Update on Metro City project (4325Z)

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RNS Number : 4325Z

KDD Group NV

15 March 2012

15 March 2012

KDD Group N.V.

("KDD Group" or the "Group")

Update on Metro City project

KDD Group (AIM: KDDG), the holding company of one of Ukraine's leading real estate investment and development groups, today announces an update on the Group's mixed use project, Metro City (the "Project").

KDD Group's wholly owned subsidiary and the holding company for the Project, Project Company Yarus LLC, ("Yarus") was awarded the Project following the Group winning an investment tender organised by Kyiv City Council in July 2007.

Consequently, Yarus, as winner of the investment tender, entered into an investment agreement ("Investment Agreement") with the economic department of Kyiv City State Administration, on 31 October 2007, for the realisation of a mixed-use project consisting of a retail and entertainment centre, offices and residential with a gross build area of approximately 900,000m(2) . Subsequently, on 27 November 2008, Kyiv City Council agreed to sign a 25 year leasehold agreement for a parcel of land comprising 11 land plots and totalling 15.55 ha ("Lease Agreement"), which was executed in June 2009.

In accordance with the Investment Agreement, Yarus has to date paid Kyiv City Council approximately Hrv50.5 million (US$6.3 million) for the Project and additional lease payments for the land of approximately Hrv7.2 million (US$0.9 million). As announced in the Group's Interim Report in August 2011, the Project is currently on hold, pending the availability of new equity financing, with little significant work having been performed to date.

However, the Prosecutor's Office of Kyiv determined that the decision by Kyiv City Council to change the target purpose of the land parcel subject to the Lease Agreement, which was previously devoted to "forest land", had contravened the procedure required during the preparation of documentation for the approval to grant leasehold rights over the land.

In April 2011, an administrative process was started and, on 2 February 2012, the Kyiv Economic Court of Ukraine decided to invalidate the Lease Agreement. Accordingly, on 20 February 2012, Yarus filed a cassation complaint to the Higher Economic Court of Ukraine and KDD Group is currently expecting a decision on this issue to be made in the coming months, although no specific date has been issued by the court.

KDD Group intends to contest its entitlement to the Project's land parcel vigorously, ultimately appealing to the Supreme Economic Court of Ukraine if necessary. However, should the current ruling stand and the Lease Agreement remain invalidated, Kyiv City Council will be required to return all payments made by Yarus in relation to the Project, in accordance with the Investment Agreement.

The Group is currently taking legal advice as to the merits of the claims, and a further update will be made in due course as appropriate.

Enquiries:

 
 KDD Group N.V.                                            Tel: [phone] 
  Petro Radchuk 
 Strand Hanson Limited                                 Tel: [phone] 
  Stuart Faulkner / James Spinney 
  / Liam Buswell 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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