New Europe Property Investments PLC, the Central and Eastern European property investment company listed on AIM, announces a further investment for a total estimated debt free price of approximately €46.3 million.
The Company has concluded a sale and purchase agreement to acquire two companies, namely General Investment SRL and General Building Management SRL (“the Property Companies”), which together own a portfolio of 18 properties, situated in various cities in Romania. The buildings comprise 47,379m2 of lettable space, of which 32,352m2 is currently subject to rental contracts, as well as 4,800m2 (included in the lettable space of 47,379 m2) of space which is currently under refurbishment. The vendor is responsible for the costs of refurbishment and has granted extensive income and rental warranties over 36 and 48 month periods respectively. Assuming vacant space and space currently under renovation is fully rented, the annual net operating income generated by the properties is expected to be approximately €3.6 million.
For the year ended 31 December 2007, the Property Companies made a loss of approximately €0.7 million under statutory Romanian accounting standards and the aggregate net asset value of these companies under Romanian accounting principles as at 31 December 2007 was approximately €9.85 million.
The vendor of the companies is Central Eastern European Real Estate Shareholdings BV, part of the Avrig 35 Group (“Avrig”). Avrig is also a 20% shareholder in the Company’s investment advisor and one of Avrig’s directors is also a director of the Company’s investment advisor. Only the independent directors of the Company’s investment advisor advised the Company on the transaction. Dan Pascariu, one of the Company’s directors, is also a minority shareholder in Avrig 35. Mr Pascariu did not participate in the board discussions on the transaction and abstained from voting on the transaction.
The final purchase price payable is dependent on the net rental income generated by the properties. Of the total debt free purchase price of approximately €46.3, €42.3 million is payable on completion and the balance is payable on the satisfaction of certain conditions being met by the vendor. Of the consideration payable on completion, approximately €14 million will be funded by an existing seven year loan from an European bank to General Investment SRL, and the balance of €28.3 million from the Company’s existing cash resources. The deferred element of the consideration payable of approximately €4 million will be met using either the Company’s own cash resources or bank finance which the Company is confident it will be able to obtain prior to such deferred consideration becoming due. The effective date of the transaction is 1 January 2008.
The transfer of the shares of the Property Companies is contingent upon change of control approval being issued by the above mentioned bank.
Radu Taracila Padurari Retevoescu (RTPR) SCA acted as legal advisor to the Company in respect of this transaction and Mazars Consulting SRL conducted the tax due diligence on behalf of the Company. KPMG Romania is providing the Company with tax advice in relation to this transaction.
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