreign currencies result in the risk of loss from
currency movements as well as movements in the value,
price or income derived from the investments themselves;
and there are additional risks associated with investments
(made directly or through investment vehicles which
invest) in emerging or developing markets. Charlemagne
Capital (UK) Limited does not guarantee the accuracy,
adequacy or completeness of any information contained
herein and is not responsible for any omissions
or for the results obtained from such information.
The information is indicative only and is for background
purposes and is subject to material updating, revision,
amendment and verification. All quoted returns are
illustrative. No representation or warranty, express
or implied, is made as to the matters stated in
this document and no liability whatsoever is accepted
by Charlemagne Capital (UK) Limited or any other
person in relation thereto.
==============================================================
This information is provided by RNS
The company news service from the London Stock Exchange
END
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