ANNUAL REPORT
2015
Table of Contents
SECTION A- Annual Report
1.
Letter to the Shareholders
2. Management Report
2.1 Corporate Overview & Financial Performance
2.2 Property Holdings
2.3 Financial and Risk Management
2.4 2016 and beyond
3. Regional Economic Developments
4. Real Estate Market Developments
4.1 Romania
4.2 Bulgaria
4.3 Ukraine
4.4 Greece
5. Property Assets
5.1 Terminal Brovary Logistic Park , Ukraine
5.2 Innovations Logistics Park, Romania
5.3 EOS Business Park – Danone headquarters, Romania
5.4 Praktiker Retail Center, Romania
5.5 Delenco office building, Romania
5.6 Autounion office building, Bulgaria
5.7 GED Logistics center, Athens Greece
5.8 Residential portfolio
• Romfelt Plaza (Doamna Ghica), Bucharest, Romania
• Linda Residence, Bucharest, Romania
• Monaco Towers, Bucharest, Romania
• Blooming House, Bucharest, Romania
• Green Lake, Bucharest, Romania
• Boyana Residence, Sofia, Bulgaria
5.9 Land Assets
• Aisi Bela – Bela Logistic Center, Odessa, Ukraine
• Kiyanovskiy Lane – Kiev, Ukraine
• Tsymlyanskiy Lane – Kiev, Ukraine
• Balabino- Zaporozhye, Ukraine
• Rozny Lane – Kiev Oblast, Kiev, Ukraine
• Delia Lebada, Romania
SECTION B- Financial Statements
SECURE PROPERTY DEVELOPMENT AND INVESTMENT PLC
KIRIAKOU MATSI 16, AG. OMOLOGITES,1082, NICOSIA,CYPRUS
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ANNUAL REPORT 2015|2
SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC
Key Figures
31 Dec 2014
31 Dec 2015
Change
Total Assets (€million):
Number of income producing commercial
Properties:
67
4
125
87%
7
75%
Operational Gearing:
48%
52%
9%
Operating Income*(€million):
EBITDA*(€million):
3,6
0,8
5,9
2,4
64%
3x
Net Equity**(€million):
32,5
42,5
31%
Issued Shares:
33.884.054
90.014.723
166%
NAV per share (£):
0,75
0,35
-
* Table 1- Excluding fair value related impact.
** Attributable to the shareholders.
This report may contain forward-looking statements about the Company. Such statements are predictive in nature and depend upon or
refer to future events or conditions and may include such words as ‘‘expects’’, ‘‘plans’’, ‘‘anticipates’’, ‘‘believes’’, ‘‘estimates’’ or other similar
expressions. In addition, any statement regarding future performances, strategies, prospects, actions or plans is also a forward-looking
statement. Forward-looking statements are subject to known and unknown risks and uncertainties and other factors that may cause actual
results, events, activities and achievements to differ materially from those expressed or implied by such statements. Such factors include
general economic, political and market conditions, interest and foreign exchange rates, regulatory or judicial proceedings, technological
change and catastrophic events. You should consider these and other factors carefully before making any investment decisions and before
relying on forward-looking statements.
ANNUAL REPORT 2015|3
1.
Letter to the Shareholders
Dear Shareholders,
29 June 2016
During 2015 the Company continued its growth trajectory thanks to a number of acquisitions of
high yielding income producing assets in South East Europe (the “Region”) resulting in a
substantial increase in our Assets Under Management (“AUM”). In parallel our strategy of
diversifying regionally also continued with the Company entering one more SEE country. By the
end of 2015, SPDI was present in four emerging economies of SEE owning seven income
producing assets in the Region.
During the first quarter of the year in order to strengthen our acquisition capacity, the directors of
SPDI offered its shareholders the opportunity to participate in a rights issue (open offer) that
generated €8m new cash in March 2015. The Company used the capital raised to acquire assets,
it also issued new shares for the same reason. In August 2015 we raised a further €2m of new
capital through the execution of warrants bringing the total new equity raised for the year to
€10m.
During the year, SPDI acquired three income producing assets: a) 20% of the Autounion office
building situated in a very prominent location close to the international airport of Sofia, Bulgaria,
which is fully let to one of the country’s largest insurance companies, Eurohold until 2027, b) the
Praktiker big box retail unit in Craiova, Romania, in exchange for SPDI redeemable convertible
shares, and c) 24% of the Delea Nuova office building, a well located property facing three main
roads in the city center of Bucharest almost fully let with the main tenant being the country’s
telecommunications regulator, in exchange of SPDI ordinary shares. Together with the latter the
Company acquired also a residential portfolio in Bucharest and Sofia. The three income producing
assets generate a combined €2m of gross rental income.
The macroeconomic environment in the Region and throughout Europe stabilised even further in
2015 with most of our countries of interest showing strong economic growth and signs that the
property markets were picking up after years of stagnation. New international investors made
their presence felt in Romania, where acquisition yields dropped across property types while
transaction volumes increased. In Greece an agreement with the country’s lenders, which was
reached in extremis in August, followed by fresh elections that confirmed the government in
place, signalled a period of lower political uncertainty. The country reached year end with a new
€14bn recapitalisation of Greece’s systemic financial institutions, the majority of which the
Company has business relationships with. Ukraine experienced yet further foreign exchange
destabilisation in H1, but the Hryvnia rate stabilised by Q4 offering a rare stability in the country’s
economy. At the same time, Europe as a whole experienced sluggish growth with the ECB
expanding its QE package.
ANNUAL REPORT 2015|4
On the heels of a successful 2014, the 2015 accounts show an even better and more effective
operational picture. If we disregard asset revaluation and Ukrainian related FX losses, the
operating results as presented in the Management Report (excluding financial costs, that are high
in our region) show positive numbers across the board. Our revenues topped €5,9m, while our
EBITDA surpassed €2,4m, 3 times more than the 2014 figure, while cash generation improved on
the back of the income producing asset acquisitions.
SPDI has been successfully put on a solid foundation, both financially and operationally, against
the backdrop of the global economic and financial sector issues between 2010–2014, having
successfully averted any substantial effects from the war in Ukraine and sheltered the Company
and its assets from the financial trouble that have hit both Greece and to a lesser extent Cyprus in
the last few years, even though none of the above have been put squarely in the past. While
2014 was a turnaround year for the Company, the progress made in 2015 has served to confirm
that the implementation of our growth strategy of acquiring quality income producing assets that
generate strong cash flows is bearing fruit. As the economic fundamentals in the Region improve
(not unlike our stated expectations) we are striving to position the Company in the centre of the
growth story of the Region that would lead to substantial positive results for our shareholders.
Having experienced in practice the firm support of our shareholders through the success of the
open offer, management will continue being guided by our vision, and exerting every effort in
achieving our common goals.
Best regards,
Lambros G. Anagnostopoulos
Chief Executive Officer
ANNUAL REPORT 2015|5
2.
Management Report
2.1 Corporate Overview & Financial Performance
In 2015 the Company’s management focused on further acquiring income producing
assets with a view to increase and diversify its income generating base. More
specifically, during the reporting period the Company acquired:
Summary
1. 20% of Autounion, a 19.000 sqm office building in Sofia, fully let to one of
Bulgaria’s largest insurance companies, generating a gross rental income of
~€2,9m annually;
2. 24,35% of Delea Nuova office building, an almost fully let 10.000 sqm office
building in Bucharest mostly let to Romania’s Telecom Regulatory Authority
ANCOM. Delea Nuova generates a gross rental income of ~€1,85m annually;
3. A portfolio of residential properties in Bucharest and Sofia, partly let and
partly intended for sale, generating ~€0,3m annual rental revenues;
4. A fully let 9.000 sqm retail property in Craiova, Romania, rented to Praktiker
until 2020, generating a gross rental income of ~€1m.
In addition in July 2015 following intensive legal battle which started in 2011, we
have finally been able to register ownership over Rozny land plot in Kiev Oblast,
destined for residential development. The ownership of Rozny plot was under
contention by an Ukrainian third party even though the claims were unsubstantiated
(as finally proven).
While the Company continued on the 2014 trend of adding assets to its portfolio
resulting in an 52% increase in rental income for the year to €5,5m, it maintained its
overall lean and strict operations management, keeping the recurring annual
operating and administrative costs to below €2,7m, an increase of ~17% compared
to 2014, even though the size of the Company almost doubled. At the same time,
management continued the implementation of the Company’s strategy through
spending time and resources to identify further acquisition opportunities for potential
future transactions.
In parallel, the Company’s Board of Directors was strengthened with the addition of
two new Directors with extensive experience in investing in real estate as well as in
other markets in our region of focus. Ms. Kalypso Nomikou and Mr. Vago
Barseghyan, have a long and successful entrepreneurial and business track record,
focusing in shipping and corporate finance respectively, both globally and in South
East Europe where they have been involved in various investments.
The political instability in Ukraine continued throughout 2015 albeit at an abating
rate. As the crisis and the war have taken a heavy toll on the country’s economy, the
trend offers hopes of stability returning to the country in the not too distant future.
Despite efforts to avert the effects of the crisis, Terminal Brovary, the Company’s
logistic complex in Kiev, has not been spared with many of its tenants experiencing
substantial financial concerns. Consequently, the Terminal saw its occupancy
decrease to 55% as a result of many tenants deciding to downsize their Ukrainian
operations, or moving to other cheaper alternatives, as the market has become
denominated in local currency (UAH) from US$ following the substantial devaluation
vis a vis the US$ in the last 18 months. Such evolution increases the FX exposure of
the Company.
Corporate
Governance
Ukrainian
Political and
Financial
Developments
ANNUAL REPORT 2015|6
Greek Political
and economic
developments
Capital
Structure
During the reporting period the Greek government continued discussions with the
creditor institutions (EU/ECB/IMF/ESM) for extending the 2010 financial assistance
program. The prolongation of the negotiation for yet another six months resulted in
maintaining of a higher political and economic risk profile for the country. Following a
referendum in July 2015 amidst a capital controls environment instigated in June
2015, a preliminary agreement signed in August 2015 and snap elections in
September 2015, Greece has finally managed to conclude a deal with the creditors
that was eventually ratified in May 2016 but the implementation of the agreement
and the reforms attached to it are still to come. Such political and economic turmoil
has not had a substantial effect on the operation of the Company in the country
where its logistics terminal is fully let.
In view of the Open Offer and the exercise of the Warrants (March and August 2015
respectively), which resulted in 38.102.375 new ordinary shares being issued by
SPDI, as well as the issuance of new redeemable shares for the acquisition of the
Craiova asset, the Company’s capital structure was 90.014.723 ordinary shares,
9.011.497 redeemable preference shares and 18.028.294 Class A warrants at the end
of the year. At the end of the reporting period SPDI had ~€43m of equity and
~€82m of liabilities, out of which ~€65m is bank debt. As a result the debt to equity
ratio was 1,51x. The Loan to overall Value ratio (debt as a % of Total Asset Value)
was 52%.
Most of its income producing assets debt profiles follows the WALT of the tenancy
agreements while the residential asset related debt is being repaid directly from sale
proceeds. Whenever a need arises to re-profile debt, the Company enters into
discussions with the relevant financial institutions to that effect, even though such
discussions in the Region, and especially as far as Greek banks are concerned are
time consuming and may take more than 6-9 months.
In 2015, the Company finalised the streamlining of the Ukrainian operating
companies by merging most of them and eliminating others, ending with nine for the
six assets it owns in the country. A similar exercise is being implemented in Romania
and Cyprus.
Optimizing
Corporate
Structure
The Company has also implemented an ERP system, based on Microsoft Dynamics
(Navision). Upon full implementation by end 2016, the system will allow for the real
time monitoring of income and expenses across all countries and assets resulting in
operating efficiencies.
The Audit Committee monitors the integrity of the consolidated financial statements,
potential conflicts of interest of the directors and senior managers as well reviews the
effectiveness of the Company’s internal controls. The Committee also supervises the
relationship with the Auditor, providing relevant recommendations for maximizing the
effectiveness of the external audit.
Audit
Committee
The Remuneration Committee has the responsibility to determine and periodically
review the policy and implementation for the remuneration of the Directors and
Executive Management of the Company so as to ensure that all are provided with
appropriate, reasonable and fair incentives for an enhanced performance.
Remuneration
Committee
The Board is ultimately responsible for the Group’s strategy, financial performance
and risk management systems. As the Group grows, the Board is also responsible for
the alignment of the implemented strategy with the vested interests of the
Internal Audit
and Control
ANNUAL REPORT 2015|7
shareholders, through annual budgets and cash flow preparation and their respective
revisions when appropriate. Monitoring the on-going financial performance is a
responsibility of the management which reports to the BoD in order to maintain a
tight liquidity control.
2015 saw SPDI continue its growth trend which commenced the year before through
the acquisition of new assets leading to the Company being by the end of the
reporting period active in Romania, Bulgaria, Greece and Ukraine. Most notably, the
Company’s annual operating income increased by ~64% to €5,9m (excluding any
property fair value adjustments to the cost of goods sold) from €3,6m in 2014. The
operating income does not include the % participation by the Company of the
operating income of the projects that the Company maintains a minority participation
in, which is reported as dividend income, but includes net income resulting from on-
going sales of residential assets (sales income minus the cost of the asset sold).
Overall, EBITDA from operations has increased 3x to ~€2,4m (2014: €0,8m).
Financial
performance
7.000.000
6.000.000
5.000.000
4.000.000
3.000.000
2.000.000
1.000.000
-
Operating Income (€)
5.836.768
3.591.903
2.717.166
1.219.483
411.472
2011
2012
2013
2014
2015
2.2 Property Holdings
The Company's portfolio consists of commercial income producing and residential
properties in Romania, Greece, Bulgaria and Ukraine as well as land plots in Ukraine,
Bulgaria and Romania.
Property
Assets
Commercial
Terminal Brovary Logistic Park consists of a 49.180 sqm gross leasable Class A
warehouse and associated office space, situated on the junction of the main Kiev –
Moscow highway and the Borispil road which was fully completed in 2012. Following
the near collapse of the Ukraine economy and its currency (that saw a drop by 70%)
the facility experienced an
increased vacancy with tenants shrinking their
warehousing needs as their bottom line sales were substantially affected. The
Terminal was ~45% leased at the end of the reporting period.
Innovations Terminal Logistic Park consists of a 16.570 sqm gross leasable Class A
warehouse 6.395 sqm of which is for cold storage. Innovations was 87% leased at
the end of the reporting period, 61% to Nestle and 26% to other local companies.
Post period end Nestle notified the Company of its intent to leave the warehouse and
the Company is in the process of both negotiating a break agreement with Nestle on
their three year remaining contract and receiving the approval for such agreement by
the financing Bank. At the same time the Company is actively looking to find
replacement tenants.
ANNUAL REPORT 2015|8
GED Logistics Terminal consists of a 17.756 sqm gross leasable area, industrial
and associated office space, situated on the west side of Athens, close to the Port of
Piraeus. The facility has been in operation since 2010 and as at the end of the
reporting period was 100% leased, to Kuehne + Nagel (70%) and GE Dimitriou SA
(30%). The park also has a photovoltaic energy production facility installed on its
roof.
EOS Business Park which serves as the Danone Head Quarters in Romania, is a
3.386 sqm gross leasable Class A office building, situated in the North Eastern Part of
Bucharest. The building is fully let to Danone until 2026.
Autounion consists of 19.476 sqm of gross leasable office area, situated in a prime
business area near the International Airport of Sofia. The BREEAM-certified building
was completed in 2008 and is fully leased to Eurohold, one of the largest Bulgarian
insurance companies, until 2027.
Praktiker Craiova consists of 9.385 sqm of gross leasable retail area, situated on
one of the main arteries of Craiova, the sixth biggest city in Romania in terms of
population. The retail unit is fully leased to Praktiker, a a regional DIY retailers in
Europe, until 2020. Early in 2016 the tenant offered to extend the lease agreement
for an additional five years until December 2025, in exchange for reducing the annual
rent to the levels of the temporary reduction that tenant and the previous owner had
agreed for the last few months of 2015, namely to ~€600k. Such offer is under
discussion.
Delenco office building consists of 10.280 sqm of gross leasable office area, spread
over 11 floors. The building was completed in 2007 and it is located in Bucharest’s
centre. At the end of the reporting period, the Delenco office building was 97% let,
with ANCOM (the Romanian Telecommunications Regulator) being the anchor tenant
(70% of GLA).
Residential portfolio
This consists of five distinct groups of residential units in Bucharest and one in Sofia.
As the market prices for residential properties picked up in 2015, the Company sold a
number of units and by the end of 2015 still manages a total of 228 apartments and
villas. The Group acquired the portfolio in two stages, the first in August 2014 and
the second in May 2015.
Land Assets
Bela Logistic Centre is a 22,4 Ha plot in Odessa situated on the main highway to
Kiev. Following the issuance of permits in 2008, below ground construction for the
development of a 103.000 sqm gross buildable area of logistic center commenced.
Construction was put on hold in 2009 due to the global economic crisis.
Kiyanovskiy Lane consists of four adjacent plots of land, totaling 0,55 Ha
earmarked for a residential development, which are well located, overlooking the
scenic Dnipro River, St. Michael’s Spires and historic Podil neighborhood.
Tsymlyanskiy Lane is a 0,36 Ha plot of land located in the historic Podil District of
Kiev earmarked for the development of a residential complex.
Balabino project is a 26,38 Ha plot of land situated on the south entrance of
Zaporozhye, a city in the south of Ukraine with a population of 800.000 people.
Balabino is zoned for retail and entertainment development.
ANNUAL REPORT 2015|9
Rozny Lane is a 42 Ha land plot located in Kiev Oblast, destined for the
development of a residential complex. It has been registered under the Company
pursuant to a legal decision in July 2015.
Pantelimon Lake consists of a ~40.000 sqm plot of land in east Bucharest situated
on the shore of Pantelimon Lake, opposite the prestigious Lebada Hotel. The
Company is in negotiations with its co-owner of the plot and the lending bank to re-
profile/restructure the loan. The construction permit, which allows for gross buildable
area of~54.000 sqm residential space to be built, was renewed in April 2014.
Boyana Land The complex of Boyana Residence includes adjacent land plots with
surface of 17.000 sqm with building permits to develop gross buildable area of
21.851 sqm.
Green Lake land The Green Lake residences complex includes adjacent land plots
of 40.360 sqm. The Green Lake project is situated in the northern part of Bucharest
on the bank of Grivita Lake in Bucharest. SPDI owns 44,24% of these plots.
In 2015, the Company maintained in position its RICS accredited valuers, namely
CBRE Ukraine for the Ukrainian Assets, and Real Act for the Romanian, Bulgarian and
Greek Assets. The valuations have been carried out by the appraisers on the basis of
Market Value in accordance with the current Practice Statements contained within the
Royal Institution of Chartered Surveyors (“RICS”) Valuation – Professional Standards
(2014) (the “Red Book”) and is also compliant with the International Valuation
Standards (IVS).
At the year-end, the Company’s property assets (including its % participation in
assets classified under associates and available for sale) were valued at €117m, an
increase of ~50% compared to December 2014, due to acquisitions effected
throughout the reporting period. It should be noted that the fair value of the
Ukrainian assets has been reduced by 24% due to the continuing crisis in the
country, while valuations in Romania, and Greece showed marginal increases.
Gross Asset Value (€mil)
150
125
100
75
50
25
0
38
2011
39
2012
39
2013
117
78
2014*
2015
Property Asset
Valuations
*Included GED warehouse acquisition completed in early 2015
During the year the Company’s asset portfolio became even more diversified in terms
of geography as well as asset class. At the end of the reporting period, ~80% of the
Company’s portfolio is outside Ukraine with Romania becoming the prime country of
operations (49%) in terms of Gross Asset Value.
ANNUAL REPORT 2015|10
GAV % allocation by Country
€40m
€78m
€117m
16%
49%
14%
21%
2015
2013
2014
Ukraine
Greece
Romania
Bulgaria
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
In respect of the income generation capacity of the Company’s assets (excluding
income resulting from asset sales) only 25% of expected annualized income comes
from Ukraine, with Romania being the prime source with 45%.
Annualized NOI % allocation by Country at year end
€2,7m
€6m
€7m
9%
45%
21%
25%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2013
2014
2015
Ukraine
Greece
Romania
Bulgaria
Excluding a) the revaluation losses attributable mostly to the situation in Ukraine, b)
the foreign exchange losses (related to the EBRD Terminal Brovary loan or the
intercompany loans that have been affected on paper by the devaluation of the UAH)
and c) any one off gains/losses, costs or impairments/provisions related to the
properties acquired during the period the table below compares the performance of
the last 2 operating periods, showing significant improvement.
P&L
ANNUAL REPORT 2015|11
Table 1
EUR
Rental Income
Income from Sale of Asset - Cost of properties sold
Income from Operations of Investments
Investment property operating expenses
Net Opereting Income from Investment Property
Share of profits from associates (ex revaluation)
Net Income from Avaliable for Sale assets (ex revaluation)
Total Income
Administration expenses
Operating Result (EBITDA)
Finance costs, net
Income tax expense
2015
2014
5.448.960
3.577.445
387.808
14.458
5.836.768
3.591.903
(1.124.583) (756.561)
4.712.185
2.835.342
166.863
485.529
5.364.577
2.835.342
(2.981.338) (2.684.422)
2.383.239 150.920
(3.771.100) (1.267.331)
(80.188) (220.476)
Operating Result after finance and tax expenses for the year
(1.468.049) (1.336.887)
Other income / (expenses), net
Other finance costs
Gain realized on acquisition of subsidiaries
Fair Value (Losses) /Gains from investments
Foreign exchange losses, net
621.252 (136.058)
(603.495) (110.072)
2.181.834 766.221
(6.785.554)
9.297.525
(10.659.602)
(18.354.598)
(Loss) / Profit for the year
(16.713.614) (9.873.869)
The table below summarizes the main financial position of each of the Company’s
assets (representing the Company’s participation at each asset) at the end of the
reporting.
Table 2
Asset
Contribution
to Net Asset
Value
Rom
Rom
Rom
Rom
Bul
Gr
Ukr
Rom & Bul
Rom & Ukr
€m
Innovations
Eos
Praktiker
Delenco
Autounion
GED logistics
Terminal Brovary
Residential units
Land banking
Total Value
Other balance sheet items, net **
Net Asset Value total
Mcap 31/12/2015 (Share price at £0,245)
Mcap 27/6/2016 (Share price at £0,14)
Discount as of the reporting date vs NAV 31/12/2015
* Reflects the Company’s participation at each asset
**Refer to balance sheet and related notes of the financial statements
GAV*
14,4
6,6
7,2
5,3
7,0
16,5
12,3
26,0
21,9
117,1
2015
Debt*
7,4
3,9
4,8
0,9
2,5
12,3
12,2
14,8
6,2
65
-9,6
NAV
7,0
2,7
2,4
4,4
4,5
4,2
0,1
11,2
15,6
52
-9,6
42,4
29,9
15,7
-63%
The Net Equity attributable to the shareholders as at 31 December 2015 stood at
~€43m representing a 31% increase over the 2014 Net Asset Value driven by the
new assets acquired for shares during the year as well as the new equity raised.
Net Equity
ANNUAL REPORT 2015|12
The NAV per share as at 31 December 2015 stood at GBP 0,35. To compare with the
2014 equivalent NAV per share, one needs to take into account the more than
doubling of the ordinary shares the Company has on issue, as a result of the March
2015 Open Offer (rights issues) to its existing shareholders as well as the issuing of
more shares in exchange of assets that have been acquired. Even though the open
offer was effected at a much lower price than the 12 month average to that date, the
discount of the Market Value vis a vis the Company’s NAV increased to 29% by year
end.
Net Asset
Value per
share
80,00%
70,00%
60,00%
50,00%
40,00%
30,00%
20,00%
10,00%
0,00%
Discount of Market Share Price over NAV at the end of the year
£0,80
£0,62
£0,65
£0,56
£0,25
63%
67%
42%
26%
29%
2011
2012
2013
2014
2015
Discount
Share Price
2.3 Financial and Risk Management
0,90
0,80
0,70
0,60
0,50
0,40
0,30
0,20
0,10
-
The Group’s overall bank principal debt exposure at the end of the reporting period
was at €65m (including property assets fully or partially owned by the Company):
Leverage
a.
the €12,2m construction debt to Terminal Brovary from EBRD. This loan is
denominated in US$ and stands at $13,25m at the end of the reporting
period.
b. the €3,9m finance lease of the EOS business park with Alpha Bank Romania.
the €7,4m finance lease of the Innovations park with Bank of Piraeus
c.
Romania.
d. the €12,3m debt financing of the GED Logistics park and photovoltaic with
Eurobank.
e.
f.
the €4,8m debt financing of the Praktiker Craiova with Marfin Bank Romania.
the €0,9m (24% participation at the total of €3,7m) debt financing of the
Delenco office building with CEC.
g. the €2,5m (20% participation at the total of €12,6m) debt financing of the
Autounion office building with Unicredit.
h. the €14,8m being the Company’s portion on the residential portfolio debt
financing.
i. with the remaining €6,2m being the Company’s portion on land plot related
debt financing in Romania and Bulgaria.
Overall, the Group's Loan to Value ratio at the end of 2015 stands at 52%.
ANNUAL REPORT 2015|13
Throughout 2015 the Company continued to focus on generating and preserving
liquidity and optimizing its cash flow in a credit environment that had not improved
much from a year before. The Company raised cash, which it used to acquire more
assets, keeping a tight cash flow schedule, and managing its liabilities in a way to
limit the need to carry cash on its balance sheet to a minimum. The reduction of
Terminal Brovary rental income (due to tenants leaving or accepting lower rent to
stay), as well as temporary cash shortfalls linked with tenants leaving until new
tenants sign up in other property assets, have caused some cash shortfalls to the
Company.
2.4 2016 and beyond
Going into 2016, the Company is poised to follow its strategy by identifying new
income producing assets in Romania, Bulgaria and/or Greece, as well as the capital
sources necessary to effect such acquisitions. As the political turmoil in Greece is
beginning to level off, and the economic growth of Romania shows signs of further
improvement, the time is ripe for the Company to seek making yet another step
towards its stated goal of becoming a leading income producing property company in
the South East Europe region. At the same time, and as the markets pick up, the
Company will not close its eyes to possibilities of realizing values through the sale of
assets, should these opportunities materialise.
Liquidity
Management-
Cash Flow Risk
General
ANNUAL REPORT 2015|14
Romania
Regional Economic Developments 1
3.
Romania’s GDP registered a 3,7% growth y-o-y in Q4 2015, the second highest
among EU28 countries after the Czech Republic. After this result, the country’s
economic growth for 2015 reached a real 3,8%, compared to 2014’s 2,8%.
The year ended with CPI falling in negative territory (-0,7% y-o-y), mainly due to
VAT rate decreasing for all food products from 24% to 9% as of June 2015.
Unemployment rate fell slightly to 6,7% compared to 2014. The Romanian
government and the trade unions have reached an agreement to increase the gross
minimum wage to €276 from €232 per month, as of May 2016. Also, the government
reduced VAT from 24% to 20% and dividend withholding tax from 16% to 5% as of
1 January 2016.
Romania's current account deficit widened to €1,76bln in 2015, from €0,69bln a year
earlier. Foreign direct investments totaled €3,04bln in the period under review,
approximately 25% higher than in 2014. Long-term external debt at end-2015 stood
at €71bln down 6,3% from end 2014. Debt stands at ~44% of GDP.
In May 2015, the Romanian National Bank cut its key monetary policy rate to a
record low of 1,75%. Exchange rates remained relatively stable throughout 2015 at
RON 4,50 to the Euro.
In December 2015, Moody’s changed the outlook on Romania’s Baa3 government
ratings to positive from stable and affirmed Romania’s Baa3/P-3 ratings, the lowest
investment grade level. Moody’s said that the country’s significant progress in
correcting its macroeconomic imbalances is one of the key drivers for changing its
outlook.
Romania is expected to continue as the Region’s outperformer in 2016, with an
accelerating growth of more than 4%, mainly driven by private consumption.
Reforms in taxation are likely to attract even higher investment volumes, along with
improved EU funds absorption rate and public investment spending. However,
scheduled elections for late 2016 may be a cause for some political uncertainty.
Macroeconomic data and forecasts
2012
2011
2013
GDP (EUR bn)
Population (mn)
GDP (constant prices y-o-y %)
CPI (average, y-o-y %)
Unemployment rate (%)
Net FDI (EUR bn)
131,4
131,8
142,2
20,1
2,2
5,8
7,4
1,8
20,0
0,7
3,4
7,0
2,2
19,9
3,4
4,0
7,1
2,6
Sources : IMF, National Sources, Eurobank EFG, Eurostat
2014
149,3
19,9
2,9
1,1
6,8
2,5
2015
156,0
19,9
3,8
-0,7
6,7
3,0
Bulgaria’s economy registered a 2,9% annual growth rate in 2015 (2014: 1,5%), the
highest rate since 2011, beating June’s estimate of 1,1%. Growth in 2015 was higher
than initially expected due to stronger exports to the EU stemming from lower
energy prices, the recovery of investments as a result of improved implementation of
EU-funded projects and better labour market performance.
The country’s current account showed a surplus of €542m in 2015, compared to a
surplus of €493m a year earlier, according to the Bulgarian Central Bank. FDI rose to
Bulgaria
1 Sources : World Bank Group, Eurostat, EBRD, National Bank of Greece, Elstat, Eurobank Research,
and Economic Research Division, National Institute of Statistics- Romania, National Statistical Institute
–Republic of Bulgaria, National Institute of Statistics – Ukraine, SigmaBleyzer.
ANNUAL REPORT 2015|15
€1,58bln in 2015, increasing by approximately 23% in comparison with the previous
year’s volume.
Annual EU-harmonized CPI stood at minus 1,1% y-o-y, while unemployment
recorded a rate of 10%, lower than 2014 rate of 11,5%. Exchange rates remained
stable throughout 2015 at BGN 1,96 to the Euro.
The Bulgarian government announced the increase of the minimum monthly wage to
€ 215 as of 1 January 2016, up from €195.
The low energy cost, the aforementioned wage rise and the low inflation rates in the
country benefits consumers in terms of disposal income. The on-going Euro area
recovery is also expected to boost Bulgaria’s economic performance in 2016, due to
the country’s high exposure to the area via trade and capital flows.
Macroeconomic data and forecasts
2012
2011
2013
GDP (EUR bn)
Population (mn)
GDP (constant prices y-o-y %)
CPI (average, y-o-y %)
Unemployment rate (%)
Net FDI (EUR bn)
38,5
7,3
1,8
4,2
11,2
1,2
39,7
7,3
0,8
3,0
12,3
1,2
Sources : IMF, National Sources, Eurobank EFG, Eurostat
41,0
7,3
0,9
1,4
12,9
1,1
2014
42,0
7,2
1,7
-1,6
11,5
1,2
2015
44,0
7,3
2,9
-1,1
10,0
1,6
Ukraine
The deep recession which was a result of the on-going conflict in the Eastern border
and sharp depreciation of the national currency in H1 2015, seems to be fading out
as also the decline of GDP continues to decelerate. In Q4 2015, GDP registered a
drop of 3,2% y-o-y compared to declines of 7,2% in Q3 and 14,6% in Q2. Based on
these results, the annual average contraction of GDP reached 9,9% in 2015.
In Q4 2015, important reforms were carried out. In particular, Ukrainian authorities
concentrated efforts on further business deregulation, trade liberalization, deepening
cooperation with the EU and privatization. The IMF has endorsed the government’s
fiscal budget for 2016 and it is expected that the third tranche from its programme is
expected to be available within Q3 2016. Due to the successful public debt
restructuring, Standard & Poor’s increased the ratings of sovereign foreign debt from
SC to B-.
The consolidated budget deficit for 2015 reached about 3,5% of GDP, including
government transfers to Naftogaz, the Pension Fund, and for banking re-
capitalization. Net FDI reached USD 2,3 bln mainly from bank recapitalization.
During the year, the sharp depreciation of the UAH and the resultant increase in
prices for imported goods and increase of the state-regulated tariffs led to an
inflation of 43,3%, compared to 12% in 2014. Unemployment rate eased down to
9,4% from 11% a year earlier. After reaching a record of 30 UAH/USD in February,
exchange rate seemed to stabilize between 24-25 UAH/USD.
A major development concerning international trade is that the Free Trade
Agreement (FTA) between Ukraine and the EU has become effective on 1 January
2016. According to the government, the FTA will eliminate 97% of EU tariffs on
Ukrainian exports and will reduce the average tariff on Ukrainian exports from 7,6%
to 0,5%.
According to the latest forecasts, Ukraine is expected to return to a modest growth
in 2016, if political reforms continue being implemented. Nevertheless, the conflict in
ANNUAL REPORT 2015|16
eastern Ukraine remains a significant problem, as ceasefire violations from time to
time jeopardize the country’s stability.
Macroeconomic data and forecasts
2012
2011
2013
GDP (USD bn)
Population (mn)
GDP (constant prices y-o-y %)
CPI (average, y-o-y %)
163,4
45,6
5,2
8,0
176,2
45,6
0,2
0,6
177,4
45,5
0,0
-0,2
ILO Unemployment rate (%)
7,9
7,0
Sources : IMF, National Sources, European Comission, Oxford Economics, SigmaBleyzer
Net FDI (USD bn)
7,5
6,6
7,4
3,3
2014
127,6
42,7
-6,0
24,9
10,5
0,2
2015
98,0
42,5
-9,9
43,3
9,4
2,3
Greece
After lengthy negotiations that started in February 2015, in August 2015 and among
fears of “Grexit”, Greece and the Eurozone stepped back from the brink and reached
an agreement on a new three-year adjustment programme offering €86bln of
financing in return for a number of reforms and measures to be implemented by the
Greek government. This agreement led to the re-opening of the banks that had been
closed for several weeks because of imposed capital controls in June 2015.
In September 2015, following a second snap election victory in less than 12 months
the SYRIZA party remained in power so as to undertake the task of completing to
pursue the implementation of the August agreement. A necessary step in this
process being the formal evaluation by the lender technocrats of the political
implementation of the required processes, political uncertainty lingers on in the
country for as long as it is not completed, leading to deepening recession and lack of
liquidity in the markets.
Greek GDP contracted by 0,2% in 2015 as a consequence of the aforementioned
political uncertainty and also the capital controls’ imposition, which reduced liquidity
in the economy.
In autumn, another bank recapitalization – the third in as many years - took place
for €14bn and proved to be successful, as systemic banks managed to find the
necessary capital through mostly private (and foreign) investors.
Greek budget showed a primary surplus of €1,23bln in 2015 compared to a surplus
of €0,53bln a year ago, while the general government deficit came to 7,2% of GDP
compared to a 3,6% deficit in 2014.
Inflation rate remained in negative territory for the third consecutive year, being at
minus 1,7% for 2015. Unemployment rate in the country eased slightly, standing at
24,6% at the end of 2015.
Political uncertainty mainly driven by the uncertainty of whether the government will
proceed with the necessary economic reforms leading to a positive evaluations by
the lenders, along with the on-going refugee crisis, are the two biggest issues that
put the country’s stability in question for 2016 and going forward.
Macroeconomic data and forecasts
2012
2011
2013
GDP (EUR bn)
Population (mn)
GDP (constant prices y-o-y %)
CPI (average, y-o-y %)
Unemployment rate (%)
Net FDI (EUR bn)
208,5
193,4
182,1
10,8
-1,1
4,2
17,9
0,8
11,1
-6,6
3,0
24,5
1,4
11,0
-3,9
-0,9
27,5
1,6
Sources : IMF, National Sources, Eurobank EFG, European Comission
2014
179,1
11,0
0,7
-1,4
26,6
1,0
2015
176,0
10,9
-0,2
-1,7
24,6
0,0
ANNUAL REPORT 2015|17
4.
Real Estate Market Developments2
4.1 Romania
The total investment volume registered in Romania for 2015 recorded a 42%
decrease, but the low level of investment volume can be explained by two major
one-off transactions at the end of 2014.
Total industrial and logistics stock in Romania reached 2,1m sqm, of which 1m sqm
is in Bucharest. Leasing demand in 2015 outpaced 2014 by 22%, reaching a total of
375.000 sqm. During the year, the investment volume reached approximately
€300m, almost seven times higher than last year’s volume. This number was
achieved through portfolio acquisitions, distressed assets acquisitions and also sale-
and-lease back transactions. Average prime rental rate remained at €3,8 per sqm,
while vacancy rate in the country continued on its decreasing trend, reaching 5%
from 11-12% in 2014. In Bucharest, vacancy rate dropped further to 3,3%, but the
demand driven pressure is expected to ease after the delivery of projects under
development. As a result of the high investment volume, yields compressed to
8,75% for prime properties, from last year’s 9,5%.
Investment Volume in Romania's Industrial Sector
General
Logistics
Market
350
300
250
200
150
100
50
0
10,50%
10,00%
9,50%
9,00%
8,50%
8,00%
2010
2011
2012
2013
2014
2015
Investment Volume (€)
Prime Yield
Bucharest’s office space stock recorded a 6,3% increase in 2015, compared to last
year, reaching 2,37m sqm in total. Currently, approximately 0,41m sqm are under
construction and scheduled for delivery in 2016. Adverse market conditions in 2009-
2010, led to a significantly low number of signed contracts and with typical leases
being signed for five years, the number of contracts expiring in 2015 was relatively
small. Thus, total leasing activity in 2015 was 20% lower than a year earlier. The
majority of lease agreements was signed by IT companies, continuing last year’s
trend. Prime headline rental rate recorded a slight increase by 2,8% during the year,
reaching €18,5 per sqm (in CBD sub-market). Vacancy rate continued on its
decreasing trend, reaching 11,9% from 13% in 2014. Yield for prime properties
registered a 3,2% decrease to 7,5% in 2015.
Office Market
2 Sources : Danos Research, Eurobank, Jones Lang LaSalle, DTZ Research, CBRE Research, Colliers
International, Cushman & Wakefield, MBL Research.
ANNUAL REPORT 2015|18
Office stock ('000 sq m) and Vacancy rate
2.400
2.300
2.200
2.100
2.000
1.900
1.800
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
2010
2011
2012
2013
2014
2015
The total modern retail supply in Romania reached approximately 3,2m sqm at the
end of 2015 with Bucharest’s stock currently standing at just over 1m sqm. Prime
rental rates for shopping centers varies between €60-70 per sqm per month, for high
street shops between €50-60 per sqm per month and for retail parks it is ~€8,5 per
sqm per month. According to the national statistics office, retail sales rose by an
annual 8,9% in 2015, mainly driven by food sales. Some of the most important
retailers as Lidl, Mega Image, Rewe and Selgros have already expressed their
intention to expand during 2016.
Modern Retail stock per region
Retail Market
22%
33%
16%
29%
Bucharest
Transylvania
Moldavia
Muntenia
Residential
Market
Romanian authorities issued a total of 39.112 building permits in 2015, a 3,8%
increase in comparison with last year’s numbers. In Bucharest, developers seem to
adjust better to the existing demand, as the residential projects that target middle
class buyers accounted for more than one third of the total stock delivered. Less
than 50% of the transactions concluded on this segment are carried out by funding
from the state guarantees programme Prima Casa (First Home), as the majority of
middle class buyers already own a unit and are generally interested in moving into a
house of higher quality. The purchase of a new house is now more feasible than
before, due to the improved economic sentiment, the increase in the net average
wage and also due to the successive decrease of the monetary policy interest rate by
the National Bank, which allowed the banks to offer attractive mortgage loans in
RON (Romanian local currency) with rates similar to Prima Casa. Prices have
remained stable this year in Bucharest, standing at ~€1.000-1.100 per sqm.
ANNUAL REPORT 2015|19
General
Office Market
4.2 Bulgaria
The total value of closed transactions on the investment market in Bulgaria in 2015
was €210 m, ~10% lower than in 2014. More than half of this volume stems from
deals for development land.
During 2015, about 70.000 sqm of class A offices were delivered. As a consequence,
the Sofia office stock increased slightly to 1,70m sqm. The pipeline of buildings,
which are under construction, amounts to 160.000 sqm. Also, construction of
115.000 sqm of office space is suspended and if the trend of resuming such projects
continues in 2016, office space supply will be even higher. The total class A and B
vacant office space in Sofia decreased to 219.000 sqm. Thus the average vacancy
rate for office space in the Bulgarian capital continued on its shrinking trend,
reaching 12,9%, compared to 15,4% in the same period last year. Asking rents vary
between €11-14 per sqm for Class A offices – depending on location, increased by
almost 5% compared to 2014. At the same time, asking rents for Class B properties
remained relatively stable between €6,5 and €8,5 per sqm.
Total Office Stock in Sofia ('000 sq m)
1.800
1.600
1.400
1.200
1.000
800
600
400
200
0
2009
2010
2011
2012
2013
2014
2015
In 2015, total modern retail stock in Bulgaria remained the same – approx. 844.000
sqm, as no new retail units were delivered. Shopping centers account for nearly 95%
of the total stock. Vacancy rate in Sofia stood at 10% lower than last year’s 12,4%,
while in the other major cities it recorded a drop of 3% points to 12,4%. The
situation in the Bulgarian retail market is not expected to change in 2016, as no new
developments are planned for the time being, except for remodeling existing
developments or resuming suspended construction projects.
Stock and Vacancy of Shopping Centers in Sofia
Retail Market
450.000
400.000
350.000
300.000
250.000
200.000
150.000
100.000
50.000
0
14%
12%
10%
8%
6%
4%
2%
0%
2010
2011
2012
2013
2014
2015
ANNUAL REPORT 2015|20
Residential stock in Sofia showed a slight increase of 2% in newly completed
projects in 2015. The high level of demand pushed the vacancy rates further down
to 11% of the total stock. The number of transactions in 2015 showed a significant
25% y-o-y growth, while pre-sales accounted for 37% of all deals. As far as prices
are concerned, a 5% y-o-y growth was registered. In addition, due to increasing
demand and limited supply, the discount from the asking to the final price shrunk to
5% from 9% a year earlier.
Residential
Market
4.3 Ukraine
Due to the deepening of the economic recession in Ukraine, many businesses were
adopting a wait-and-see attitude in relation to further activity in the country, whilst
the purchasing power of the country’s population further decreased.
As of the end of 2015, total stock of modern warehousing and logistics space in the
greater Kiev area amounted to 1,79m sqm, only a 3,5% increase in comparison with
2014, due to Ukraine’s weak economic performance that led to a drop in demand
from the occupier’s side. The cumulative take-up reached 160.700 sqm, decreasing
by around 25% compared to last year’s performance. This number was generated
mainly by logistics companies’ relocation, cost cutting criteria being the driving force.
As a result of Ukraine’s weak economic performance vacancy rates generally
increased, reaching 9,8% by the end of the year, from 6,1% a year earlier. Rental
rates remained relatively stable at US$3-5 per sqm for Class A properties and US$2-3
for Class B. The majority of the new leases in 2015 were signed in the Ukrainian
hryvnya without binding the rental payment to the US dollar.
Rental and Vacancy Rates in the Greater Kyiv area
General
Logistics
Market
5,0
4,5
4,0
3,5
3,0
2,5
2,0
1,5
1,0
0,5
0,0
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
2010
2011
2012
2013
2014
2015
Prime Rental Rate
Prime Vacancy Rate
The total office take-up in Kiev was around 174.000 sqm of GLA in 2015, twice as
high as the figure registered during 2014. On the supply side, there was no major
change in the office property market in Kiev and across Ukraine in 2015. The total
office stock in Kiev reached around 1,8m sqm with approximately 70.000 sqm of
offices delivered during 2015. The office vacancy rate in Kiev varied between 23-
24% during Q1-Q3 2015, and decreased to around 21,5% by the end of the year.
During 2015, a further downward correction in rental rates for classes B and C was
witnessed, whilst rental rates for A-class properties remained in the range of USD
17-28 per sqm per month.
Office Market
ANNUAL REPORT 2015|21
Office Space take-up in Kyiv
200.000
180.000
160.000
140.000
120.000
100.000
80.000
60.000
40.000
20.000
0
2010
2011
2012
2013
2014
2015
4.4 Greece
The property market is expected to recover gradually, once Greece emerges from
the recession cycle. In terms of investment interest, the most dynamic sectors
appear to be that of hospitality, as a result of a projected substantial growth in
tourism.
The Industrial and Logistics market seemed stagnant in the first nine months of the
year but in the last quarter investment activity started picking up. As a result,
demand increased despite the fact that rents remained stable. Prime rental rates for
industrial space are approximately €2,5 per sqm, while for logistics space they range
from €3 to €4 per sqm. Demand for logistics space is expected to continue its
increasing trend, especially after the successful privatization of Piraeus Port and the
announcement for a tender regarding the Thriassio Freight Center in Attica
Prefecture.
No major changes were observed in the office sector throughout 2015. Rental rates
in prime office districts were stable through the whole year at €8-15/sqm depending
on locations. This relatively large range is also a sign of market inefficiency due to
low transaction volume. Developers’ unwillingness to commit to new
the
constructions still exists, therefore there is no pipeline of new projects and this
situation is not expected to change over the short or medium term.
General
Logistics
Market
Office Market
ANNUAL REPORT 2015|22
5. Property Assets
5.1 Terminal Brovary Logistic Park, Ukraine
The Brovary Logistic Park consists of a 49.180 sqm GLA Class A warehouse and
associated office space. The building has large facades to the Brovary ring road, at
the intersection of the Brovary (Е-95/М-01 highway) and Borispol ring roads. It is
located 10 km from Kiev city border and 5 km from Borispol international airport.
Project
description
The building is divided into six independent sections (each at least 6.400 sqm), with
internal clear ceiling of 12m height and industrial flooring constructed with an anti–
dust overlay quartz finish. The terminal accommodates 90 parking spaces for cars
and trucks, as well as 24 hour security.
As of the end of 2015, the Park was ~45% leased, representing a decrease of ~45%
over the last year end numbers. This reduction was essentially driven by the on-
going crisis of the Ukrainian economy, creating reduced warehouse storage needs.
Current status
Post period end, in May 2016 the Company fully leased the warehouse space while it
also signed a letter of intent to sell the property to Rozetka, the leading Ukrainian
internet retailer. Such sale is subject to EBRD approval as well as to various other
conditions precedent.
5.2 Innovations Logistics Park, Romania
The Park incorporates approximately 8.470 sqm of multipurpose warehousing space,
6.395 sqm of cold storage and 1.705 sqm of office space. It is located in the area of
Clinceni, south west of Bucharest center, 200m from the city’s ring road and 6km from
Bucharest-Pitesti (A1) highway. Its construction was completed in 2008 and was
tenant specific. It comprises four separate warehouses, two of which offer cold
storage.
Project
description
ANNUAL REPORT 2015|23
In 2015 the warehouse was 87% leased with Nestle Ice Cream Romania being the
anchor tenant. Following a request by Nestle Ice Cream, the Company has entered
into discussions with Nestle and Bank of Piraeus to proceed with execution of an
amicable settlement agreement, in breaking the remaining of Nestle’s fix tenancy
contract (until September 2018). In the meantime the Company has identified
potential replacement tenants with whom it is having preliminary discussions.
Current status
5.3 EOS Business Park – Danone headquarters, Romania
The park consists of 5.000 sqm of land including a class “A” office building of 3.386
sqm GLA and 90 parking places. It is located next to the Danone factory, in the
North-Eastern part of Bucharest with access to the Colentina Road and the Fundeni
Road. The Park is very close to Bucharest’s ring road and the DN 2 national road
(E60 and E85) and is also serviced by public transportation. The park is highly energy
efficient.
Project
description
The Company acquired the asset in November 2014. The complex at the end of 2015
is fully let to Danone Romania, the French multinational food company, until 2026.
Current status
5.4 Praktiker Retail Center, Romania
The retail park consists of 21.860 sqm of land including a retail BigBox of 9.385 sqm
GLA and 280 parking places. It is located in Craiova, on one of the main arteries of
the city, along with most of the DIY companies.
Project
description
The Company finalised the acquisition of the asset in July 2015. As at year-end, the
complex is fully let to Praktiker Romania, a regional DIY retailer, until 2020 and the
Company is negotiating the extension of the Praktiker lease agreement until
December 2025 for an annual rent of ~€600.000
Current status
ANNUAL REPORT 2015|24
5.5 Delenco office building, Romania
The property is a 10.280 sqm office building, which consists of two underground
levels, a ground floor and ten above-ground floors. The building is strategically
located in the very center of Bucharest, close to three main squares of the city:
Unirii, Alba Iulia and Muncii, only 300m from the metro station.
Project
description
The Company acquired 24,35% of the property in May 2015. As of the end of 2015,
the building is 97% let, with ANCOM (the Romanian Telecommunications Regulator)
being the anchor tenant (70% of GLA).
Current status
5.6 Autounion office building, Bulgaria
A 19.476 sqm Class A office building which is located in a prime business area of
Sofia, very close to the international airport and close to the city center. The building
is BREEAM certified.
Project
description
The Company acquired 20% of the property in April 2015. As at year-end 2015
Autounion is fully let to Eurohold Bulgaria, one of the largest Bulgarian insurance
companies, on a long lease extending to 2027.
Current status
5.7 GED Logistics center, Athens Greece
The 17.756 sqm complex that consists of industrial and office space is situated on a
44.268 sqm land plot in the West Attica Industrial Area (Aspropyrgos). It is located at
exit 4 of Attiki Odos (the Athens ring road) and is 10 minutes from the port of Piraeus
(where COSCO runs two of the three piers of one of the biggest container port in the
Mediterranean Sea) and the National Road connecting Athens to the north of the
country. The roofs of the warehouse buildings house a photovoltaic park of
1.000KWp.
Project
description
ANNUAL REPORT 2015|25
The buildings are characterized by high construction quality and state-of-the-art
security measures. The complex includes 100 car parking spaces, as well as two
central gateways (south and west).
The complex at the end of 2015 is 100% occupied, with the major tenant
(approximately 70%) being the German transportation and logistics company Kuehne
+ Nagel.
Current status
5.8 Residential portfolio
•
Romfelt Plaza (Doamna Ghica), Bucharest, Romania
Romfelt Plaza is a residential complex located in Bucharest, Sector 2, relatively close
to the city center, easily accessible by public transport and nearby supporting
facilities and green areas.
Project
description
At the end of 2015, 20 apartments
were available while 12 of them
were
an
rented,
occupancy rate of 60%.
indicating
Current status
•
Linda Residence, Bucharest, Romania
Linda Residence is a residential complex located in Bucharest, Sector 3, close to
subway transportation which connects the project to all areas in Bucharest in less
than 30 minutes.
Project
description
Current status
At the end of 2015, 22 apartments
were available with 4 of them being
rented indicating an occupancy rate
of approximately 18%.
In May 2016,
the Company
accepted an offer to sell in bulk
most of the remaining units (16) it
owned in Linda Residence.
ANNUAL REPORT 2015|26
•
Monaco Towers, Bucharest, Romania
Monaco Towers is a residential complex located in South Bucharest, Sector 4,
enjoying good car access due to the large boulevards, public transportation, and a
shopping mall (Sun Plaza) reachable within a short driving distance or easily
accessible by subway.
Project
description
At the end of 2015, 26 units were
available, 11 of them being rented
indicating an occupancy rate of
42%.
Current status
•
Blooming House, Bucharest, Romania
Blooming House is a residential development project located in Bucharest, Sector 3, a
residential area with the biggest development and property value growth in
Bucharest, offering a number of supporting facilities such as access to Vitan Mall,
kindergartens, café, schools and public transportation (both bus and tram).
Project
description
At the end of 2015, 22 units were
available 11 of them being rented
indicating an occupancy rate of
50%.
Current status
•
Green Lake, Bucharest, Romania
A residential compound of 40.500 sqm GBA, which at the end of 2015 consisted of 40
unsold apartments plus 37 unsold villas, situated on the banks of Grivita Lake, in the
northern part of the Romanian capital – the only residential project in Bucharest with
a 200 meters frontage to a lake. The compound also includes facilities such as one of
Bucharest’s leading private schools (International School for Primary Education),
outdoor sport courts and restaurants. Additionally Green Lake includes land plots
totaling 40.360 sqm. SPDI owns ~43% of this property asset portfolio.
Project
description
ANNUAL REPORT 2015|27
During the period, eight apartments and villas were sold while at the end of 2015, 77
units were unsold with 26 of them being let (occupancy rate of ~34% - 53% for
apartments and 14% for villas).
Current status
•
Boyana Residence, Sofia, Bulgaria
A residential compound, which consisted at acquisition date (May 2015) of 67
apartments plus 83 underground parking slots developed on a land surface of 5.700
sqm, situated in the Boyana high end suburb of Sofia, at the foot of Vitosha
mountain with GBA totaling to 11.400 sqm. The complex includes adjacent land plots
with surface of 17.000 sqm with building permits under renewal to develop GBA of
21.851 sqm.
Project
description
During 2015, six apartments were sold, with 61 units remaining unsold at the end of
2015.
Current status
5.9 Land Assets
•
Aisi Bela – Bela Logistic Center, Odessa, Ukraine
The site consists of a 22,4 Ha plot of land with zoning allowance to construct up to
103.000 sqm GBA industrial properties and is situated on the main Kiev – Odessa
highway, 20km from Odessa port, in an area of high demand for logistics and
distribution warehousing.
Project
description
The Company has hired a new security agency to safeguard the premise and does
not intend to recommence construction in the near future.
Current status
•
Kiyanovskiy Lane – Kiev, Ukraine
The project consists of 0,55 Ha of land located at Kiyanovskiy Lane, near Kiev city
centre. It is destined for the development of business to luxury residences with
beautiful protected views overlooking the scenic Dnipro River, St. Michaels’ Spires
and historic Podil.
Certain local developers have approached the Company in late 2015 in order to
explore the possibility of co-development. Such proposals are being evaluated by the
Company.
Project
description
Current status
•
Tsymlyanskiy Lane – Kiev, Ukraine
The 0,36 Ha plot is located in the historic and rapidly developing Podil District in Kiev.
The Company owns 55% of the plot, with one local co-investor owning the remaining
45%.
Project
description
During Q4 2015, a number of interested parties approached the Company with the
intent to partnering in commencing the development of this property. Such proposals
are being evaluated.
Current status
ANNUAL REPORT 2015|28
•
Balabino- Zaporozhye, Ukraine
The 26,38 Ha site is situated on the south entrance of Zaporozhye city, three km
away from the administrative border of Zaporozhye. It borders the Kharkov-
Simferopol Highway (which connects eastern Ukraine and Crimea and runs through
the two largest residential districts of the city) as well as another major artery
accessing the city centre.
Project
description
The site is zoned for retail and entertainment. Development has been put on hold.
Current status
•
Rozny Lane – Kiev Oblast, Kiev, Ukraine
The 42 Ha land plot located in Kiev Oblast, destined for the development of a
residential complex.
Project
description
Following protracted legal battle it has been registered under the Company pursuant
to a legal decision in July 2015.
Current status
•
Delia Lebada, Romania
The site consists of a ~40.000 sqm plot of land in east Bucharest situated on the
shore of Pantelimon Lake, opposite to a famous Romanian hotel, the Lebada Hotel.
The lake itself, having a 360 Ha surface, is the largest lake of Bucharest and provides
for many leisure activities like fishing, cycling, walking, etc. At the back of the
property there is a forest which transforms the area into a very attractive habitat for
families and adds value to the residential units to be developed.
Project
description
The construction permit, which allows for ~54.000 sqm to be built, was renewed in
April 2014 but the project has been on hold. As the lending bank (Bank of Cyprus)
expressed the intent not to renew the land acquisition loan (that the Company
inherited upon acquisition of the asset as part of a portfolio in 2015 and which was in
default), the Company entered in negotiations with the co-owner and the financing
bank either acquire the associated loan, or sell the property all together. In the
meantime the SPV owning the plot has entered into an insolvency status.
Current status
ANNUAL REPORT 2015|29
ANNUAL REPORT 2015|30
CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2015
CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2015
CONTENTS
Corporate Information
Chairman’s Statement
Declaration
Report of the Board of Directors
Independent Auditor’s Report
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
PAGE
33
34
36
37
40
42
43
44
45
46-94
CONSOLIDATED FINANCIAL STATEMENTS 2015| 32
Corporate Information
Board of Directors
Antonios Achilleoudis (resigned on 22/7/2015)
Lambros Anagnostopoulos
Vagharshak Barseghyan (appointed on 22/7/2015)
Ian Domaille
Paul Ensor
Franz Hoerhager
Antonios Kaffas
Kalypso Maria Nomikou (appointed on
22/7/2015)
Alvaro Portela
Robert Sinclair (resigned on 22/7/2015)
Harin Thaker
Registered Address
16, Kyriakou Matsi Avenue,
Eagle House, 10th floor, PC 1082,
Agioi Omologites, Nicosia, Cyprus
Principal Places of Business
11, Bouboulinas Street,
4th floor, Office No. 48,
1060 Nicosia, Cyprus
Prytys'ko-Mykilska 5
Kiev 04070,
Ukraine
49-51 Sfintii Voievozi Street,
1st floor, apartment no 6
Interior 006, district 1, Bucharest
Romania PC 010965
Company Secretary
Chanteclair Secretarial Ltd
16, Kyriakou Matsi Avenue
Eagle House, 10th floor, PC 1082, Nicosia, Cyprus
Nominated Adviser and Broker
S. P. Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street, London W1S 2PP
Registrars
Computershare Investor Services PLC
The Pavillions, Bridgewater Road
Bristol BS99 7NH, UK
Cymain Registrars Limited
P.O. Box 25719
1311 Nicosia, Cyprus
Main Collaborating Banks
European Bank for Reconstruction and Development
One Exchange Square
London EC2A 2JN, United Kingdom
Unicredit Bank
14A, Yaloslav Val Str, 01034 Kyiv
Ukraine
Bank of Cyprus
P.O. Box 22032
1598 Nicosia, Cyprus
UNIVERSAL Bank
54/19, Avtozavodska str., 04114
Kiev, Ukraine
Eurobank Ergasias S.A.
8, Othonos st, 105 57
Athens, Greece
Eurobank EFG Cyprus Ltd
41, Makarios Avenue, 5th floor,
1065 Nicosia, Cyprus
Alpha Bank Romania
Neocity 2 Building, 237B, Calea Dorobantilor Str.
District 1, Bucharest, Romania
Piraeus Leasing Romania
B-dul Nicolae Titulescu, nr. 29 - 31, etaj 5
Sector 1, Bucuresti, Romania
Solicitors
WTS Tax Legal Consulting LLC
5, Pankivska Str., 5th floor
Kyiv, Ukraine, 01033
Drakopoulos Law Firm
332, Kifissias Avenue, 152 33 Halandri,
Athens, Greece
Drakopoulos Law Firm
7 David Praporgescu, District 2, 020965
Bucharest, Romania
Reed Smith LLP
The Broadgate Tower20 Primrose Street
London EC2A 2RS, United Kingdom
Georgiades & Pelides LLC
Kyriakou Matsi Avenue
Eagle House, 10th floor, PC 1082, Nicosia, Cyprus
Lex Consulting Ltd
103 James Baucher Blvd., floor 2, office 5
Lozenetz quarter, Sofia, Bulgaria
Auditors
Baker Tilly Klitou and Partners Limited
Corner C Hatzopoulou & 30 Griva Digheni Avenue
1066 Nicosia, Cyprus
CONSOLIDATED FINANCIAL STATEMENTS 2015| 33
Chairman’s Statement
2015 saw significant momentum build behind our strategy: to turn SPDI into the leading London listed property company focused on
South East European region, and during the year under review we have doubled the number of our income producing properties.
SPDI has undergone a structural shift, which has seen us build a portfolio of prime real estate properties with a broad geographic
spread, highly attractive yields and significant capital growth potential. To put the year into context, SPDI has gone from having just
one income producing property in 2012, to a portfolio of seven properties in four South Eastern European countries at the end of
2015.
The acquisitions we completed in 2015 lie behind the financial performance we have reported today, specifically a 50% increase in
the asset value of our property portfolio to €117 million; and a 52% step-up in our revenues from income producing assets to €5,5
million. Our acquisition-led strategy is overlain with a strict risk management policy that requires all potential targets match our stated
investment criteria. It is with risk management very much in mind that we look to invest in prime real estate that: benefits from
excellent addresses and transport links; is let out to blue chip customers on long leases with strong covenants; generates visible
income streams, and offers scope for significant capital appreciation by providing exposure to the on-going European yield
convergence play.
All acquisitions made in 2015 are representative of what we look for: a fully let logistics park west of Athens predominantly let to
Kuehne + Nagel generating a ~€1,5 million net operating income (‘NOI’); a fully let office building in Sofia let to one of Bulgaria’s
largest insurance companies, generating €2,9 million gross rental income; a fully let retail property in Craiova, Romania rented to
Praktiker with ~€1 million of gross rental income, and a fully let office building in Bucharest mostly let to Romania’s Telecom Regulatory
Authority generating ~€1,85 million of gross rental income. As well as providing a cash flow generative platform that we can use to
acquire additional properties in our area of interest, by acquiring these assets we have proven our ability to source, identify, and
execute transactions at attractive yields in South Eastern Europe, a market that continues to offer the right dynamics for the execution
of our strategy. Furthermore, the commencement of the European Central Bank’s (ECB) quantitative easing programme early in 2015
provides a significant tailwind to the on-going European yield compression play, which in our view has a long way to run, particularly
in the exciting emerging European countries which are our core area of focus.
To be able to successfully navigate these markets requires a first rate management team and Board. SPDI has both and it is the
team’s vision and direction, which has not only been key to the turnaround of the Company, but is also a key differentiating factor
for the Company. We have strengthened our team further this year and welcomed Kalypso Maria Nomikou and Vagharshak Barseghyan
to the Board, two highly qualified entrepreneurial members with extensive investment and real estate knowledge in the region. They
have already enhanced the capabilities of our highly skilled team and will help the Board identify and secure future acquisitions which
offer material and sustainable cash flows.
As well as acquiring assets, the management team is also focused on actively managing our growing portfolio of real estate to ensure
we maximise value for our shareholders. The performance of each asset as well as that of the local and regional property markets
are all constantly monitored to ascertain the optimal strategy for each asset. All options are considered, including development and
sale. With this in mind post period end we announced the proposed sale of the Brovary Terminal in Ukraine, as well as the sale of the
Linda residential portfolio in Bucharest. Subject to the completion of the transactions, the proceeds will be reinvested both into
growing our portfolio further as well as potentially returning some cash to our shareholders.
CONSOLIDATED FINANCIAL STATEMENTS 2015| 34
Having de-risked our portfolio through the acquisition of prime real estate, we now have an excellent platform from which to access
further opportunities and in the process capitalise on the huge potential across the region. Our portfolio is our competitive advantage
and having expanded our income-producing assets this year we aim to continue to grow, as we look to generate value by taking
advantage of the highly positive regional macro and property market fundamentals. It is clear however that our current share price,
which is trading at a significant discount to the net asset value of our existing properties, has not kept pace with SPDI’s transformation
into a diversified revenue-generative property company focused on the dynamic SEE region. We are confident this disconnect will
narrow as the income generating capability of our existing portfolio becomes apparent and we move closer to the point at which we
are in a position to sustainably distribute a portion of our earnings as dividends. In the meantime, we will continue to identify and
invest in highly attractive growth opportunities in the real estate market whilst maintaining our focus on efficient asset management,
as we look to repeat the successes of 2015 in the year ahead and beyond.
At the tail end of the period as well as in the first part of 2016 the Company faced some challenges created mainly by the continuing
turmoil in the Ukrainian Economy as well as the recapitalization of the Greek banks that took place in December 2015. Those factors
resulted in the reduction of the occupancy of the Terminal Brovary in Kiev and substantially prolonged transaction times, respectively.
As our Auditor’s Report notes in an emphasis of the matter, at the end of 2015 our current liabilities in effect exceeded current assets
by €21,1m, but this is qualified by Notes 36.7 and 37 of the accounts that explain the two current liabilities that create this imbalance
(which relate to our residential business in Romania and Terminal Brovary in Ukraine) are either long term liabilities reclassified as
short term or reflect an agreed but yet to be contractually approved practice to repay certain loans in tandem with the residential
sales progress and as such there is every indication that these debts will be repaid in 2016 in the normal course of business. In
parallel both tenant issues (Nestle replacement following the expression of their intent to vacate the Innovation Terminal, and
Praktiker’s tenancy extension for an additional five years) as well as the potential sale of Terminal Brovary have taken longer than
originally expected which made it necessary for management to very carefully, and successfully, manage our cash position and
banking relationships in 2016.
Another perennial challenge for the Company was that operating in Ukraine showed up in our accounts in 2015 with a €5m (2014:
€7,5m) foreign exchange loss related to the EBRD loan and a €13,6m unrealized foreign exchange loss (2014: loss €19,7m) stemming
from intercompany loans. This was due to the continued weakness of the Ukrainian currency, both of which are expected to be
mitigated upon the Terminal Brovary sale completion. In light of the continued problems in that country, the agreed sale of Terminal
Brovary in June 2016 at a substantial profit to its Net Asset Value is all the more impressive. The 53% fall in NAV per share during
2015 is the result of a combination of factors: share issuance from the Open Offer and purchase of properties, and revaluation of
assets caused by the continuing difficulties faced by the Ukrainian economy.
I would like to take this opportunity to thank our shareholders for their continued support throughout the year. This was further
demonstrated by the raising of €8 million via an open offer in March 2015 which has helped facilitate our progress. Thanks to their
support, we are delivering on our objective to position SPDI as the go to publicly traded vehicle for institutional and retail investors
looking to gain exposure to the attractive yields available in SEE, a region that is increasingly gaining the recognition it deserves for
its favourable supply and demand dynamics and attractive yields.
Paul Ensor
Chairman of the Board
CONSOLIDATED FINANCIAL STATEMENTS 2015| 35
DECLARATION BY THE MEMBERS OF THE BOARD OF DIRECTORS AND THE
PERSON RESPONSIBLE FOR THE PREPARATION OF THE CONSOLIDATED
FINANCIAL STATEMENTS OF THE COMPANY
We, the Members of the Board of Directors and the person responsible for the preparation of the consolidated financial statements
of SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC for the year ended 31 December 2015, based on our opinion, which is a
result of diligent and scrupulous work, declare that the elements written in the consolidated financial statements are true and
complete.
Board of Directors members:
Lambros Anagnostopoulos
Vagharshak Barseghyan
Ian Domaille
Paul Ensor
Franz M. Hoerhager
Antonios Kaffas
Kalypso Maria Nomikou
Alvaro Portela
Harin Thaker
Person responsible for the preparation of the consolidated financial statements for the year ended 31 December 2015:
Constantinos Bitros
CONSOLIDATED FINANCIAL STATEMENTS 2015| 36
REPORT OF THE BOARD OF DIRECTORS
The Board of Directors presents its report and the audited consolidated financial statements of SECURE PROPERTY DEVELOPMENT &
INVESTMENT PLC (“SPDI” or “SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC” or the “Company”) and its subsidiaries (the
“Group”) for the year ended 31 December 2015.
Principal activities
The principal activities of the Company, which are unchanged from last year, are to invest directly or indirectly in and/or manage real
estate properties as well as real estate development projects in South East Europe (the "Region"). These include the acquisition,
development, operation and selling of property assets in the Region.
Review of current position, future developments and significant risks
Throughout the year Management has worked towards identifying growth opportunities in the form of property acquisition in South
East Europe. During the year the Company acquired a 20% participation at the Autounion office building in Sofia, Bulgaria, a mixed
use portfolio of property assets in Romania and Bulgaria through exchange of shares, a DIY retail property in Craiova Romania (also
through exchange of shares) and completed the acquisition of the GED Logistics, a warehouse in Aspropyrgos, Greece. Management
has also succeeded in registering a 42ha plot in Kiev under the Company’s ownership following a lengthy legal process that started
in 2011.
On the operational side, the Group’s gross income increased from ~€3,7m in 2014 to ~€7,2m. As a result of the continuing
diversification effort, exposure to Ukraine has now dropped to ~21% in terms of Gross Asset Value and ~25% in terms of NOI. The
Company has seen the valuation of its Ukrainian assets drop substantially (Note 15), due to the risk emanating from the general
uncertainty in the country and are now valued at ~70% lower valuation that their peak value in 2008, and 24% lower than a year
ago.
The Directors expect that the organic growth of the Group, together with sales proceed from the Group’s non-core assets, may allow
a cash distribution by the Company via return of capital to its shareholders during 2016.
The most significant risks faced by the Group and the steps taken to manage these risks are described in Notes 5 and 36 of the
consolidated financial statements.
Results and Dividends
The Group's results for the year are set out on page 42. No dividends were declared during the year.
Share Capital
Authorised share capital
As at the end of 2014 the authorized share capital of the Company was 989.869.935 Ordinary Shares of €0,01 nominal value each
and 785.000 Preference Shares of €0,01 nominal value each.
During the EGM dated 24 June 2015, it was approved by the shareholders of the Company that the authorized share capital of the
Company be increased to €9.992.739,35 divided into: (a) 989.869.935 ordinary shares of € 0,01 each; (b) 785.000 Redeemable
Preference Shares Class A of €0,01 each; and (c) 8.618.997 Redeemable Preference Shares Class B of €0,01 each by the creation of
8.618.997 Redeemable Preference Shares Class B of €0,01 each. The above approval has effective date 1st July 2015. The
reorganization of the capital was mandated by the acquisition growth plan of the Company since the creation of the Redeemable
Preference Shares Class B was necessary to be issued to BLUEHOUSE ACCESSION PROPERTY HOLDINGS III S.A.R.L which was the
seller of the income producing real estate asset in Craiova, Romania, which the Company acquired in July 2015 (Note 37f).
As at the end of the reporting period the authorized share capital of the Company is 989.869.935 Ordinary Shares of €0,01 nominal
value each, 785.000 Redeemable Preference Class A Shares of €0,01 nominal value each and 8.618.997 Redeemable Preference
Class B Shares of €0,01 nominal value each (Note 23.1).
Issued share capital
As at the end of 2014 the issued share capital of the Company was 33.884.054 Ordinary Shares of €0,01 nominal value each, and
785.000 Preference Shares of €0,01 nominal value each.
A. Further to the resolutions approved at the AGM of 31 December 2014 the Board has proceeded in allocating shares as
follows:
1. On 13/3/2015, the allotment of 23.777.748 ordinary shares of €0,01 each for the purpose of capital raising of
€8.000.000 in the Company by its existing shareholders.
2. On 31/5/2015, the allotment of 18.028.294 ordinary shares of €0,01 each for the purpose of an in kind contribution
of mixed Portfolio acquisition (Notes 15,16,17). The shares issued for this purpose are locked in for a period of 12
months.
3. On 27/7/2015 and on 12/8/2015, the allotment of 14.324.627 (8.785.580 and 5.539.047 respectively) ordinary shares
of €0,01 each which were the Class A Warrants exercised (part of the total of 18.028.294 warrants) that have been
provided as part of the in kind contribution of mixed Portfolio acquisition (Notes 15,16,17).
B. Furthermore the Company proceeded on 29/6/2015 with redeeming half of the issued preference redeemable-convertible
shares (392.500) but the cancellation of these shares within the appropriate authorities will be completed during 2016.
C. Finally, further to the resolutions approved at the EGM of 24 June 2015 the Board has proceeded on 1 st July 2015 in issuing
8.618.997 Redeemable Preference Shares Class B of €0,01 each to BLUEHOUSE ACCESSION PROPERTY HOLDINGS III
S.A.R.L which was the seller of the income producing real estate asset in Craiova, Romania, which the Company acquired
in July 2015 (Note 16, 37f).
CONSOLIDATED FINANCIAL STATEMENTS 2015| 37
REPORT OF THE BOARD OF DIRECTORS
As at the end of the reporting period the issued share capital of the Company is as follows:
a) 90.014.723 Ordinary Shares of €0,01 nominal value each,
b) 392.500 Redeemable Preference Class A Shares of €0,01 nominal value each, following the above described redemption which
shall be officially finalized during 2016, and
c) 8.618.997 Redeemable Preference Class B Shares of €0,01 nominal value each.
Board of Directors
The members of the Company's Board of Directors as at 31 December 2015 and at the date of this report are presented on page 33.
During the reporting period Mr. Antonios Achilleoudis and Mr. Robert Sinclair have resigned as Non-Executive Directors to pursue
other business interest. Ms. Kalypso Maria Nomikou and Mr. Vagharshak Barseghyan have been appointed by the Board of Directors
as Non-Executive Directors.
In accordance with the Company's Articles of Association, during the Annual General Meeting held on 31st December 2015, Ms. Kalypso
Maria Nomikou and Mr. Vagharshak Barseghyan have been elected to the Board of Directors together with Mr. Portela, Mr. Domaille
and Mr. Ensor who being eligible, retired by rotation, offered themselves for re-election and were re-elected.
There were no changes in the assignment of responsibilities of the Board of Directors.
Board Committees
The Board has constituted two committees, the audit committee and the remuneration committee.
The membership of the audit committee remains unchanged (Mr. Domaille as Chairman and Mr. Kaffas as member) while following
the resignation of Mr. Achilleoudis, Mr. Thaker became a member of the remuneration committee with Mr. Domaille remaining as
Chairman. The responsibilities for both committees remained unchanged since last year.
Remuneration Policy
The remuneration policy for the Board (non-executive members) and the senior management of the Company which includes a
monetary portion, as well as equity like instruments to further incentivize the recipients and further align their interests with those of
the shareholders, remains unchanged. Such equity like instruments and the respective granting terms have been approved by the
Annual General Meeting of December, 30th 2013 and/or of December, 31st 2014.
As far as the Board's remuneration is concerned, this has been adjusted to the growth of the Gross Asset Value of the Company as
mandated by the policy. It should be noted that the said policy relates to payments through shares which are locked up for the earlier
of two years from the date of issue or the date following which the 30 day average traded value exceeds GBP 70.000. During the
reporting period there were no new shares issued to the Board members as part of their remuneration.
The remuneration of the senior management is described in Note 33.1 .
Options currently held by Board Members
Following the share capital restructuring of the Company, the existing option schemes are as follows:
Director's Option scheme, allotted on 25/7/2007
Under the said scheme each director serving at the time, who is still a Director of the Company, is entitled to subscribe for 2.631
ordinary shares exercisable as set out below:
Exercisable until 1 August 2017
Exercisable until 1 August 2017
Director Franz M. Hoerhager Option scheme, 12/10/2007
Exercise Price
US$
57
83
Number of
Shares
1.754
877
Under the said scheme, director Franz M. Hoerhager is entitled to subscribe for 1.829 ordinary shares exercisable as set out below:
Exercisable until 1 August 2017
Exercisable until 1 August 2017
Exercise Price
GBP
40
50
Number of
Shares
1.219
610
The above option schemes were approved, by the shareholders of the Company in General Meeting on 31st March 2008. As at 31
December 2015 the Company considers that the options are well out of the money.
CONSOLIDATED FINANCIAL STATEMENTS 2015| 38
REPORT OF THE BOARD OF DIRECTORS
Options currently held by employees
As approved by the ANNUAL GENERAL MEETING on 30th December 2013 the Company proceeded in 2015 in issuing 590.000 options
to its employees corresponding to potentially 590.000 ordinary shares. The terms of the options and the related holdings are analyzed
in Note 23.3. As at the reporting date no options have been exercised. The Company considers these option as currenty being also
out of money.
Directors and Management Holdings in the Company
The table below presents Directors and Management shareholding in the Company as at the end of the reporting period:
Name
Paul Ensor
Antonios Achilleoudis
Barseghyan Vagharshak
Ian Domaille
Franz Horhager
Antonios Kaffas
Kalypso Maria Nomikou
Alvaro Portela
Robert Sinclair
Harin Thaker
Lambros Anagnostopoulos
Constantinos Bitros
Position
Chairman
Non-Executive Director until 22 July 2015
Non-Executive Director since 22 July 2015
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director since 22 July 2015
Non-Executive Director
Non-Executive Director until 22 July 2015
Non-Executive Director
Executive Director and CEO
Chief Financial Officer
Amount of Shares held
147.495
89.345
-
133.132
121.474
62.980
-
44.742
57.374
44.742
448.092
296.271
As at the financial statements issue date the Director’s holdings remain unchanged.
Warrants issued and exercised
Class A warrants
The Company acquired the Sec South portfolio (Notes 16,17) in exchange of Ordinary shares which were issued at GBP 0,65 each.
The sellers were also provided certain Class A Warrants giving the right to the Warrant holders to subscribe in cash at the Exercise
Amount for additional Ordinary Shares in the Company. The Company issued then two sets of Class A Warrants as follows:
1) 18.028.294 warrants corresponding to 18.028.294 ordinary shares, exercisable within 45 days from signing at an exercise amount
of £0,10 per ordinary share. 14.324.627 out of these warrants were exercised by August 2015 (Notes 23.2). The remaining
warrants have lapsed.
2) 18.028.294 warrants corresponding to 18.028.294 ordinary shares, exercisable by 31 December 2016 at an exercise amount of
£0,45 per ordinary share.
Class B warrants
All Class B Warrants (Note 23.5) are yet to be exercised with the exercise period ending 31 December 2016.
Other share capital related matters
Pursuant to decisions taken by the AGM of December 31st 2014, the Board was authorised and empowered to:
-
-
issue up to 200.000.000 ordinary shares of €0,01 each at an issue price as the Board may from time to time determine
(with such price being at a discount to the net asset value per share in the Company which is in issue immediately prior to
the issue of the shares) so as to facilitate the profitable growth of the Company. Until the reporting date the Board had
issued 56.130.669 shares under its authority.
issue Class A Warrants, to subscribe for up to 350% of the outstanding ordinary shares at the time of issuance of the Class
A Warrants, upon such terms and conditions as may be determined by the Board (with such price being at a discount to
the net asset value per share in the Company which is in issue immediately prior to the issue of the Class A Warrants).
Such Class A Warrants may be offered to various third party entities a) for participating in the capital raising of the Company,
b) for their contribution in creating value for the Company and c) for their assistance with the fundraising.
Events after the end of the reporting period
The significant events that occurred after the end of the reporting period are described in Note 37 to the financial statements.
Independent auditors
The Independent Auditors, Baker Tilly Klitou and Partners Limited, have expressed their willingness to continue in office.
The Audit Committee will be proposing to the Board the appointment of the Independent Auditors for 2016, authorizing the CEO and
the CFO to negotiate their remuneration so as to present a relevant proposal to the Annual General Meeting of the Shareholders of
the Company.
By order of the Board of Directors,
Constantinos Bitros
Chief Financial Officer
CONSOLIDATED FINANCIAL STATEMENTS 2015| 39
Baker Tilly Klitou & Partners Ltd
Corner C. Hatzopoulou & 30 Griva Digheni Avenue
1066 Nicosia, Cyprus
P.O. Box 27783, 2433 Nicosia, Cyprus
T: +357 22 458500 | F: +357 22 751648
info@bakertillyklitou.com
www.bakertillyklitou.com
Independent Auditor’s Report
To the Members of Secure Property Development & Investment Plc
Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of Secure Property Development & Investment Plc (the
“Company”) and its subsidiaries (together with the Company, the "Group"), which comprise the consolidated statement of financial
position as at 31 December 2015, and the consolidated statements of comprehensive income, changes in equity and cash flows for the
year then ended, and a summary of significant accounting policies and other explanatory information.
Board of Directors’ responsibility for the consolidated financial statements
The Board of Directors is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance
with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies
Law, Cap. 113, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in
accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement
of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December
2015, and of its financial performance and its cash flows for the year ended in accordance with International Financial Reporting
Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap113.
Offices:
Cyprus Greece Bulgaria Romania Moldova
Nicosia T: +357 22 458500 Athens T: +30 215 500 6060 Sofia T: +359 2 9580980 Bucharest T: +40 21 3156100 Chisinau T: +373 22 233003
Limassol T: +357 25 591515
Larnaca T: +357 24 663299
Registered in Cyprus (Reg. No. 156870) List of Directors can be found at the Company's Registered Office
Independent Auditor’s Report (continued)
Emphasis of matters
We draw attention to Notes 3, 5, 15, 26, 36.7 and 37 to the consolidated financial statements, which describe the following matters:
(a) The fair value of the investment properties as indicated in Notes 3 and 15 to the consolidated financial statements is based on
valuations performed by independent valuators. The fair value is determined by selecting a variety of methods and making assumptions
that are mainly based on conditions existing at the end of each reporting period. In the event that any of the assumptions do not
materialize the fair values of the Group’s Investment Properties will be affected accordingly.
(b) We draw attention to Note 5 to the consolidated financial statements, which describe the political and social unrest and regional
tensions in Ukraine, which could adversely affect the Group’s results and financial position in a manner not currently determinable. The
Group has diversified its geographical exposure through is expansion in Romania, Greece, Bulgaria during 2014 and 2015, and thus
reduced any possible adverse effect of Ukrainian operations on the Group as a whole.
(c) We draw attention to Notes 26 and 37e to the consolidated financial statements which describe that the loan payable to Bank of
Cyprus by the Group’s subsidiary Delia Lebada Srl is currently in default and the Bank has initiated insolvency procedures.
(d) We draw attention to Notes 37b and 37c to the consolidated financial statements describing the disposal of Terminal Brovary and
the associated loan payable to European Bank for Reconstruction and Development.
(e) We draw attention to Note 36.7 to the consolidated financial statements which indicate that the Group’s current liabilities exceeded
the current assets by €21.772.364 as at 31 December 2015. The Group incurred a net loss amounting to €11.610.589 during the year
ended 31 December 2015. These conditions indicate the existence of a material uncertainty which casts significant doubt as to the
Group’s ability to continue as a going concern.
Our opinion is not qualified in respect of these matters.
Report on other legal requirements
Pursuant to the additional requirements of the Auditors and Statutory Audits of Annual and Consolidated Accounts Laws of
2009 and 2013, we report the following:
• We have obtained all the information and explanations we considered necessary for the purposes of our audit.
• In our opinion, proper books of account have been kept by the Company, so far as appears from the examination of those books.
• The consolidated financial statements are in agreement with the books of account.
• In our opinion and to the best of our information and according to the explanations given to us, the consolidated financial statements
give the information required by the Companies Law, Cap. 113, in the manner so required.
• In our opinion, the information given in the report of the Board of Directors is consistent with the consolidated financial statements.
Other matter
This report, including the opinion, has been prepared for and only for the Company's members as a body in accordance with Section
34 of the Auditors and Statutory Audits of Annual and Consolidated Accounts Laws of 2009 and 2013 and for no other purpose. We do
not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report
may come to.
Andreas Pittakas
Certified Public Accountant and Registered Auditor
for and on behalf of
Baker Tilly Klitou
Certified Public Accountants and Registered Auditors
Corner C Hatzopoulou and 30 Griva Digheni Avenue
1066 Nicosia, Cyprus
Nicosia, 29 June 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2015
Operating income
Valuation (losses)/gains from Investment Property
Administration expenses
Investment property operating expenses
Gain realized on acquisition of subsidiaries
Other operating income/(expenses), net
Share of profits/(losses) from associates
Impairment allowance for inventory and provisions
Goodwill impairment
Operating profit / (loss)
Finance income
Interest expenses
Other finance costs
Foreign exchange (loss), net
Profit / (Loss) before tax
Income tax expense
Profit / (Loss) for the year
Other comprehensive income
Note
7
7
8
9
16
10
17
11
16b
12
12
12
13a
2015
€
5.130.637
(2.335.247)
2.795.390
(2.981.338)
(1.124.583)
2.181.834
621.252
(1.244.572)
(1.675.659)
(657.082)
2014
€
3.591.903
9.297.525
12.889.428
(2.684.422)
(756.561)
766.221
(136.058)
-
-
-
(2.084.758)
10.078.608
63.596
(3.834.696)
(603.495)
(5.071.048)
80.895
(1.348.226)
(110.072)
(7.512.640)
(11.530.401)
1.188.565
14
(80.188)
(220.476)
(11.610.589)
968.089
Exchange difference on I/C loans to foreign holdings
Exchange difference on translation of foreign operations
Available-for-sale financial assets – fair value gain
13b
24
20
(13.653.402)
8.064.848
485.529
(19.746.111)
8.904.153
-
Total comprehensive income for the year
(16.713.614)
(9.873.869)
Profit / (Loss) attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
(11.015.852)
(594.737)
(11.610.589)
927.337
40.752
968.089
(15.981.196)
(732.418)
(16.713.614)
(9.577.120)
(296.749)
(9.873.869)
Earnings / (Losses) per share (Euro cent per share):
Basic earnings/(losses) for the year attributable to ordinary equity
owners of the parent
Diluted earnings/(losses) for the year attributable to ordinary equity
owners of the parent
31b
(0,16)
(0,13)
0,03
0,03
The notes on pages 46 to 94 form an integral part of these consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS 2015|42
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the year ended 31 December 2015
ASSETS
Non-current assets
Investment properties
Investment properties under development
Prepayments made for investments
Tangible and intangible assets
Goodwill
Long-term receivables
Investments in associates
Available for sale financial assets
Current assets
Inventories
Prepayments and other current assets
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Issued share capital
Share premium
Foreign currency translation reserve
Exchange difference on I/C loans to foreign holdings
Available for sale financial assets – fair value reserve
Accumulated losses
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
Non-current liabilities
Borrowings
Finance lease liabilities
Redeemable preference shares
Trade and other payables
Deposits from tenants
Current liabilities
Borrowings
Trade and other payables
Taxes payable
Redeemable preference shares
Provisions
Deposits from tenants
Finance lease liabilities
Total liabilities
Total equity and liabilities
Net Asset Value (NAV) € per share:
Basic NAV attributable to equity holders of the parent
Diluted NAV attributable to equity holders of the parent
Note
15.4a
15.4b
15.4c
18
16
17
20
19
21
22
23
24
33.3
2015
€
2014
€
94.340.471
5.125.389
100.000
164.617
-
252.916
4.887.944
2.783.535
107.654.872
11.300.000
4.795.223
895.422
16.990.645
124.645.517
900.145
122.874.268
6.653.023
(33.399.513)
485.529
(55.080.327)
42.433.125
53.533.187
5.083.216
2.674.219
200.203
43.269
125.909
-
-
61.660.003
-
4.251.489
891.938
5.143.427
66.803.430
338.839
97.444.044
(1.411.825)
(19.746.111)
-
(44.064.475)
32.560.472
25
615.527
651.882
43.048.652
33.212.354
26
30
23.6
27
28
26
27
29
23.6
29
28
30
31c
26.263.559
11.273.639
-
4.672.888
623.770
42.833.856
27.417.220
3.044.036
822.005
6.430.536
724.445
132.684
192.083
38.763.009
81.596.865
12.255.716
11.463.253
349.325
214.685
499.831
24.782.810
5.960.706
1.654.852
431.828
349.325
68.253
161.579
181.723
8.808.266
33.591.076
124.645.517
66.803.430
0,47
0,41
0,96
0,84
On 29 June 2016 the Board of Directors of SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC authorised these financial
statements for issue.
Lambros Anagnostopoulos
Director & Chief Executive Officer
Paul Ensor
Director & Chairman of the Board
Constantinos Bitros
Chief Financial Officer
The notes on pages 46 to 94 form an integral part of these consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS 2015|43
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2015
Attributable to owners of the Company
Share capital
Share
premium,
Net1
Accumulated
losses, net of
non-controlling
interest2
Exchange
difference on I/C
loans to foreign
holdings3
Foreign
currency
translation
reserve4
Available for
sale financial
assets – fair
value
reserve5
Total
Non-
controlling
interest
Total
€
€
€
€
€
€
€
€
Balance - 31 December 2013
4.383.018
92.704.841
(49.093.113)
Profit for the year
Exchange difference on I/C loans to foreign
holdings (Note 24)
Foreign currency translation reserve
-
-
-
-
-
-
Issue of share capital, net (Note 23)
57.122
4.739.203
927.337
-
-
-
Reduction of share capital
(4.101.301)
-
4.101.301
-
-
(10.315.978)
-
(19.746.111)
-
-
8.904.153
-
-
-
-
Balance - 31 December 2014
338.839
97.444.044
(44.064.475)
(19.746.111)
(1.411.825)
Loss for the year
Exchange difference on I/C loans to foreign
holdings (Note 24)
Foreign currency translation reserve
Fair value gain on available-for-sale financial
assets (Note 20)
Acquisition of non-controlling interest
-
-
-
-
-
-
-
-
-
-
Issue of share capital, net (Note 23)
561.306
25.430.224
(11.015.852)
-
-
-
-
-
-
(13.653.402)
-
-
-
-
-
-
8.064.848
-
-
-
-
-
-
-
-
-
-
-
-
-
37.678.768
948.631
38.627.399
927.337
40.752
968.089
(19.746.111)
8.904.153
-
(337.501)
(19.746.111)
8.566.652
4.796.325
-
-
-
4.796.325
-
32.560.472
651.882
33.212.354
(11.015.852)
(594.737)
(11.610.589)
(13.653.402)
-
(13.653.402)
8.064.848
(137.681)
7.927.167
485.529
485.529
-
-
696.063
485.529
696.063
25.991.530
-
25.991.530
-
-
Balance - 31 December 2015
900.145 122.874.268
(55.080.327)
(33.399.513)
6.653.023
485.529
42.433.125
615.527
43.048.652
1Share premium is not available for distribution.
2Companies which do not distribute 70% of their profits after tax, as defined by the relevant tax law, within two years after the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these profits. Special contribution for
defense at 20% will be payable on such deemed dividends to the extent that the shareholders (companies and individuals) are Cyprus tax residents. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the
relevant year at any time. This special contribution for defense is payable on account of the shareholders.
3 Exchange differences on intercompany loans to foreign holdings arose as a result of devaluation of the Ukrainian Hryvnia during 2014 and 2015. The Group treats the mentioned loans as a part of the net investment in foreign operations (Note 33.3).
4 Exchange differences related to the translation from the functional currency of the Group’s subsidiaries are accounted for directly to the foreign currency translation reserve. The foreign currency translation reserve represents unrealized profits or
losses related to the appreciation or depreciation of the local currencies against the euro in the countries where the Company’s subsidiaries own property assets.
5 Available For Sale financial assets are measured at fair value. Fair value changes on AFS assets are recognized directly in equity, through other comprehensive income.
The notes on pages 46 to 94 form an integral part of these consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS 2015|44
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) before tax and non-controlling interests
Adjustments for:
(Gains)/losses on revaluation of investment property
Other non-cash movements
Write offs of prepayments
Impairment of assets
Accounts payable written off
Depreciation/ Amortization charge
Interest income
Interest expense
Share of losses from associates
Gain on acquisition of subsidiaries
Impairment on Inventory
Goodwill Impairment
Effect of foreign exchange differences
Cash flows used in operations before working capital changes
Change in inventories
Change in prepayments and other current assets
Change in trade and other payables
Change in VAT and other taxes receivable
Increase in Provisions
Change in other taxes payables
Increase in deposits from tenants
Cash generated from operations
Income tax paid
Note
2015
€
2014
€
(11.530.401)
1.188.565
7
10
10
10
8
12
12
17
16
11
16b
13a
19
21
27
21
29
29
28
2.335.247
35.071
47.316
342.280
(1.197.740)
40.823
(63.596)
3.834.696
1.244.572
(2.181.834)
975.659
657.082
5.071.048
(389.777)
24.341
1.242.809
1.131.688
(290.593)
656.192
87.524
(117.497)
(9.297.525)
(593.717)
3.973
-
(12.422)
17.897
(80.895)
1.385.223
-
(766.221)
-
-
7.512.640
(642.482)
-
(1.754.061)
(710.064)
1.408.353
(50.770)
(49.029)
211.228
2.344.687
(1.586.825)
(238.616)
(284.153)
Net cash flows provided/(used) in operating activities
2.106.071
(1.870.978)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure on investment property
Prepayment made for acquisition of investment property
Cash outflow on available for sales financial assets
Interest received
Cash outflow on acquisition of subsidiaries
Net cash flows from / (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital/shareholders advances
Net (repayment) of borrowings
Interest and financial charges paid
Decrease in financial lease liabilities
Repayment of preference shares
15
15
16
23
26
30
23
-
(100.000)
(2.298.005)
63.596
(1.786.934)
(4.121.343)
(60.155)
(624.841)
-
80.895
(6.210.254)
(6.814.355)
10.839.040
(5.672.198)
(2.619.506)
(179.255)
(349.325)
1.727.691
(565.389)
(1.170.847)
(82.444)
-
Net cash flows from / (used in) financing activities
2.018.756
(90.989)
Net increase/(decrease) in cash at banks
(203.603)
(8.956.072)
Cash:
At beginning of the year
891.938
9.668.260
Effect of foreign exchange rates on cash and cash equivalents
(207.087)
(179.750)
At end of the year
22
895.422
891.938
The notes on pages 46 to 94 form an integral part of these consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS 2015|45
Notes to the Consolidated Financial Statements
For the year ended 31 December 2015
1. General Information
Country of incorporation
SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC (the ''Company'') was incorporated in Cyprus on 23 June 2005 and is a public
limited liability company, listed on the London Stock Exchange (AIM): ISIN CY0102102213. Its registered office is at Kyriakou Matsi 16,
Eagle House, 10th floor, Agioi Omologites, 1082 Nicosia, Cyprus while its principal place of business in Cyprus is 11 Bouboulinas Street.
Principal activities
The principal activities of the Company, which are unchanged from last year, are to invest directly or indirectly in and/or manage real
estate properties as well as real estate development projects in South East Europe (the "Region"). These include the acquisition,
development, commercializing, operating and selling of property assets, in the Region.
The Group maintains offices in Nicosia, Cyprus, in Kyiv, Ukraine, in Bucharest, Romania and in Athens, Greece.
As at the reporting date, the companies of the Group employed and/or used the services of 27 Full Time Equivalent, (2014 19
people).
2. Adoption of new and revised Standards and Interpretations
Adoption of new and revised International Financial Reporting Standards and Interpretations as adopted by the
European Union (EU)
As from 1 January 2015, the Group adopted all changes to International Financial Reporting Standards (IFRSs) as adopted by EU which
are relevant to its operations. This adoption did not have a material effect on the financial statements of the Group.
(i) Standards and Interpretations adopted by the EU
IAS 19 (Amendments) “Defined Benefit Plans: Employee Contributions” (effective for annual periods beginning on or after 1
February 2015).
Annual Improvements to IFRSs 2010-2012 (effective for annual periods beginning on or after 1 February 2015).
IAS 27 (Amendments) ''Equity method in separate financial statements'' (effective for annual periods beginning on or after 1
January 2016).
IAS 1 (Amendments): Disclosure Initiative (effective for annual periods beginning on or after 1 January 2016).
Annual Improvements to IFRSs 2012–2014 Cycle (effective for annual periods beginning on or after 1 January 2016) .
IAS 16 and IAS 38 (Amendments) ''Clarification of acceptable methods of depreciation and amortisation'' (effective for annual
periods beginning on or after 1 January 2016).
IFRS 11 (Amendments) ''Accounting for acquisitions of interests in Joint Operations'' (Amendments) (effective for annual periods
beginning on or after 1 January 2016).
IAS 16 and IAS 41 (Amendments) ''Bearer plants'' (effective for annual periods beginning on or after 1 January 2016).
(ii) Standards and Interpretations not adopted by the EU
IFRS 14 ''Regulatory Deferral Accounts'' (effective for annual periods beginning on or after 1 January 2016).
IFRS 10, IFRS 12 and IAS 28 (Amendments) “Investment Entities: Applying the Consolidation Exception” (effective for annual
periods beginning on or after 1 January 2016).
IAS 7 (Amendments) “Disclosure Initiative” (effective for annual accounting periods beginning on or after 1 January 2017).
IAS 12 (Amendments) “Recognition of Deferred Tax Assets for Unrealised Losses” (effective for annual accounting periods
beginning on or after 1 January 2017).
IFRS 15 ''Revenue from contracts with customers'' (effective for annual periods beginning on or after 1 January 2018).
IFRS 9 ''Financial Instruments'' (effective for annual periods beginning on or after 1 January 2018).
IFRS 16 “Leases” (effective for annual periods beginning on or after 1 January 2019).
The Board of Directors expects that the adoption of these standards will not have a material effect on the consolidated financial
statements of the Group in the future periods.
CONSOLIDATED FINANCIAL STATEMENTS 2015|46
3. Significant accounting policies
3.1 Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap.113.
The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of
investment property, investment property under construction and available for sale financial assets to fair value.
3.2 Basis of preparation
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies
have been consistently applied to all years presented in these consolidated financial statements unless otherwise stated.
Local statutory accounting principles and procedures differ from those generally accepted under IFRS. Accordingly, the consolidated
financial information, which has been prepared from the local statutory accounting records for the entities of the Group domiciled in
Cyprus, Romania, Ukraine, Greece and Bulgaria reflects adjustments necessary for such consolidated financial information to be
presented in accordance with IFRS.
3.3 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose
entities) controlled by the Company (its subsidiaries).
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the
group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity.
The Company applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of
a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity
interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent
consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognized amounts
of acquiree’s identifiable net assets.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in
the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized
in profit or loss.
Any contingent consideration to be transferred by the group is recognized at fair value at the acquisition date. Subsequent changes to
the fair value of the contingent consideration that is deemed to be an asset or liability is recognized in accordance with IAS 39 either in
profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured,
and its subsequent settlement is accounted for within equity.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs,
the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted
during the measurement period (see above), or additional assets or liabilities are recognized, to reflect new information obtained about
facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.
Business combinations that took place prior to 1 January 2010 were accounted for in accordance with the previous version of IFRS 3.
Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses
are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the group’s accounting
policies.
Changes in ownership interests in subsidiaries without change of control and Disposal of Subsidiaries
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as
transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant
share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling
interests are also recorded in equity.
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is
lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously
recognized in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related
assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.
CONSOLIDATED FINANCIAL STATEMENTS 2015|47
3. Significant accounting policies (continued)
3.4 Functional and presentation currency
Items included in the Group's financial statements are measured applying the currency of the primary economic environment in which
the entities operate (''the functional currency''). The national currency of Ukraine, the Ukrainian Hryvnia, is the functional currency for
all the Group’s entities located in Ukraine, the Euro for all the Romanian, Bulgarian, Greek and Cypriot subsidiaries.
The consolidated financial statements are presented in Euro, which is the Group’s presentation currency.
As Management records the consolidated financial information of the entities domiciled in Cyprus, Romania, Ukraine, Greece and
Bulgaria in their functional currencies, in translating financial information of the entities domiciled in these countries into Euro for
inclusion in the consolidated financial statements, the Group follows a translation policy in accordance with International Accounting
Standard No. 21, “The Effects of Changes in Foreign Exchange Rates”, and the following procedures are performed:
All assets and liabilities are translated at closing rate;
Equity of the Group has been translated using the historical rates;
Income and expense items are translated using exchange rates at the dates of the transactions, or where this is not practicable
the average rate has been used;
All resulting exchange differences are recognized as a separate component of equity;
When a foreign operation is disposed of through sale, liquidation, repayment of share capital or abandonment of all, or part
of that entity, the exchange differences deferred in equity are reclassified to the consolidated statement of comprehensive
income as part of the gain or loss on sale;
Monetary items receivable from foreign operations for which settlement is neither planned nor likely to occur in the foreseeable
future and in substance are part of the Group’s net investment in those foreign operations are recongised initially in other
comprehensive income and reclassified from equity to profit or loss on disposal of the foreign operation.
The relevant exchange rates of the European and local central banks used in translating the financial information of the entities from
the functional currencies into Euro are as follows:
Average
31 December
Currency
USD
UAH
RON
BGN
2015
1,1095
24,2054
4,4450
1,9558
2014
1,3285
15,6833
4,4446
1,9558
2015
1,0887
26,2231
4,5245
1,9558
2014
1,2141
19,2329
4,4821
1,9558
2013
1,3791
11,0231
4,4847
1,9558
3.5 Investment Property at fair value
Investment property, comprising freehold and leasehold land, investment properties held for future development, warehouse and office
properties as well as the residential property units, is held for long term rental yields and/or for capital appreciation and is not occupied
by the Group. Investment property and investment property under construction are carried at fair value, representing open market
value determined annually by external valuers. Changes in fair values are recorded in the statement of comprehensive income and are
included in other operating income.
A number of the land leases (all in Ukraine) are held for relatively short terms and place an obligation upon the lessee to complete
development by a prescribed date. It is important to note that the rights to complete a development may be lost or at least delayed if
the lessee fails to complete a permitted development within the timescale set out by the ground lease.
In addition, in the event that a development has not commenced upon the expiry of a lease then the City Authorities are entitled to
decline the granting of a new lease on the basis that the land is not used in accordance with the designation. Furthermore, where all
necessary permissions and consents for the development are not in place, this may provide the City Authorities with grounds for
rescinding or non-renewal of the ground lease. However Management believes that the possibility of such action is remote and was
made only under limited circumstances in the past.
Management believes that rescinding or non-renewal of the ground lease is remote if a project is on the final stage of development or
on the operating cycle. In undertaking the valuations reported herein, the valuer of Ukrainian properties CBRE have made the
assumption that no such circumstances will arise to permit the City Authorities to rescind the land lease or not to grant a renewal.
Land held under operating lease is classified and accounted for as investment property when the rest of the definition is met. The
operating lease is accounted for as if it were a finance lease.
Investment property under development or construction initially is measured at cost, including related transaction costs.
The property is classified in accordance with the intention of the management for its future use. Intention to use is determined by the
Board of Directors after reviewing market conditions, profitability of the projects, ability to finance the project and obtaining required
construction permits.
CONSOLIDATED FINANCIAL STATEMENTS 2015|48
3. Significant accounting policies (continued)
3.5 Investment Property at fair value (continued)
The time point, when the intention of the management is finalized is the date of start of construction. At the moment of start of
construction, freehold land, leasehold land and investment properties held for a future redevelopment are reclassified into investment
property under development or inventory in accordance to the final decision of management.
Initial measurement and recognition
Investment property is measured initially at cost, including related transaction costs. Investment properties are derecognized when
either they have been disposed off or when the investment property is permanently withdrawn from use and no future economic benefit
is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognized in the
consolidated statement of comprehensive income in the period of retirement or disposal.
Transfers are made to investment property when, and only when, there is a change in use, evidenced by the end of owner occupation,
or the commencement of an operating lease to third party. Transfers are made from investment property when, and only when, there
is a change in use, evidenced by commencement of owner occupation or commencement of development with a view to sale.
If an investment property becomes owner occupied, it is reclassified as property, plant and equipment, and its fair value at the date of
reclassification becomes its cost for accounting purposes. Property that is being constructed or developed for future use as investment
property is classified as investment property under construction until construction or development is complete. At that time, it is
reclassified and subsequently accounted for as investment property.
Subsequent measurement
Subsequent to initial recognition, investment property is stated at fair value. Gains or losses arising from changes in the fair value of
investment property are included in the statement of comprehensive income in the period in which they arise.
If a valuation obtained for an investment property held under a lease is net of all payments expected to be made, any related
liabilities/assets recognized separately in the statement of financial position are added back/reduced to arrive at the carrying value of
the investment property for accounting purposes.
Subsequent expenditure is charged to the asset ’s carrying amount only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are
charged to the statement of comprehensive income during the financial period in which they are incurred.
Basis of valuation
The fair values reflect market conditions at the financial position date. These valuations are prepared annually by chartered surveyors
(hereafter “appraisers”). The Group appointed valuers in 2014 which remain the same in 2015:
CBRE Ukraine, for all its Ukrainian properties,
Real Act for all its Romanian, Greek and Bulgarian properties.
The valuations have been carried out by the appraisers on the basis of Market Value in accordance with the appropriate sections of the
current Practice Statements contained within the Royal Institution of Chartered Surveyors (“RICS”) Valuation – Professional Standards
(2014) (the “Red Book”) and is also compliant with the International Valuation Standards (IVS).
“Market Value”, is defined as: “The estimated amount for which a property should exchange on the date of valuation between a willing
buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably,
prudently and without compulsion”.
In expressing opinions on Market Value, in certain cases the appraisers have estimated net annual rentals/income from sale. These
are assessed on the assumption that they are the best rent/sale prices at which a new letting/sale of an interest in property would have
been completed at the date of valuation assuming: a willing landlord/buyer; that prior to the date of valuation there had been a
reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest,
for the agreement of the price and terms and for the completion of the letting/sale; that the state of the market, levels of value and
other circumstances were, on any earlier assumed date of entering into an agreement for lease/sale, the same as on the valuation date;
that no account is taken of any additional bid by a prospective tenant/buyer with a special interest; that the principal deal conditions
assumed to apply are the same as in the market at the time of valuation; that both parties to the transaction had acted knowledgeably,
prudently and without compulsion.
A number of properties are held by way of ground leasehold interests granted by the City Authorities. The ground rental payments of
such interests may be reviewed on an annual basis, in either an upwards or downwards direction, by reference to an established
formula. Within the terms of the lease, there is a right to extend the term of the lease upon expiry in line with the existing terms and
conditions thereof. In arriving at opinions of Market Value, the appraisers assumed that the respective ground leases are capable of
extension in accordance with the terms of each lease. In addition, given that such interests are not assignable, it was assumed that
each leasehold interest is held by way of a special purpose vehicle (“SPV”), and that the shares in the respective SPVs are transferable.
With regard to each of the properties considered, in those instances where project documentation has been agreed with the respective
local authorities, opinions of the appraisers of value have been based on such agreements.
CONSOLIDATED FINANCIAL STATEMENTS 2015|49
3. Significant accounting policies (continued)
3.5 Investment Property at fair value (continued)
In those instances where the properties are held in part ownership, the valuations assume that these interests are saleable in the open
market without any restriction from the co-owner and that there are no encumbrances within the share agreements which would impact
the sale ability of the properties concerned.
The valuation is exclusive of VAT and no allowances have been made for any expenses of realization or for taxation which might arise
in the event of a disposal of any property.
In some instances the appraisers constructed a Discounted Cash Flow (DCF) model. DCF analysis is a financial modeling technique
based on explicit assumptions regarding the prospective income and expenses of a property or business. The analysis is a forecast of
receipts and disbursements during the period concerned. The forecast is based on the assessment of market prices for comparable
premises, build rates, cost levels etc. from the point of view of a probable developer.
To these projected cash flows, an appropriate, market-derived discount rate is applied to establish an indication of the present value of
the income stream associated with the property. In this case, it is a development property and thus estimates of capital outlays,
development costs, and anticipated sales income are used to produce net cash flows that are then discounted over the projected
development and marketing periods. The Net Present Value (NPV) of such cash flows could represent what someone might be willing
to pay for the site and is therefore an indicator of market value. All the payments are projected in nominal US Dollar/Euro amounts and
thus incorporate relevant inflation measures.
Valuation Approach
In addition to the above general valuation methodology, the appraisers have taken into account in arriving at Market Value the following:
Pre Development
In those instances where the nature of the ‘Project’ has been defined, it was assumed that the subject property will be developed in
accordance with this blueprint. The final outcome of the development of the property is determined by the Board of Directors decision,
which is based on existing market conditions, profitability of the project, ability to finance the project and obtaining required construction
permits.
Development
In terms of construction costs, the budgeted costs have been taken into account in considering opinions of value. However, the
appraisers have also had regard to current construction rates prevailing in the market which a prospective purchaser may deem
appropriate to adopt in constructing each individual scheme. Although in some instances the appraisers have adopted the budgeted
costs provided, in some cases the appraisers’ own opinions of costs were used.
Post Development
Rental values have been assessed as at the date of valuation but having regard to the existing occupational markets taking into
account the likely supply and demand dynamics during the anticipated development period. The standard letting fees were assumed
within the valuations. In arriving at their estimates of gross development value (“GDV”), the appraisers have capitalized their opinion
of net operating income, having deducted any anticipated non-recoverable expenses, such as land payments, and permanent void
allowance, which has then been capitalized into perpetuity.
The capitalization rates adopted in arriving at the opinions of GDV reflect the appraisers’ opinions of the rates at which the properties
could be sold as at the date of valuation.
In terms of residential developments, the sales prices per sq. m. again reflect current market conditions and represent those levels the
appraisers consider to be achievable at present. It was assumed that there are no irrecoverable operating expenses and that all costs
will be recovered from the occupiers/owners by way of a service charge.
The valuations take into account the requirement to pay ground rental payments and these are assumed not to be recoverable from
the occupiers. In terms of ground rent payments, the appraisers have assessed these on the basis of information available, and if not
available they have calculated these payments based on current legislation defining the basis of these assessments. Property tax is not
presently payable in Ukraine.
3.6 Investment Property under development
Property that is currently being constructed or developed, for future use as investment property is classified as investment property
under development carried at cost until construction or development is complete, or its fair value can be reliably determined. This
applies even if the works have temporarily being stopped.
3.7 Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated
impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or Groups of cash-generating
units) that is expected to benefit from the synergies of the combination.
CONSOLIDATED FINANCIAL STATEMENTS 2015|50
3. Significant accounting policies (continued)
3.7 Goodwill (continued)
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is
indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the
unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or
loss in the consolidated statement of comprehensive income. An impairment loss recognized for goodwill is not reversed in subsequent
periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or
loss on disposal.
3.8 Property, Plant and equipment and intangible assets
Property, plant and equipment and intangible non-current assets are stated at historical cost less accumulated depreciation and
amortization and any accumulated impairment losses.
Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined and
intangibles not inputted into exploitation, are carried at cost, less any recognized impairment loss. Cost includes professional fees and,
for qualifying assets, borrowing costs capitalized in accordance with the Group's accounting policy. Depreciation of these assets, on the
same basis as other property assets, commences when the assets are ready for their intended use.
Depreciation and amortization are calculated on the straight-line basis so as to write off the cost of each asset to its residual value over
its estimated useful life. The annual depreciation rates are as follows:
Type
Leasehold
IT hardware
Motor vehicles
Furniture, fixtures and office equipment
Machinery and equipment
Software and Licenses
No depreciation is charged on land.
%
20
33
25
20
15
33,33%
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter,
the term of the relevant lease.
The assets residual values and useful lives are reviewed, and adjusted, if appropriate, at each reporting date.
Where the carrying amount of an asset is greater than its estimated recoverable amount, the asset is written down immediately to its
recoverable amount.
Expenditure for repairs and maintenance of tangible and intangible assets is charged to the statement of comprehensive income of the
year in which it is incurred. The cost of major renovations and other subsequent expenditure are included in the carrying amount of the
asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing
asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset.
An item of tangible and intangible assets is derecognized upon disposal or when no future economic benefits are expected to arise from
the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is
determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the statement of
comprehensive income.
3.9 Available for sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other
categories. They are included in non-current assets, unless Management intends to dispose of the investment within twelve months of
the reporting date.
Shares of a property holding corporate entity that are owned by the Company in lieu of owning a percentage of the asset itself, are
considered under this classification even if the shares are not intended to be sold immediately but are intended to offer to the Company
the said percentage of the revenue streams generated by the property asset itself.
Regular way purchases and sales of available-for-sale financial assets are recognised on trade-date which is the date on which the
Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs. Financial assets
are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group
has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in other
comprehensive income are included in profit or loss as gains and losses on available-for-sale financial assets.
Interest on available-for-sale securities calculated using the effective interest method is recognised in the profit or loss. Dividends on
available-for-sale equity instruments are recognised in profit or loss when the Group's right to receive payments is established.
CONSOLIDATED FINANCIAL STATEMENTS 2015|51
3. Significant accounting policies (continued)
3.9 Available for sale financial assets (continued)
The Group assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is
impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the
security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale
financial assets the cumulative loss which is measured as the difference between the acquisition cost and the current fair value, less
any impairment loss on that financial asset previously recognised in profit or loss, is removed from equity and recognised in profit or
loss.
In respect of available for sale equity securities, impairment losses previously recognised in profit or loss are not reversed through
profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and
accumulated under the heading of investments fair value reserve. In respect of available for sale debt securities, impairment losses
are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an
event occurring after the recognition of the impairment loss.
3.10 Inventory
Inventory principally comprises land purchased for development and property under construction. Inventory is recognized initially at
cost, including transaction costs, which represent its fair value at the time of acquisition. Costs related to the development of land are
capitalised and recognized as inventory. Inventory is carried at the lower of cost and net realizable value.
3.11 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost.
Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period
of the borrowings, using the effective interest method, unless they are directly attributable to the acquisition, construction or production
of a qualifying asset, in which case thay are capitalized as part of the cost of that asset.
Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that
some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extend there is no
evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment and amortised
over the period of the facility to which it relates.
Borrowing costs are interest and other costs that the Group incurs in connection with the borrowing of funds, including interest on
borrowings, amortization of discounts or premium relating to borrowings, amortization of ancillary costs incurred in connection with the
arrangement of borrowings, finance lease charges and exchange differences arising from foreign currency borrowings to the extent
that they are regarded as an adjustment to interest costs.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, being an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale, are capitalised as part of the cost of that asset,
when it is probable that they will result in future economic benefits to the Group and the costs can be measured reliably.
Borrowings are classified as current liabilities, unless the Group has an unconditional right to defer settlement of the liability for at
least twelve months after the reporting date.
3.12 Tenant security deposits
Tenant security deposits represent financial advances made by lessees as guarantees during the lease and are repayable by the Group
upon termination of the contracts. Tenant security deposits are recognized at nominal value.
3.13 Financial liabilities and equity instruments
3.13.1 Classification as debt or equity
Debt and equity instruments issued by a Group entity are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
3.13.2 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity
instruments issued by the Group are recognized at the proceeds received, net of direct issue costs.
Ordinary shares are classified as equity. The difference between the fair value of the consideration received by the Company and the
nominal value of the share capital being issued is taken to the share premium account.
Share premium account can only be resorted to for limited purposes, which don’t include the distribution of dividends, and is otherwise
subject to the provisions of the Cyprus Companies Law on reduction of share capital.
Repurchase of the Company's own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in the
statement of comprehensive income on the purchase, sale, issue or cancellation of the Company's own equity instruments.
3.13.3 Financial liabilities
Financial liabilities are classified as either financial liabilities “at Fair Value Through Profit or Loss” or “other financial liabilities”.
CONSOLIDATED FINANCIAL STATEMENTS 2015|52
3. Significant accounting policies (continued)
3.13 Financial liabilities and equity instruments (continued)
3.13.3.1 Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
it has been acquired principally for the purpose of repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent
actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance
is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and
information about the grouping is provided internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and
Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognized in profit or loss.
The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability and is included in the “other gains
and losses” line item in the consolidated statement of comprehensive income.
3.13.3.2 Other financial liabilities
Other financial liabilities (including borrowings) are subsequently measured at amortized cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and
points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial
recognition.
Preference shares, which may be redeemable on a specific date, are classified as liabilities. The dividends, if any, on these preference
shares are recognized in the income statement as interest expense.
3.13.3.3 De-recognition of financial liabilities
The Group derecognizes financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they are expired.
The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized
in profit or loss.
3.14 Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and
only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or
to realize the asset and settle the liability simultaneously. This is not generally the case with master netting agreements and the related
assets and liabilities are presented gross in the consolidated statement of financial position.
3.15 Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating
units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation
basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment loss annually, and
whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount
of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss,
unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
CONSOLIDATED FINANCIAL STATEMENTS 2015|53
3. Significant accounting policies (continued)
3.15 Impairment of tangible and intangible assets other than goodwill (continued)
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognized for the asset (cash-generating unit) in prior years. A reversal of an impairment
loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of
the impairment loss is treated as a revaluation increase.
3.16 Cash and Cash equivalents
Cash and cash equivalents include cash balances, call deposits and short-term, highly liquid investments that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdraft that are repayable on demand
and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose
of the statement of cash flows.
3.17 Share Capital
Ordinary shares are classified as equity.
3.18 Share premium
The difference between the fair value of the consideration received by the shareholders and the nominal value of the share capital
being issued is taken to the share premium account.
3.19 Share-based compensation
The Group had in the past and intends in the future to operate a number of equity-settled, share-based compensation plans, under
which the Company receives services from Directors and/or employees as consideration for equity instruments (options) of the Group.
The fair value of the Director and employee cost related to services received in exchange for the grant of the options is recognized as
an expense. The total amount to be expensed is determined by reference to the fair value of the options granted, excluding the impact
of any non-market service and performance vesting conditions. The total amount expensed is recognized over the vesting period, which
is the period over which all of the specified vesting conditions are to be satisfied. At each financial position date, the Group revises its
estimates on the number of options that are expected to vest based on the non-marketing vesting conditions. It recognizes the impact
of the revision to original estimates, if any, in the statement of comprehensive income, with a corresponding adjustment to equity. The
proceeds received net of any directly attributable transaction costs are credited to share capital and share premium when the options
are exercised.
3.20 Provisions
Provisions are recognized when the Group has a present obligation (legal, tax or constructive) as a result of a past event, it is probable
that the Group will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. As at the
reporting date the Group has settled all its construction liabilities.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of
the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using
the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect
of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable
is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured
reliably.
3.21 Leased assets
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to
the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at
the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of
financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or
loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Group's general
policy on borrowing costs (see above).
Lease payments are analyzed between capital and interest components so that the interest element of the payment is charged to the
statement of comprehensive income over the period of the lease and represents a constant proportion of the balance of capital
repayments outstanding. The capital part reduces the amount payable to the lessor.
3.22 Non-current liabilities
Non-current liabilities represent amounts that are due in more than twelve months from the reporting date.
CONSOLIDATED FINANCIAL STATEMENTS 2015|54
3. Significant accounting policies (continued)
3.23 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns,
rebates and other similar allowances. It is recognized to the extent that it is probable that the economic benefits associated with the
transaction will flow to the Group and the revenue can be measured reliably. Revenue earned by the Group is recognized on the
following bases:
3.23.1 Income from investing activities
Income from investing activities includes profit received from disposal of investments in the Company’s subsidiaries and associates and
income accrued on advances for investments outstanding as at the year end.
3.23.2 Dividend income
Dividend income from investments is recognized when the shareholders’ right to receive payment has been established (provided that
it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably).
3.23.3 Interest income
Interest income is recognized on a time-proportion (accrual) basis, using the effective interest rate method.
3.23.4 Rental income
Rental income arising from operating leases on investment property is recognized on an accrual basis in accordance with the substance
of the relevant agreements.
3.24 Service charges and expenses recoverable from tenants
Income arising from expenses recharged to tenants is recognized on an accrual basis.
3.25 Other property expenses
Irrecoverable running costs directly attributable to specific properties within the Group's portfolio are charged to the statement of
comprehensive income. Costs incurred in the improvement of the assets which, in the opinion of the directors, are not of a capital
nature are written off to the statement of comprehensive income as incurred.
3.26 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily
take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as
the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in the statement of comprehensive income in the period in which they are incurred as interest
costs which are calculated using the effective interest rate method, net result from transactions with securities, foreign exchange gains
and losses, and bank charges and commission.
3.27 Asset Acquisition Related Transaction Expenses
Expenses incurred by the Group for acquiring a subsidiary or associate company as part of an Investment Property and are directly
attributable to such acquisition are recognized within the cost of the Investment Property and are subsequently accounted as per the
Group’s accounting Policy for Investment Property subsequent measurement.
3.28 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
3.28.1 Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated
statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that
are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively
enacted by the end of the reporting period.
3.28.2 Deferred tax
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred tax.
CONSOLIDATED FINANCIAL STATEMENTS 2015|55
3. Significant accounting policies (continued)
3.28 Taxation (continued)
3.28.2 Deferred tax (continued)
Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when the deferred taxes relate to the same fiscal authority.
3.28.3 Current and deferred tax for the year
Current and deferred tax are recognized in the statement of comprehensive income, except when they relate to items that are recognized
in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other
comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a
business combination, the tax effect is included in the accounting for the business combination.
The operational subsidiaries of the Group are incorporated in Ukraine, Greece and Romania, while the Parent and some holding
companies are incorporated in Cyprus. The Group’s management and control is exercised in Cyprus.
The Group’s Management does not intend to dispose of any asset, unless a significant opportunity arises. In the event that a decision
is taken in the future to dispose of any asset it is the Group’s intention to dispose of shares in subsidiaries rather than assets. The
corporate income tax exposure on disposal of subsidiaries is mitigated by the fact that the sale would represent a disposal of the
securities by a non-resident shareholder and therefore would be exempt from tax. The Group is therefore in a position to control the
reversal of any temporary differences and as such, no deferred tax liability has been provided for in the financial statements.
3.28.4 Withholding Tax
The Group follows the applicable legislation as defined in all double taxation treaties (DTA) between Cyprus and any of the countries of
Operations (Romania, Ukraine, Greece, Bulgaria). In the case of Romania, as the latter is part of the European Union, through the
relevant directives the withholding tax is reduced to NIL subject to various conditions.
3.28.5 Dividend distribution
Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s financial statements in the period in which
the dividends are approved by the Company’s shareholders.
3.29 Value added tax
VAT levied at various juristictions were the Group is active, was at the following rates, as at the end of the reporting period:
20% on Ukrainian domestic sales and imports of goods, works and services and 0% on export of goods and provision of
works or services to be used outside Ukraine.
19% on Cyprus domestic sales and imports of goods, works and services and 0% on export of goods and provision of works
or services to be used outside Cyprus.
24% on Romanian domestic sales and imports of goods, works and services (reduced to 20% in 2016) and 0% on export of
goods and provision of works or services to be used outside Romania.
20% on Bulgarian domestic sales and imports of goods, works and services and 0% on export of goods and provision of
services to taxable persons outside Bulgaria.
23% on Greek domestic sales and imports of goods, works and services (increased to 24% from 1 June 2016) and 0% on
export of goods and provision of works or services to be used outside Romania.
3.30 Operating segments analysis
Segment reporting is presented on the basis of Management’s perspective and relates to the parts of the Group that are defined as
operating segments. Operating segments are identified on the basis of their economic nature and through internal reports provided to
the Group’s Management who oversee operations and make decisions on allocating resources serve. These internal reports are prepared
to a great extent on the same basis as these consolidated financial statements.
For the reporting period the Group has identified the following material reportable segments, where the Group is active in acquiring,
holding, managing and disposing:
Commercial-Industrial
Warehouse segment
Office segment
Retail segment
Residential
Residential segment
Land Assets
Land assets – the Group owns a number of land assets which are either available for sale or for potential development
The Group also monitors investment property assets on a Geographical Segmentation, namely the country were its property is located.
CONSOLIDATED FINANCIAL STATEMENTS 2015|56
3. Significant accounting policies (continued)
3.31 Earnings and Net Assets value per share
The Group presents basic and diluted earnings per share (EPS) and net asset value per share (NAV) for its ordinary shares.
Basic EPS amounts are calculated by dividing net profit/loss for the year, attributable to ordinary equity holders of the Company by the
weighted average number of ordinary shares outstanding during the year. Basic NAV amounts are calculated by dividing net asset value
as at year end, attributable to ordinary equity holders of the Company by the number of ordinary shares outstanding at the end of the
year.
Diluted EPS is calculated by dividing net profit/loss for the year, attributable to ordinary equity holders of the parent, by the weighted
average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be
issued on conversion of all the potentially dilutive ordinary shares into ordinary shares.
Diluted NAV is calculated by dividing net asset value as at year end, attributable to ordinary equity holders of the parent with the
number of ordinary shares outstanding at year end plus the number of ordinary shares that would be issued on conversion of all the
potentially dilutive ordinary shares into ordinary shares.
3.32 Comparative Period
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.
4. Critical accounting estimates and judgments
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and requires
Management to exercise its judgment in the process of applying the Group's accounting policies. It also requires the use of assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on
Management's best knowledge of current events and actions and other factors, including expectations of future events that are believed
to be reasonable under the circumstances. Actual results though may ultimately differ from those estimates.
As the Group makes estimates and assumptions concerning the future the resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below:
Provision for impairment of receivables
The Group reviews its trade and other receivables for evidence of their recoverability. Such evidence includes the counter party's
payment record, and overall financial position as well as the state's ability to pay its dues (VAT receivable). If indications of non-
recoverability exist, the recoverable amount is estimated and a respective provision for impairment of receivables is made. The amount
of the provision is charged through profit or loss. The review of credit risk is continuous and the methodology and assumptions used
for estimating the provision are reviewed regularly and adjusted accordingly. As at the reporting date Management did not consider
necessary to make a provision for impairment of receivables.
Fair value of investment property
The fair value of investment property is determined by using various valuation techniques. The Group selects accredited professional
valuers with local presence to perform such valuations. Such valuers use their judgment to select a variety of methods and make
assumptions that are mainly based on market conditions existing at each financial reporting date. The fair value has been estimated as
at 31 December 2015 (Note 15).
Income taxes
Significant judgment is required in determining the provision for income taxes. There are transactions and calculations for which the
ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such
determination is made.
Impairment of tangible assets
Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes
of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating
units).
Provision for deferred taxes
Deferred tax is not provided in respect of the revaluation of the investment property and investment property under development as
the Group is able to control the timing of the reversal of this temporary difference and the Management has intention not to reverse
the temporary difference in the foreseeable future. The properties are held by subsidiary companies in Ukraine, Greece and Romania.
Management estimates that the assets will be realized through a share deal rather than through an asset deal. Should any subsidiary
be disposed of, the gains generated from the disposal will be exempt from any tax.
CONSOLIDATED FINANCIAL STATEMENTS 2015|57
4. Critical accounting estimates and judgments (continued)
Application of IFRS 10
The Group has considered the application of IFRS 10 and concluded that the Company is not an Investment Entity as defined by IFRS
10 and it should continue to consolidate all of its investments. The reasons for such conclusion are among others that the Company:
is not an Investment Management Service provider to Investors,
a)
b) actively manages its own portfolio (leasing, development, allocation of capital expenditure for its properties, marketing etc) in
order to provide benefits other than capital appreciation and/or investment income,
c) has investments that are not bound by time in relation to the exit strategy nor to the way that are being exploited,
d) provides asset management services to its subsidiaries as well as loans and guarantees (directly or indirectly),
e) even though is using Fair Value metrics in evaluating its investments, this is being done primarily for presentation purposes
rather that evaluating income generating capability and making investment decisions. The latter is being based on metrics like
IRR, ROE and others.
5. Risk Management
5.1 Financial risk factors
The Group is exposed to operating country risk, real estate holding and development associated risks, market price risk, interest rate
risk, credit risk, liquidity risk, currency risk, other market price risk, operational risk, compliance risk, litigation risk, reputation risk,
capital risk management and other risks arising from the financial instruments it holds. The risk management policies employed by the
Group to manage these risks are discussed below.
5.1.1 Operating Country Risks
The Group is exposed to country risk, stemming from the political and economic environment of countries in which it operates.
Notably:
5.1.1.1 Cyprus
During the past 10 years Cyprus has become an established financial center taking advantage of favorable double tax treaties with
various countries around the world, most importantly with Eastern European countries where the Group operates. Due to the world
financial crisis erupting in 2008 and the ensuing debt crisis which had a liquidity effect of the Cypriot banking system as in all of the
south and east European countries, following the restructuring of the Greek public debt certain of the Cypriot banks have taken a blow
to their solvency (write off of €4,5bn of Greek debt) and have requested the support of the ECB through the ELA mechanism.
Thus, the indebtedness of the Cypriot Republic and its two main banks Bank of Cyprus and Cyprus Popular Bank (Laiki) created the
basis for the country to be part of a financial rescue plan under the supervision of the IMF, the ECB and the European Union in early
2013, a moment when the Cypriot State stopped being able to borrow from the international debt markets. At the same time, the recent
discovery of potentially significant natural gas and oil deposits within the boundaries of the Cypriot exclusive economic zone perplexes
the geographic and political relationships and developments as Cyprus is in the crossroad of 3 continents.
Following the implementation of the economic plan agreed with Troika, Cyprus economy is back on growth and has returned during
2015 to the international debt markets which signifies a return to normality.
On that note, the Company had proactively evaluated the probable effect of the measures in relation to the levy on deposits and the
restrictions on capital movement applied to Cyprus based financial institutions. The Company held most of its liquidity with non-Cypriot
owned banking institutions, partly in Cyprus and partly outside Cyprus and to this date all operations of the Group continue to be carried
out normally.
5.1.1.2 Ukraine
During 2015, an armed conflict with separatists continued in certain parts of Luhansk and Donetsk regions.
The National Bank of Ukraine (the “NBU”) extended its range of measures that were introduced in 2014 and aimed at limiting the
outflow of foreign currency from the country, inter alia, a mandatory sale of foreign currency earnings, certain restrictions on purchases
of foreign currencies on the interbank market and on usage of foreign currencies for settlement purposes, limitations on remittances
abroad. In early 2015, the Government of Ukraine agreed with the IMF a four-year program for USD 17.500 million loan aimed at
supporting the economic stabilization of Ukraine. The program defines economic reforms that must be undertaken by the Government
of Ukraine to reinstate a sustainable economic growth in the mid-term perspective.
In 2015, political and economic relationships between Ukraine and the Russian Federation remained strained that led to a significant
reduction in trade and economic cooperation. On 1 January 2016, a free-trade element of Ukraine’s association agreement with the
European Union is coming into force. In late 2015, the Russian Federation denounced the free trade zone agreement with Ukraine and
further trade restrictions were announced by both countries.
Stabilization of the economic and political situation depends, to a large extent, upon the ability of the Ukrainian Government to continue
reforms and the efforts of the NBU to further stabilize the banking sector, as well as upon the ability of the Ukrainian economy in
general to respond adequately to changing markets. Nevertheless, further economic and political developments, as well as the impact
of the above factors on the Company, its customers, and contractors are currently difficult to predict.
CONSOLIDATED FINANCIAL STATEMENTS 2015|58
5. Risk Management (continued)
5.1 Financial risk factors (continued)
5.1.1.2 Ukraine (continued)
Whilst, Group’s management considers that all necessary actions are being performed to maintain financial stability of the Group in
current circumstances. Continuation of the current unstable business environment may adversely affect results and financial position of
the Company, in a manner not currently determinable these consolidated financial statements reflect current management estimation
of Ukrainian business environment influence on the financial position of the Group. Situation development may differ from management
expectations.
5.1.1.3 Greece
During the period the Greek government continued discussions with the creditor institutions (EU/ECB/IMF/ESM) resulting in
continuations of higher political and economic instability for the country. Failure to reach agreement at the end of June 2015 led to the
implementation of capital controls in the banking sector and a 3-week bank holiday on 27 June 2015.
Following a referendum on a deal proposed by international institutions and further negotiations, a preliminary agreement on a rescue
program was reached on 12 July 2015 for a 3-year €86 billion support package, which was followed in August 2015 by the signing of a
related agreement and the ratifications by Greek and a number of EU member country parliaments of this agreement in August 2015,
signaling the commitment of Greece to remain in the Eurozone and effect any necessary reforms requested by the creditor institutions
as a prerequisite to capital deployment. Following elections in September 2015 which secured another term for the government that
reached this agreement, discussions with the creditor institutions (EU/ECB/IMF/ESM) were reenacted aiming to the conclusion of the
appraisal of the rescue program. Such discussions have lasted through the first 5 months of 2016 leading to considerable political and
economic instability and were concluded suddessfully on May 24th, 2016. In June 2016 the appaisal was finaly concluded and ratified
by EU member states parliaments and Greece received the first installment of the new rescue package. As such uncertainty may
decrease in the coming months. However there is still risk around implementation of the rescue program and the reforms included
therein. The implementation of the program and its effects on the economy are beyond the Group's control.
Various risks emerge should the program is not implemented as planned, including restrictions on use of local bank deposits, liquidity
of the financial sector and businesses, recoverability of receivables, impairment of assets, sufficiency of financing by the lending banks,
serving of existing financing arrangements and/or compliance with existing terms and financial covenants of such arrangements. These
and any possible further negative developments in Greece could impact the results and financial position of the Group΄s Greek
operations to some extent, in a manner not currently determinable.
The Group has been closely assessing developments in Greece and preparing for a number of eventualities around the Greek crisis, in
line with its established risk management policy in order to ensure that timely actions and response are undertaken so as to minimize
any impact on the Group’s business and operations.
5.1.2 Risks associated with property holding
Several factors may affect the economic performance and value of the Group's properties, including:
risks associated with construction activity at the properties, including delays, the imposition of liens and defects in
workmanship;
the ability to collect rent from tenants , on a timely basis or at all, taking also into account the UAH rapid devaluation;
the amount of rent and the terms on which lease renewals and new leases are agreed being less favorable than current
leases;
cyclical fluctuations in the property market generally;
local conditions such as an oversupply of similar properties or a reduction in demand for the properties;
the attractiveness of the property to tenants or residential purchasers;
decreases in capital valuations of property;
changes in availability and costs of financing, which may affect the sale or refinancing of properties;
covenants, conditions, restrictions and easements relating to the properties;
changes in governmental legislation and regulations, including but not limited to designated use, allocation, environmental
usage, taxation and insurance;
the risk of bad or unmarketable title due to failure to register or perfect our interests or the existence of prior claims,
encumbrances or charges of which we may be unaware at the time of purchase;
the possibility of occupants in the properties, whether squatters or those with legitimate claims to take possession;
the ability to pay for adequate maintenance, insurance and other operating costs, including taxes, which could increase over
time; and
political uncertainty, acts of terrorism and acts of nature, such as earthquakes and floods that may damage the properties.
5.1.3 Property Market price risk
Market price risk is the risk that the value of the Group’s portfolio investments will fluctuate as a result of changes in market prices. The
Group's assets are susceptible to market price risk arising from uncertainties about future prices of the investments. The Group's market
price risk is managed through diversification of the investment portfolio, continuous elaboration of the market conditions and active
asset management. To quantify the value of its assets and/or indicate the possibility of impairment losses, the Group commissioned
internationally acclaimed valuers.
CONSOLIDATED FINANCIAL STATEMENTS 2015|59
5. Risk Management (continued)
5.1 Financial risk factors (continued)
5.1.3 Property Market price risk (continued)
Valuations reported as at 31 December 2015 take into account the continuation of political instability in Ukraine. Given the nature of
the Group’s assets the most immediate effect would be the prolongation of the period needed to market and effectively sell an asset
under such duress conditions.
The BoD is monitoring the situation to ensure that assets’ value is preserved while at the same time through diversification according
to the strategic plan of the Group, Ukrainian operations are gradually becoming a smaller part of a larger portfolio of assets.
5.1.4 Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates.
The Group's income and operating cash flows are substantially independent of changes in market interest rates as the Group has no
significant interest-bearing assets apart from its cash balances that are mainly kept for liquidity purposes.
The Group is exposed to interest rate risk in relation to its borrowings. Borrowings issued at variable rates expose the Group to cash
flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. All of the Group's borrowings
are issued at a variable interest rate. Management monitors the interest rate fluctuations on a continuous basis and acts accordingly.
5.1.5 Credit risk
Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from
financial assets at hand at the end of the reporting period. Cash balances are held with high credit quality financial institutions and the
Group has policies to limit the amount of credit exposure to any financial institution.
Management has been in continuous discussions with banking institutions monitoring their ability to extend financing as per the Group’s
needs. The sovereign debt crisis has affected the pan-European banking system during 2011 and 2012 imposing financing uncertainties
for new development projects. The financial crisis in the European Union periphery has strained any remaining liquidity and the financial
institutions in the region (including those that have Italian, Greek or Austrian parent) have entered into deleveraging programs.
5.1.6 Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates.
Currency risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not
the Group's functional currency. Excluding the transactions in Ukraine all of the Group’s transactions, including the rental proceeds are
denominated or pegged to €. In Ukraine even though some of the rental proceeds are denominated in USD, Management has been
monitoring the rental market decoupling from the USD and switching to the UAH, which entails significant FX risks for the Group in the
future. Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly, by limiting net exposures to
a few days to 2 months. It should be noted that the current political uncertainty in Ukraine, and the currency devaluation may affect
the Group’s income streams indirectly also through affecting the financial condition of the tenants of the Group’s properties their solvency
and their income generating capacity.
Apart from liquidity maintained in local currency for operating reasons the Group’s liquid assets are held in EUR denominated deposit
accounts. Management is monitoring the situation closely and acts accordingly.
5.1.7 Capital risk management
The Group manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to shareholders
through the optimization of the debt and equity balance. The Group’s core strategy is described in Note 36.1 of the consolidated financial
statements.
5.1.8 Compliance risk
Compliance risk is the risk of financial loss, including fines and other penalties, which arises from non-compliance with laws and
regulations of each country the Group is present as well as from the stock exchange where the Company is listed. Although the Group
is trying to limit such risk, the uncertain environment in which it operates in various countries increases the complexities handled by
Management.
5.1.9 Litigation risk
Litigation risk is the risk of financial loss, interruption of the Group's operations or any other undesirable situation that arises from the
possibility of non-execution or violation of legal contracts and consequentially of lawsuits. The risk is restricted through the contracts
used by the Group to execute its operations .
CONSOLIDATED FINANCIAL STATEMENTS 2015|60
5. Risk Management (continued)
5.1 Financial risk factors (continued)
5.1.10 Insolvency risk
Insolvency arises from situations where a company may not meet its financial obligations towards a lender as debts become due.
Addressing and resolving any insolvency issues is usually a slow moving process in the Region. Management is closely involved in
discussions with creditors when/if such cases arise in any subsidiary of the Company aiming to effect alternate repayment plans including
debt repayment so as to minimize the effects of such situations on the Group’s asset base.
5.2. Operational risk
Operational risk is the risk that derives from the deficiencies relating to the Group's information technology and control systems as well
as the risk of human error and natural disasters. The Group’s systems are evaluated, maintained and upgraded continuously.
5.3. Fair value estimation
The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the end of the reporting period.
Valuations reported as at 31 December 2015 take into account past political developments in Ukraine which given the nature of the
Group’s assets the most immediate effect would be the prolongation of the period needed to market and effectively sell an asset under
such duress conditions.
CONSOLIDATED FINANCIAL STATEMENTS 2015|61
6. Investment in subsidiaries
The Company has direct and indirect holdings in other companies, collectively called the Group, that were included in the consolidated
financial statements, and are detailed below:
Name
SC SECURE Capital Limited
SL SECURE Logistics Limited
LLC Aisi Brovary
LLC Terminal Brovary
LLC Aisi Ukraine
LLC Retail Development Balabino
LLC Trade Center
LLC Almaz-press-Ukrayina
LLC Aisi Bela
LLC Merelium Investments
LLC Interterminal
LLC Aisi Outdoor
LLC Aisi Ilvo
LLC Aisi Donetsk
Myrnes Innovations Park Limited
Best Day Real Estate SRL
Yamano Holdings Limited
Secure Property Development and
Investment Srl
N-E Real Estate Park First Phase Srl
Victini Holdings Limited
SPDI Logistics S.A.
Zirimon Properties Limited
Bluehouse Accession Project IX Limited
Bluehouse Accession Project IV Limited
Bluebigbox 3 Srl
SEC South East Continent Unique Real
Estate Investments II Limited
SEC South East Continent Unique Real
Estate (Secured) Investments Limited
Diforio Holdings Limited
Demetiva Holdings Limited
Ketiza Holdings Limited
Frizomo Holdings Limited
SecMon Real Estate SRL
SecVista Real Estate SRL
SecRom Real Estate SRL
Ketiza Real Estate SRL
Edetrio Holdings Limited
Emakei Holdings Limited
RAM Real Estate Management Limited
Iuliu Maniu Limited
Moselin Investments srl
Rimasol Enterprises Limited
Rimasol Real Estate Srl
Ashor Ventures Limited
Ashor Development Srl
Jenby Ventures Limited
Jenby Investments Srl
Ebenem Limited
Ebenem Investments Srl
Sertland Properties Limited
Boyana Residence ood
Mofben Investments Limited
Delia Lebada Invest srl
Country of
incorporation
Cyprus
Cyprus
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Cyprus
Romania
Cyprus
Romania
Romania
Cyprus
Greece
Cyprus
Cyprus
Cyprus
Romania
Cyprus
Cyprus
Cyprus
Cyprus
Cyprus
Cyprus
Romania
Romania
Romania
Romania
Cyprus
Cyprus
Cyprus
Cyprus
Romania
Cyprus
Romania
Cyprus
Romania
Cyprus
Romania
Cyprus
Romania
Cyprus
Bulgaria
Cyprus
Romania
Related Asset
Brovary Logistics Park
Kiyanovskiy Residence
Tsymlianskiy Residence
Bela Logistic Park
Merged
Zaporizhia Retail Center
Merged
Merged
Innovations Logistics
Park
EOS Business Park
GED Logistics
Delea Nuova
Praktiker Craiova
Residential and Land
portfolio
Holding %
as at
31 Dec 2015
100
100
100
100
100
100
100
55
100
-
100
-
100
-
100
100
100
as at
31 Dec 2014
100
100
100
100
100
100
100
55
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
90
100
100
100
100
90
100
100
50
45
45
44,24
44,24
44,24
44,24
44,30
44,30
44,30
44,30
100
100
100
65
100
100
100
-
-
-
-
-
100
-
100
100
45
100
100
100
100
45
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Within the reporting period the subsidiaries LLC Aisi Outdoor, LLC Merelium Investments and LLC Aisi Donetsk were merged to LLC Aisi
Ilvo. The reorganization (merger) process was finished in June 2015. The Group is planning to further streamline its structure in Cyprus,
Ukraine and Romania throughrout 2016-2017.
CONSOLIDATED FINANCIAL STATEMENTS 2015|62
6. Investment in subsidiaries (continued)
During the reporting period the Company realized a number of acquisitions: GED Warehouse, Praktiker Craiova and a part of the mixed
portfolio including commercial, residential properties and land were categorized under “Investment Property” (Notes 15 & 16). Another
part of the mixed portfolio (Delea Nuova office Building , Green Lake land has been categozied under “Associates” (Note 17). The 20%
acquisition of Autounion has been recored under “Available for Sale Fianancial Assets” (Note 20).
7. Operating Income
Operating income in the net amount of €5.130.637 for the year ended 31 December 2015 represents:
a) rental income as well as service charges and utilities income collected from tenants as a result of the rental agreements concluded
with tenants of the Terminal Brovary Logistic Park (Ukraine), Innovations Logistics Park (Romania), EOS Business Park (Romania),
Praktiker Craiova (Romania), and GED Logistics (Greece),
income from the sale of electricity by GED Logistics to the Greek grid,
b)
c) rental income and service charges by tenants of the Residential Portfolio, and
d) sales proceeds income from sale of several apartments and parking spaces from the Residential Portfolio minus the deduction of
Cost of assets Sold, representing the fair value of the previous year of the apartments and parking spaces sold in 2015. The net
income from sale of assets incudes both sales from Investment Property assets and Inventory assets.
Rental income
Sale of electricity
Service charges and utilities income
Total income from rental contracts
Income from sale of assets
Cost of assets sold
Net Income from sale of assets
Total Operating income
31 Dec 2015
€
4.605.022
297.962
545.976
5.448.960
1.725.326
(2.043.649)
(318.323)
31 Dec 2014
€
3.063.875
-
513.570
3.577.445
107.917
(93.459)
14.458
5.130.637
3.591.903
Occupancy rates in the various income producing assets of the Group as at 31 December 2015 were as follows:
Income producing assets
%
EOS Business Park
Innovations Logistics Park (Note 37d)
GED Logistics
Terminal Brovary (Note 37b)
Praktiker Craiova (Note 37f)
Romania
Romania
Greece
Ukraine
Romania
31 Dec 2015
31 Dec 2014
100%
87%
100%
47%
100%
100%
100%
n/a
94%
n/a
Valuation gains /(losses) from investment property for the reporting period, excluding foreign exchange translation differences which
are incorporated in the table of Note 15, are presented in the table below.
Property Name (€)
Brovary Logistic Park
Bela Logistic Center
Kiyanovskiy Lane
Tsymlyanskiy Lane
Balabino Lane
Rozny Lane (Note 15.2 , Note 15.4c)
Innovations Logistics Park
EOS Business Park
Residential Portfolio
Green Lake
Pantelimon Lake
Praktiker Craiova
GED Logistics
Total
Valuation gains/(losses)
31 Dec 2015
31 Dec 2014
€
€
(589.179)
1.513.658
278.302
178.669
(8.143)
(865.054)
400.000
150.000
251.500
(865.000)
(10.000)
(2.870.000)
100.000
(2.335.247)
8.512.454
1.646.852
1.155.225
184.450
269.744
(2.440.200)
1.000.000
550.000
(1.581.000)
-
-
-
-
9.297.525
CONSOLIDATED FINANCIAL STATEMENTS 2015|63
8. Administration Expenses
Salaries and Wages
Legal fees
Advisory fees
Corporate registration and maintenance fees
Directors’ remuneration
Audit and accounting fees
Public group expenses
Depreciation/Amortization charge
Sundry expenses
Total Administration Expenses
31 Dec 2015
€
(1.108.614)
(241.092)
(323.232)
(226.326)
(278.417)
(191.230)
(155.766)
(40.823)
(415.838)
(2.981.338)
31 Dec 2014
€
(807.171)
(410.394)
(380.525)
(210.164)
(171.197)
(143.261)
(101.780)
(17.897)
(442.033)
(2.684.422)
Salaries and wages include the remuneration of the CEO, the CFO, the Group Commercial Director, the Group Investment Director and
the Country Managers of Ukraine and Romania, as well as the salary cost of personnel employed in the region.
Legal fees represent legal expenses incurred by the Group in relation to asset operations (rentals, sales etc), ongoing legal cases in
Ukraine, debt restructurings as well as its compliance with AIM listing.
Advisory fees are mainly related to outsourced human resources support on the basis of advisory contracts, capital raising advisory
expenses and marketing expenses incurred by the Group in relation to Cypriot, Ukrainian, Romanian, Bulgarian and Greek operations.
Directors’ remuneration represents the remuneration of all non-executive Directors and committee members (Note 33.1)
Audit and accounting expenses includes the audit fees and accounting fees for the Company and all the subsidiaries.
Public group expenses include among others fees paid to the AIM: LSE stock exchange and the Nominated Advisor of the Company as
well as other expenses related to the listing of the Company.
Depreciation/Amortization expense is mainly related to amortization of software (ERP - Navision) and for the depreciation of the
generator in Terminal Brovary.
Sundry expenses include office expenses, travel expenses, communication expenses, D&O insurance and all other general expenses for
Cypriot, Romanian, Ukrainian, Bulgarian and Greek operations.
9. Investment property operating expenses
The Group incurs expenses related to the proper operation and maintenance of all the income generating properties in Kiev, Bucharest,
Athens, Sofia and Craiova. A part of these expenses is recovered from the tenants through the rental agreements (Note 7).
Property Management fees
Property related taxes
Expenses for Utilities
Property security
Repairs and technical maintenance
Leasing expenses
Property Insurance
Other Investment property operating expenses
Total
31 Dec 2015
€
(253.060)
(363.080)
(274.149)
(55.688)
(70.247)
(30.861)
(48.258)
(29.240)
(1.124.583)
31 Dec 2014
€
(316.768)
(59.301)
(244.557)
(11.984)
(6.399)
(36.997)
(11.919)
(68.636)
(756.561)
Property Management fees relate to Property Management Agreements for Terminal Brovary Logistics Park, Innovation Logistics Park,
and Praktiker Craiova with third party Managers outsourcing the related services.
Property related taxes reflect local taxes related to land and building properties (in the form of land taxes, building taxes, garbage fees,
etc).
Leasing expenses reflect expenses related to long term land leasing.
CONSOLIDATED FINANCIAL STATEMENTS 2015|64
10. Other operating income/(expenses), net
Compensation received
Accounts payable written off
Other income
Impairment of assets
Provision/impairment of prepayments and other current assets
Transaction costs
Other expenses
Other expenses
Total
31 Dec 2015
€
182.638
1.197.740
1.380.378
(342.280)
(47.316)
(287.999)
(81.531)
(759.126)
31 Dec 2014
€
-
12.422
12.422
-
(3.973)
-
(144.507)
(148.480)
621.252
(136.058)
Compensation received relates to the extraordinary income due to early break off tenancy agreements by tenants in Terminal Brovary.
Accounts payable written off represent a write off of management fees associated with SEC South East Continent Unique Estate
Investments Ltd charged by a related party, SECURE Management Ltd, which has accepted to forgo any claim on such payable amount.
Impairment of assets represents an amount paid by a subsidiary 8 years ago for acquiring an option to buy properties which has not
been exercised.
Transaction costs represent due diligence costs for properties that were considered for acquisition which at the end were not acquired.
Such expenses were presented previously as Deferred expenses.
Other income/(expenses) represents mainly non recoverable VAT.
11. Impairment allowance for inventory and provisions
Impairment of Inventory
Provision (Notes 29, 34)
Total
Impairment of Inventory relates to Boyana residence (Note 19).
Provision reflects potential contigent liabilities from legal cases (Notes 29, 34).
12. Finance costs and income
Finance income
Interest from non bank loans
Bank interest income
Total finance income
Finance costs
Borrowing interest expenses (Note 26)
Finance leasing interest expenses (Note 30)
Finance charges and commissions
Default interest
Other finance expenses
Total finance costs
31 Dec 2015
€
(975.659)
(700.000)
(1.675.659)
31 Dec 2014
€
-
-
-
31 Dec 2015
€
48.730
14.866
63.596
31 Dec 2015
€
(3.283.056)
(551.640)
(258.493)
(325.707)
(19.295)
(4.438.191)
31 Dec 2014
€
-
80.895
80.895
31 Dec 2014
€
(1.091.474)
(256.752)
(68.744)
-
(41.328)
(1.458.298)
Net finance result
(4.374.595)
(1.377.403)
Borrowing interest expense represents interest expense charged on bank and non-bank borrowings.
Finance leasing interest expenses relate to the sale and lease back agreements of the Group.
Finance charges and commissions include regular banking commissions, and various fees paid to the banks, including a fee paid to
EBRD for the restructuring of the Terminal Brovary loan amounting to €99.154.
Default interest relates to interest charged by Bank of Cyprus in relation to the loan over Delia Lebada Invest srl (Note 26).
CONSOLIDATED FINANCIAL STATEMENTS 2015|65
13. Foreign exchange profit / (losses)
a. Foreign exchange loss – non realised
Foreign exchange losses (non-realised) resulted from the loans and/or payables/receivables denominated in non EUR currencies when
translated in EUR, mainly the EBRD loan (Note 26). The exchange loss for the year ended 31 December 2015 amounted to €5.071.048
(2014: loss € 7.512.640).
b. Exchange difference on intercompany loans to foreign holdings
The intercompany loans provided by SC Secure Capital Limited to Ukrainian subsidiaries (Note 33.3) incurred an exchange loss (non-
realised) of €13.653.402, due to the UAH devaluation which took place during the reporting period (2014: loss €19.746.111). Settlement
of these loans is not planned to occur in the foreseeable future and in substance is part of the Group’s net investment in its foreign
operations.
14. Income Tax Expense
Current income and defence tax expense
Taxes
31 Dec 2015
€
(80.188)
(80.188)
31 Dec 2014
€
(220.476)
(220.476)
For the year ended 31 December 2015, the corporate income tax rate for the Company’s subsidiaries are as follows: in Ukraine 19%,
in Romania 16%, in Greece 26% and in Bulgaria 10%. The corporate tax that is applied to the qualifying income of the Company and
its Cypriot subsidiaries is 12,5%.
The tax on the Group's results differs from the theoretical amount that would arise using the applicable tax rates as follows:
Profit / (loss) before tax
Tax calculated on applicable rates
Expenses not recognized for tax purposes
Tax effect of allowances and income not subject to tax
Tax effect of group tax relief
Tax effect on tax losses for the year
Tax effect on tax losses brought forward
10% additional tax
Defence tax
Overseas tax in excess of credit claim used during the year
Prior year tax
Total Tax
31 Dec 2015
€
(11.530.401)
31 Dec 2014
€
1.188.565
(3.340.505)
483.029
(248.073)
(8.573)
3.181.833
(822)
7.200
2.092
166
3.841
80.188
318.134
941.488
(139.164)
-
(882.377)
(43.807)
13.989
2.656
6.598
2.959
220.476
CONSOLIDATED FINANCIAL STATEMENTS 2015|66
15. Investment Property
15.1 Investment Property Presentation
Investment Property consists of the following assets:
Income Producing Assets
Terminal Brovary Logistic Park consists of a 49.180 sqm gross leasable Class A warehouse and associated office space,
situated on the junction of the main Kyiv – Moscow highway and the Borispil road. The facility is in operation since Q1 2010
and as at the end of the reporting period its warehouse space is ~47% leased (~45% occupancy).
Innovations Logistic Park is a 16.570 sqm gross leasable area logistics park located in Clinceni in Bucharest, which benefits
from being on the Bucharest ring road. Its construction was tenant specific, was completed in 2008 and is separated in four
warehouses, two of which offer cold storage (freezing temperature), the total area of which is 6.395 sqm. Innovations was
acquired by the Group in May 2014 and was 87% leased at the end of the reporting period.
EOS Business Park is a 3.386 sqm gross leasable area and includes a Class A office Building in Bucharest, which is currently
fully let to Danone Romania. EOS Business Park was acquired by the Group in October 2014.
GED Logistics is a logistics park comprising 17.756 gross leasable sqm and has a net operating income (“NOI”) of
approximately €1,5 million per annum. It is fully let to the German multinational transportation and logistics company, Kuehne
+ Nagel (70%) and to a Greek commercial company trading electrical appliances GE Dimitriou SA (30%). The NOI also
includes income from selling electric energy produced by the 1MW photovoltaic park installed on the roof of the property to
the Greek Electric Grid.
Praktiker Craiova, a DIY retail property was acquired by the Group in July 2015. Situated in a prime location in Craiova,
Romania it is wholly let to Praktiker, a regional DIY retailer. The property has a Gross Lettable Area ('GLA') of 9.385 square
meters and at the time the agreement to acquire the property was concluded, it produced an annualized gross rental income
of ~€1 million. Early in 2016 the tenant offered to extend the lease agreement for an additional 5 years until 2025, in exchange
of reducing the annual rent to the levels of the temporary reduction that the tenant and the previous owner had agreed for
the last few months of 2015, namely to ~€600k. Such offer is under discussion.
Residential Assets
The Company owns a residential portfolio, consisting at the end of the reporting period of partly let and income producing
104 apartments and villas across five separate complexes (Residential portfolio: Romfelt, Linda, Monaco, Blooming House,
Green Lake Residential: Green Lake Parcel K) located in different residential areas of Bucharest and Sofia. The Group acquired
the portfolio partly in August 2014 and partly May 2015. The aggregate residential portfolio is ~27% let at the end of the
reporting period.
Land Assets
Bela Logistic Center is a 22,4 Ha plot in Odessa situated on the main highway to Kyiv. Following the issuance of permits
in 2008, below ground construction for the development of a 103.000 sqm GBA logistic center commenced. Construction was
put on hold in 2009 following adverse macro-economic developments at the time.
Kiyanivsky Lane consists of four adjacent plots of land, totaling 0,55 Ha earmarked for a residential development,
overlooking the scenic Dnipro River, St. Michael’s Spires and historic Podil neighborhood.
Tsymlianskiy Lane, is a 0,36 Ha plot of land located in the historic Podil District of Kyiv and is destined for the development
of a residential complex.
Rozny Lane is a 42 Ha land plot located in Kiev Oblast, destined for the development of a residential complex. It has been
registered under the Group pursuant to a legal decision (Note 15.4c).
Balabino project is a 26,38 Ha plot of land situated on the south entrance of Zaporizhia, a city in the south of Ukraine with
a population of 800.000 people. Balabino is zoned for retail and entertainment development.
Green Lake land is a 40.360 sqm plot and is adjacent to the Green Lake part of the Company’s residential portfolio (classified
under Associates). It is situated in the northern part of Bucharest on the bank of Grivita Lake in Bucharest. SPDI owns 44,24%
of these plots, but has effective management control.
Pantelimon Lake consists of a ~40.000 sq m plot of land in east Bucharest situated on the shore of Pantelimon Lake,
opposite to a famous Romanian hotel, the Lebada Hotel. The construction permit, which allows for ~54.000 sqm residential
space to be built, was renewed in April 2014.
CONSOLIDATED FINANCIAL STATEMENTS 2015|67
15. Investment Property (continued)
15.2 Investment Property Movement during the reporting period
The table below presents a reconciliation of the Fair Value movements of the investment property during the reporting period broken
down by property and by local currency vs. reporting currency.
2015 (€)
Asset Name
Type
Fair Value movements
Carrying
amount
31/12/2015
Foreign
exchange
translation
difference
(a)
Fair value
gain/(loss)
based on
local
currency
valuations
(b)
Disposals
2015
Asset Value at the Beginning of the period or
at Acquisition/Transfer date
Transfer from
prepayments
made for
investments
Additions
2015
Carrying
amount as
at
31/12/2014
Terminal Brovary
Logistic Park
Bela Logistic
Center
Kiyanivskiy Lane
Tsymlyanskiy
Lane
Balabino
Rozny Lane
Total Ukraine
Overall
change in
Ukraine
Innovations
Logistics Park
EOS Business
Park
Residential
portfolio
Green Lake
Pantelimon Lake
Praktiker Craiova
Total Romania
GED Logistics
Total Greece
Warehouse
12.264.323
(4.609.808)
(589.179)
Land
Land
Land
Land
Land
5.125.389
(1.471.485)
1.513.658
3.203.368
(1.092.315)
278.302
1.006.773
(319.719)
178.669
1.555.922
1.194.085
(567.608)
-
(8.060.935)
(8.143)
(324.395)
1.048.912
-
-
-
-
-
1.518.480
-
24.349.860
(7.012.023)
1.518.480
Warehouse
14.400.000
Office
6.550.000
Residential
6.722.000
Land
Land
Retail
Warehouse
17.932.000
5.812.000
7.200.000
58.616.000
16.500.000
16.500.000
-
-
-
-
-
-
-
-
-
400.000
150.000
251.500
(865.000)
(10.000)
(2.870.000)
(2.943.500)
100.000
100.000
(1.902.500)
(1.902.500)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18.797.000
5.822.000
10.070.000
34.689.000
16.400.000
16.400.000
17.463.310
5.083.216
4.017.381
1.147.823
2.131.673
-
29.843.403
14.000.000
6.400.000
8.373.000
-
-
-
28.773.000
-
-
TOTAL
99.465.860
(8.060.935)
(1.794.588)
(1.902.500)
1.518.480
51.089.000
58.616.403
The two components comprising the fair value movements are presented in accordance with the requirements of IFRS in the
consolidated statement of comprehensive income as follows:
a. The translation loss due to the devaluation of local currencies of €8.060.935 (a) is presented as part of the exchange difference
on translation of foreign operations in other comprehensive income of the Profit and Loss Account and then carried forward
in the Foreign currency translation reserve; and,
b. The fair value loss in terms of the local functional currencies amounting to €1.794.588 (b), is presented as Valuation
gains/(losses) from investment properties under the Profit and Loss Account and is carried forward in Accumulated losses.
The fair value of the properties held by the Group in Ukraine has decreased overall, as a result of the political uncertainty, by €7.012.023.
The reduction includes a €324.395 fair value loss for the Rozny property that the Group finally registered under its name in July 2015
following protracted legal actions (Note 15.4c).
The fair value of the unsold units of the Residential portfolio as at the end of the reporting period has increased by €251.500 compared
to the 2014 valuation (which was used for discharging the units sold during the period).
2014 (€)
Asset Name
Type
Terminal Brovary Logistic Park
Industrial
Bela Logistic Center
Kiyanovskiy Lane
Tsymlyanskiy Lane
Balabino
Sub total
Total Ukraine
Innovations Logistics Park
EOS Business Park
Residential portfolio
Total Romania
TOTAL
Land
Land
Land
Land
Industrial
Office
Residential
Fair Value movements
Carrying
amount
31/12/2014
17.463.310
Foreign Exchange
Translation
difference
(9.382.086)
Fair Value
gain/(loss)
8.512.454
Additions/
acquisitions
2014
60.155
Carrying
amount
31/12/2013
18.272.787
5.083.216
(3.089.631)
1.646.852
4.017.381
1.147.823
2.131.673
29.843.403
14.000.000
6.400.000
8.373.000
28.773.000
58.616.403
(2.503.662)
1.155.225
(776.892)
(1.473.579)
184.450
269.743
(17.225.850)
11.768.724
(5.457.126)
-
-
-
(31.000)
(5.488.126)
1.000.000
550.000
(1.581.000)
60.155
13.000.000
5.850.000
9.954.000
28.804.000
28.864.155
-
-
-
-
6.525.995
5.365.818
1.740.265
3.335.509
35.240.374
-
-
-
-
35.240.374
CONSOLIDATED FINANCIAL STATEMENTS 2015|68
15. Investment Property (continued)
15.3 Investment Property Valuations per asset
The table below presents the values of the individual assets as appraised by the appointed valuer.
Asset Name
Description/
Location
Principal
Operation
Related Companies
Carrying amount as at
Terminal
Brovary
Logistics Park
Bela Logistic
Center
Brovary,
Kiev oblast
Odesa
Kiyanivskiy Lane
Podil,
Kiev City Center
Tsymlianskiy
Lane
Balabino
Podil,
Kiev City Center
Zaporizhia
Warehouse
Land and
Development Works
for Warehouse
Land for residential
development
Land for residential
development
Land for retail
development
Rozhny Lane
Total Ukraine
Brovary district,
Kyiv oblast
Land for residential
Development
Innovations
Logistic Park
Clinceni,
Bucharest
Warehouse
EOS Business
Park
Bucharest
Office building
Residential
Portfolio
Bucharest
Residential
apartments
(90 in total in 4
complexes)
Green Lake
Bucharest
Residential
apartments (14 in
total)
&
land for residential
development
Pantelimon Lake
Bucharest
Land for residential
development
Craiova
Big Box retail
Praktiker
Craiova
Total Romania
GED Logistics
Total Greece
TOTAL
LLC TERMINAL BROVARY
LLC AISI BROVARY
SL LOGISTICS LIMITED
LLC AISI BELA
31 Dec
2015
€
12.264.323
31 Dec
2014
€
17.463.310
5.125.389
5.083.216
LLC AISI UKRAINE
3.203.368
4.017.381
LLC ALMAZ PRES UKRAINE
1.006.773
1.147.823
LLC INTERTERMINAL
LLC AISI Ilvo,
1.555.922
2.131.673
SC Secure Capital
1.194.085
-
MYRNES INNOVATIONS PARK
LIMITED
BEST DAY REAL ESTATE SRL
YAMANO LIMITED
SPDI SRL,
N-E Real Estate Park First Phase
Srl
Secure Investment II
Demetiva Limited
Diforio Limited
Frizomo Limited
Ketiza Limited
SecRom Srl
SecVista Srl
SecMon Srl
Ketiza Srl
Secure Investment I
Edetrio Holdings Limited
Emakei Holdings Limited
Iuliu Maniu Limited
Ram Real Estate Management
Limited
Moselin Investments srl
Rimasol Limited
Rimasol Real Estate Srl
Ashor Ventures Limited
Ashor Develpoment Srl
Jenby Ventures Limited
Jenby Investments Srl
Ebenem Limited
Ebenem Investments Srl
Secure Investment I
Mofben Investments Limited
Delia Lebada Invest srl
Bluehouse Accession Project IX
Bluehouse Accession Project IV
BlueBigBox 3 srl
24.349.860
29.843.403
14.400.000
14.000.000
6.550.000
6.400.000
6.722.000
8.373.000
17.932.000
-
5.812.000
7.200.000
-
-
58.616.000
16.500.000
28.773.000
-
16.500.000
-
99.465.860
58.616.403
CONSOLIDATED FINANCIAL STATEMENTS 2015|69
Athens
Warehouse
Victini Holdings Limited.
SPDI Logistics S.A.
15. Investment Property (continued)
15.4 Investment Property analysis
a.
Investment Properties
The following assets are presented under Investment Property: Terminal Brovary, Innovations, EOS Business Park, GED Logistics Park,
Craiova Praktiker, the Residential Portfolio (consisting of apartments in 4 complexes and Green Lake) as well as all the land assets
namely Kiyanivskiy Lane, Tsymlyanskiy Lane, Balabino and Rozny in Ukraine, Pantelimon Lake and Green Lake in Romania.
At 1 January
Capital expenditure on investment property
Acquisitions of investment property
Disposal of investment Property
Transfer from prepayments made
Revaluation gain/(loss) on investment property
Translation difference
At 31 December
b.
Investment Properties Under Development
31 Dec 2015 31 Dec 2014
€
€
53.533.187
-
51.089.000
(1.902.500)
1.518.480
(3.308.246)
(6.589.450)
94.340.471
28.714.379
60.155
28.744.000
-
-
10.090.872
(14.076.219)
53.533.187
As at 31 December 2015 investment property under development represents the carrying value of Bela Logistic Center project, which
has reached the +10% construction in late 2008 but it is stopped since then.
At 1 January
Revaluation on investment property
Translation difference
At 31 December
c. Prepayments made for Investments
31 Dec 2015 31 Dec 2014
€
€
5.083.216
1.513.658
(1.471.485)
5.125.389
6.525.995
1.646.852
(3.089.631)
5.083.216
From time to time, when the Company acquires a new project, it may proceed with downpayment in order to facilitate such transactions.
Movements of such prepayments are presented below for 2014 and 2015.
At 1 January
Advances for acquisition transferred to Investment in subsidiary
Translation difference
Transfer to Investment Property
Advances for investments from acquisition of subsidiaries
Impairment provision
At 31 December
31 Dec 2015 31 Dec 2014
€
€
2.674.219
(624.841)
9.761
(1.518.480)
100.000
(540.659)
100.000
3.625.553
624.841
-
-
-
(1.576.175)
2.674.219
Advances for acquisition transferred to Investment in subsidiary reflects a downpayment provided for the acquisition of GED logistics
park in 2014 that has been closed upon transaction finalizaztion in 2015.
Transfer to Investment Property relates to Kiev Oblast-Rozny Property. The Group made an advance payment of ~US$12mil. for the
acquisition of a project in Podil (Kyiv) in 2007. As of the end of the reporting period Management continues its effort to collect the
original US $12mil as the seller defaulted but at the same time succeeded in enforcing the collateral (a 42ha land plot Kiev Oblast named
Rozny-) after a protracted legal battle. Such asset was transfered to Investment Property at €1.518.480 when the Group took ownership
(July 2015) while the amount of €540.659 represents the impairment at the date of transfer. The Group will keep pursuing legally the
difference from the advance payment.
CONSOLIDATED FINANCIAL STATEMENTS 2015|70
15. Investment Property (continued)
15.5 Investment Property valuation method presentation
In respect of the Fair Value of Investment Properties the following table represents an analysis based on the various valuation methods.
The different levels as defined by IFRS have been defined as follows:
-
-
-
Level 1 relates to quoted prices (unadjusted) in active and liquid markets for identical assets or liabilities.
Level 2 relates to inputs other than quoted prices that are observable for the asset or liability indirectly (that is, derived from
prices). Level 2 fair values of investment properties have been derived using the market value approach by comparing the
subject asset with similar assets for which price information is available. Under this approach the first step is to consider the
prices for transactions of similar assets that have occurred recently in the market. The most significant input into this valuation
approach is price per square meter.
Level 3 relates to inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
Level 3 valuations have been performed by the external valuer using the income approach (discounted cash flow) due to the
lack of similar sales in the local market (unobservable inputs).
To derive Fair Values the Group has adopted a combination of income and market approach weighted according to the predominant
local market and economic conditions.
Fair value measurements at 31 Dec 2015 (€)
(Level 1)
(Level 2)
(Level 3)
Total
Recurring fair value measurements
Balabino- Zaporizhia
Tsymlyanskiy Lane – Podil, Kyiv City Center
Bela Logistics Center- Odessa
Terminal Brovary Logistics Park - Brovary Kyiv Oblast
Kiyanivskiy Lane – Podil, Kyiv City Center
Rozny Lane – Brovary district, Kyiv oblast
Innovations Logistics Park – Bucharest
EOS Business Park – Bucharest, City Center
Residential Portfolio (ex Green Lake) – Bucharest
Green Lake – Bucharest
Pantelimon Lake – Bucharest
Praktiker - Craiova
GED Logistics – Athens
Totals
1.555.922
1.006.773
-
-
-
-
-
3.203.368
-
1.194.085
-
-
-
-
-
6.722.000
-
-
17.932.000
-
5.812.000
-
-
-
16.500.000
- 53.926.148
-
-
5.125.389
12.264.323
-
-
14.400.000
6.550.000
-
-
7.200.000
-
45.539.712
1.555.922
1.006.773
5.125.389
12.264.323
3.203.368
1.194.085
14.400.000
6.550.000
6.722.000
17.932.000
5.812.000
7.200.000
16.500.000
99.465.860
Fair value measurements at 31 Dec 2014 (€)
(Level 1)
(Level 2)
(Level 3)
Total
Recurring fair value measurements
Balabino – Zaporizhia
Tsymlyanskiy – Podil, Kyiv City Center
Bela Logistics Center – Odessa
Terminal Brovary Logistics Park - Brovary Kyiv Oblast
Kiyanivskiy Lane – Podil, Kyiv City Center
Innovations Logistics Park – Bucharest
EOS Business Park – Bucharest, City Center
Residential Portfolio - Bucharest
Totals
2.131.673
-
-
-
5.083.216
-
-
-
-
-
-
-
-
-
-
8.373.000
15.587.889
-
1.147.823
-
17.463.310
4.017.381
14.000.000
6.400.000
-
43.028.514
2.131.673
1.147.823
5.083.216
17.463.310
4.017.381
14.000.000
6.400.000
8.373.000
58.616.403
The table below shows yearly adjustments for Level 3 investment property valuations:
Level 3 Fair value
measurements at
31 Dec 2015 (€)
Terminal
Brovary
Logistics Park
Kiyanivskiy
Lane
Tsymlyanskiy
Lane
Bela
Logistics
Center
Innovations
Logistics
Park
EOS
Business
Park
Praktiker
Craiova
Total
Opening balance
Transfer to and
from level 2 due to
change of
valuation methods
Acquisitions
Additions
Disposals
Profit/(loss) on
revaluation
Translation
difference
Closing balance
17.463.310
4.017.381
1.147.823
-
14.000.000
6.400.000
- 43.028.514
-
-
-
-
(4.017.381)
-
-
-
(1.147.823)
-
-
-
5.083.216
-
-
-
-
-
-
-
-
-
(81.988)
- 10.070.000 10.070.000
-
-
-
-
-
-
(2.870.000
(589.179)
(4.609.808)
12.264.323
-
-
-
-
-
-
1.513.658
400.000
150.000
) (1.395.521)
(1.471.485)
5.125.389
-
14.400.000
- (6.081.293)
6.550.000 7.200.000 45.539.712
-
CONSOLIDATED FINANCIAL STATEMENTS 2015|71
15. Investment Property (continued)
15.5 Investment Property valuation method presentation (continued)
Level 3 Fair value
measurements at 31
Dec 2014 (€)
Terminal
Brovary
Logistics Park
€
Kiyanivskiy
Lane
Tsymlyanskiy
Lane
Innovations Logistics
Park
EOS Business
Park
Total
€
€
€
€
€
Opening balance
18.272.787
5.365.818
1.740.265
-
-
25.378.870
Acquisitions
Additions
Disposals
-
60.155
-
-
-
-
-
-
-
13.000.000
5.850.000
18.850.000
-
-
-
-
60.155
-
Profit on revaluation
8.512.454
1.155.225
Translation difference
(9.382.086)
(2.503.662)
184.450
(776.892)
1.000.000
550.000
11.402.129
-
-
(12.662.640)
Closing balance
17.463.310
4.017.381
1.147.823
14.000.000
6.400.000
43.028.514
Information about Level 3 Fair Values is presented below:
Fair value at
31 Dec 2015
Fair value at
31 Dec 2014
Valuation
technique
Unobservable
inputs
Relationship of unobservable
inputs to fair value
Terminal Brovary
Logistics Park-
Brovary Kyiv Oblast
€
12.264.323
€
17.463.310 Combined market
€
and income
approach
Bela Logistics
Center – Odessa
5.125.389
-
Combined market
and cost approach
Innovations
Logistics Park –
Bucharest
EOS Business Park
– Bucharest, City
Center
14.400.000
14.000.000
Income approach
6.550.000
6.400.000
Income approach
Praktiker Craiova
7.200.000
-
Income approach
€
Future rental income
and costs for 14
months, discount
rate
€
The higher the rental income the
higher the fair value. The higher
the discount rate, the lower fair
value
Percentage of
development works
completion,
deterioration rate
Future rental income
and costs for 10
years, discount rate
The higher the percentage of
completion the higher the fair
value. The higher the
deterioration rate the lower the
fair value
The higher the rental income the
higher the fair value. The higher
the discount rate, the lower fair
value
Future rental income
and costs for 10
years, discount rate
Future rental income
and costs for 10
years, discount rate
The higher the rental income the
higher the fair value. The higher
the discount rate, the lower fair
value
The higher the rental income the
higher the fair value. The higher
the discount rate, the lower fair
value
Kiyanivskiy Lane
Tsymlyanskiy Lane
-
-
4.017.381
Combined market
and income
approach
Future rental income
and costs for 4 years
The higher the price of
sales/rental income the higher the
fair value
1.147.823 Combined market
and income
approach
Future rental income
and costs for 4 years
The higher the price of
sales/rental income the higher the
fair value
Total
45.539.712
43.028.514
16. Investment Property Acquisitions and Goodwill Movement
a. Investment Property Acquisitions
In March 2015 the Group completed the acquisition of an income producing logistics park (the “GED Logistics Park”), located in the
West Attica Industrial Area of Athens, Greece. The GED Park comprises a fully let 17.756 leasable sqm warehouse property which has
a photovoltaic alternative energy production facility installed on its roof. 70% of the space is let to the multinational transportation and
logistics company Kuehne + Nagel, with the remaining 30% let to GE Dimitriou SA, a Greek company which trades electrical appliances.
In July 2015 the Group acquired Praktiker Craiova, a DIY retail property. Situated in a prime location in Craiova, Romania it is wholly
let to Praktiker,a regional DIY retailer. At the time of concluding the acquisition the building produced a gross rental income of ~€1
million and has a Gross Lettable Area ('GLA') of 9.385 square metres. The acquisition has been effected through the issuance of the
Redeemable Convertible Preference Shares (‘RCPS’) to the vendors (Note 23.6). The Purchase Price was €6,1m while the property has
debt amounting to €5m (Note 37f).
CONSOLIDATED FINANCIAL STATEMENTS 2015|72
16. Investment Property Acquisitions and Goodwill Movement (continued)
During the reporting period the Company acquired the mixed use portfolio of Sec South, a private equity entity, which included
investment properties, inventories and investment in associates, (Notes 15, 16, 17) via in kind contribution by the vendors and in
exchange of 18.028.294 ordinary shares of €0,01 and 2 equivalent set of warrants as described below (Note 23.4).The shares were
issued at a price of 0,65 GBP per share while the first set of warrants had an exercise price of £0,10 and the second of £0,45. Assuming
that all sellers would exersises the 10p warrants the effective share price acquisition would be 37,5p. In parallel the Company in
exchange of these shares wrote off a past liability of the portfolio of €0,2m and took over via assignment a loan that had been
contributed by a partner of a project amounting to €838.561. The acquisition was in line with the Company’s strategy to build a
diversified portfolio of prime commercial real estate in East and Southeast Europe, which generates cash flow from blue chip tenants
and offers substantial potential for capital growth. The acquired investment properties include Green Lake (residential portfolio and
land), Pantelimon Lake (land) and Boyana (residential portfolio and land) projects. The transaction did not include Hotel Yugoslayvija,
a Sec South property that was under development, but prior to having received zoning and construction permits. The Hotel Yugoslayvija
is being transferred to the old shareholders of Sec South but the process has not finalized yet. The vendors of the Sec South included
Ionian Equity Participations Limited, a substantial shareholder in the Company, holding then in excess of 10% of the Company’s issued
share capital, as well as an entity in which Lambros Anagnostopoulos (a director of the Company and the CEO) had a majority stake
and Constantinos Bitros (the CFO of the Company) with stakes in Sec South of less than 20%, 4% and 1% respectively. Sec South
transferred four properties in SPDI, the net equity of which was €15.782.190 (fair value at acquisition).
The fair value of identifiable assets and liabilities of acquired projects during 2015 as of the date of their acquisition was as follows:
€
ASSETS
Non-current assets
Investment property
Investments in associates
Other non-current assets
Current assets
Inventories
Prepayments and other current assets
Cash and cash equivalents
GED
Logistics
SEC South
East
Praktiker
Craiova
Total
16.400.000
-
29.911
24.619.000
6.132.516
69.536
10.070.000
-
-
51.089.000
6.132.516
99.447
-
353.366
160
12.300.000
1.203.036
777.247
-
384.884
26.425
12.300.000
1.941.286
803.832
Total assets
16.783.437
45.101.335
10.481.309
72.366.081
Non-current liabilities
Interest bearing borrowings
Deposits from tenants
Current liabilities
Interest bearing borrowings
Trade and other payables
Taxes payable
12.549.180
211.243
23.865.253
-
4.892.950
-
41.307.383
211.243
135.110
492.060
56.776
1.431.464
3.074.332
252.033
-
120.961
-
1.566.574
3.687.353
308.809
Total liabilities
13.444.369
28.623.082
5.013.911
47.081.362
Net assets acquired (including non-controlling
interest)
3.339.068
16.478.253
5.467.398
25.284.719
Non-controlling interest
-
(696.063)
-
(696.063)
Net assets acquired attributable to equity holders
3.339.068
15.782.190
5.467.398
24.588.656
Financed by
Cash consideration paid
Issue of shares
Total consideration
1.786.934
-
1.786.934
-
15.152.490
15.152.490
-
6.081.211
6.081.211
1.786.934
21.233.701
23.020.635
Gain realized on acquisition
Goodwill =Net Assets – Total consideration
1.552.134
-
629.700
-
-
(613.813)
2.181.834
(613.813)
CONSOLIDATED FINANCIAL STATEMENTS 2015|73
16. Investment Property Acquisitions and Goodwill Movement (continued)
In May 2014, the Group acquired 100% of the shares of Myrnes Innovations Park Limited (“Myrnes”), a Cyprus registered company
which in turn owns 100% of the shares of Best Day Real Estate SRL (“Best Day”), a Romanian entity, owner of a multipurpose
warehousing space in South Bucharest, Romania. The purchase price was funded by €4,4 million of the Company’s existing cash
resources and by issuance of 785.000 redeemable preference shares to the sellers of the asset. The then existing leasing contracted
with the Bank of Piraeus Romania and associated with the asset of €7.500.000 remained (Note 30.2).
The acquisition of a Residential Portfolio consisting of appartment units in four residential complexes (Romfelt, Linda, Monaco, Blooming
House) was completed in August 2014. The Company acquired all the shares of SEC South East Continent Unique Real Estate
Investments II Ltd in exchange for 3.702.910 of the Company’s shares. No cash consideration was paid for this acquisition. Lambros
Anagnostopoulos (a director and the CEO of the Company) and Constantinos Bitros (the CFO of the Company) had small stakes in the
Portfolio (less than 5% in aggregate) and received 133.437 and 33.357 SPDI shares respectively.
The acquisition of EOS Business Park in Bucharest was completed in October 2014. SECURE PROPERTY DEVELOPMENT & INVESTMENT
Srl a subsidiary of the Company acquired the shares of NE REAL ESTATE PARK FIRST PHASE Srl, owner of the property. The acquisition
price was €5,85 million with €1,85 million being the cash consideration with the remainder funded by a sales and lease back with Alpha
Bank Romania (Note 30.2).
The fair value of identifiable assets and liabilities of acquired projects during 2014 as of the date of their acquisition was as follows:
(€)
ASSETS
Non-current assets
Investment property
Tangible and intangible assets
Other non-current assets
Current assets
Cash and cash equivalents
Trade and other receivables
Total assets
(€)
LIABILITIES
Non-current liabilities
Interest bearing borrowings
Finance lease liabilities
Deposits from tenants
Current liabilities
Interest bearing borrowings
Finance lease liabilities
Trade and other payables
Total liabilities
Innovations
Logistics Park
Residential
Portfolio
EOS Business
Park
Total
13.000.000
-
124.396
13.124.396
30.823
-
30.823
13.155.219
9.894.000
5.701
510
9.900.211
134.667
178.176
312.843
10.213.054
5.850.000
7.584
-
5.857.584
83.864
2.445.863
2.529.727
8.387.311
Innovations
Logistics Park
Residential
Portfolio
EOS Business
Park
-
7.414.992
-
7.414.992
85.008
192.592
277.600
7.692.592
6.311.417
-
57.749
6.369.166
75.560
-
574.118
649.678
7.018.844
-
3.905.656
-
3.905.656
-
85.954
41.336
127.290
4.032.946
28.744.000
13.285
124.906
28.882.191
249.354
2.624.039
2.873.393
31.755.584
Total
6.311.417
11.320.648
57.749
17.689.814
75.560
170.962
808.046
1.054.568
18.744.382
Net assets acquired (including non-
controlling interest)
5.462.627
3.194.210
4.354.365
13.011.202
Non-controlling interest
-
248.668
-
248.668
Net assets acquired attributable to
equity holders
5.462.627
.
3.442.878
4.354.365
13.259.870
Financed by
Cash consideration paid
Issuance of redeemable-convertible shares
Issuance of ordinary shares
Accounts receivable swap (netting)
Total consideration
4.372.000
698.650
-
-
5.070.650
3.068.634
-
3.068.634
2.087.608
-
2.310.026
4.397.634
6.459.608
698.650
3.068.634
2.310.026
12.536.918
Gain realized on acquisition
Goodwill
391.977
-
374.244
-
-
(43.269)
766.221
(43.269)
CONSOLIDATED FINANCIAL STATEMENTS 2015|74
16. Investment Property Acquisitions and Goodwill Movement (continued)
b. Goodwill Movement
Management decided to fully impair the goodwill resulting mainly from the 2015 acquisitions and to a lesser extent from the 2014
acquisitions as they expect that the future cashflow to be generated from the related properties, based on year end valuations and
sales price expectations do not validate any more.
Goodwill
Opening Balance
Goodwill on acquisitions (Note 16a)
Goodwill impairment
Total
17. Investments in associates
31 Dec 2015 31 Dec 2014
€
43.269
613.813
(657.082)
-
€
-
43.269
-
43.269
In May 2015 by acquiring the mixed use Sec South portfolio (Note 16) the Group acquired participation in certain properties classified
under Investments in Associates. The associates acquired are as follows:
a) Green Lake Development srl, is a residential compound company which consists as at end of the reporting period of 40
apartments plus 23 villas as well as 4 commercial use designated buildings (Phase A of Green Lake project). The compound
is situated on the banks of Grivita Lake, in the northern part of the Romanian capital. The compound includes also facilities
such as private kindergarten, nautical club, outdoor sport courts, and restaurants. The Company has a 40,35% participation
in this asset. The property as of the end of the reporting period was 41% let.
b) The Company acquired a 24,35% participation in the Delea Nuova office building property in Bucharest. The property is a
10.280 sqm office building, which consists of two underground levels, a ground floor and ten above-ground floors. As of the
end of the reporting period, the building was 100% let, with ANCOM (the Romanian Telecommunications Regulator) being
the anchor tenant (70% of GLA).The table below summarizes the movements in the carrying amount of the Group’s
investment in associates.
At 1 January 2015
Cost of investment in associates
Share of profits /(losses) from associates
At 31 December 2015
€
-
6.132.516
(1.244.572)
4.887.944
Share of profits/(losses) from associates reflects the post acquisition after tax profits of each associate derived from rental income,
change in the fair value of properties, minus operational and financial expenses for the year ended 31 December 2015.
As at 31 December 2015, the Group’s interests in its associates and their summarised financial information, including total assets at fair
value, total liabilities, revenues and profit or loss, were as follows:
Project
Name
Associates Total assets
Total
liabilities
Profit/
(loss)
Holding
Country Asset type
Share of
profits from
associates
€
€
€
%
€
Delea
Nuova
Project
GreenLake
Project –
Phase A
Total
Lelar Holdings
Limited and
S.C. Delenco
Construct
S.R.L.
GreenLake
Development
Srl
24.232.215
(4.158.521)
(2.895.756) 24,354%
(705.232) Romania
15.651.396
(16.080.270)
(2.374.548)
40,35%
(539.340) Romania
39.880.611 (20.238.791) (5.270.304)
(1.244.572)
Office
building
Residential
assets
The share of profit from the associate GreenLake Delevopment Srl was limited up to the interest of the Group in the associate.
18. Tangible and intangible assets
As at 31 December 2015 the intangible assets were composed of the capitalized expenditure on the Enterprise Resource Planning
system (Microsoft Dynamics-Navision) in the amount of €90.647. Amortization was recognized during 2015 and amounts to €30.213 as
the system was already in use.
As at 31 December 2015 and 2014 the tangible non-current assets mainly consisted of the machinery and equipment used for the
servicing the Group's investment properties in Ukraine and Romania.
CONSOLIDATED FINANCIAL STATEMENTS 2015|75
19. Inventories
Inventories
31 Dec 2015 31 Dec 2014
€
11.300.000
€
-
In May 2015 by acquiring the mixed use Sec South portfolio (Note 16) the Group also acquired also 100% of a residential portfolio in
Boyana, Sofia, Bulgaria which is classified as Inventory. The Group had at Boyana Residence 61 apartment units as at the end of the
reporting period and adjacent land plots with surface of 17.000 sqm.
20. Available for sale financial assets
In April 2015 the Group completed the acquisition of a 20% interest in a fully let and income generating office building in Sofia,
Autounion, for a cash consideration of €4.059.839 including the assignment of a loan amounting to €1.859.278 including accumulated
interest up to the acquisition date (Note 21). The holding is classified as “Available for Sale Financial Assets” in conformity with IAS 39.
At 1 January
Acquisition cost of the investment
Fair Value gain
At 31 December
31 Dec 2015 31 Dec 2014
€
€
2.298.006
485.529
2.783.535
-
-
-
Autounion is a Class A BREEAM certified office building, located to close to Sofia Airport. The building has a Gross Lettable Area of
19.476 square sqm over ten floors, includes underground parking and is fully let to one of the largest Bulgarian insurance companies
on a long lease extending to 2027.
Fair value gain for the reporting period represents the difference between the fair value of the investment at acquisition date minus the
fair value of investment at the reporting date.
21. Prepayments and other current assets
Prepayments and other receivables
Loan to Available for Sale Financial Assets (Note 20)
Loan to associates
VAT and other tax receivable
Deferred expenses
Receivables due from related parties
Allowance for impairment of prepayments and other current assets
Total
31 Dec 2015 31 Dec 2014
€
792.565
1.905.933
254.718
938.464
921.427
3.384
(21.268)
4.795.223
€
922.115
-
-
1.229.057
2.100.317
-
-
4.251.489
Prepayments and other receivables include receivables from tenants, as well as short term financial support to subsidiaries.
Loan to Available for Sale Financial Assets reflects a loan receivable from Bluehouse V, holding company of Autounion building (Note
20).
Loan to associates reflects a loan receivable from Greenlake Developement SRL, holding company of Greenlake Phase A (Note 17, Note
33.4).
VAT and other tax receivable is mainly the current portion of the Terminal Brovary VAT receivable, to be offset from VAT charged over
rental income during the next years.
Deferred expenses include legal, advisory, consulting and marketing expenses related to ongoing share capital increase and due
diligence expenses related to the possible acquisition of investment properties in the near future.
22. Cash and cash equivalents
Cash and cash equivalents represent liquidity held at banks.
Cash with banks in USD
Cash with banks in EUR
Cash with banks in UAH
Cash with banks in RON
Cash with banks in BGN
Cash equivalents
Total
31 Dec 2015 31 Dec 2014
€
25.205
214.177
40.505
569.424
3.701
42.410
895.422
€
43.612
495.052
150.029
201.984
-
1.261
891.938
CONSOLIDATED FINANCIAL STATEMENTS 2015|76
23. Share capital
Number of Shares during 2015
31
December
2014
13 March
2015
31 May
2015
29 June
2015
1 July
2015
27 July
2015
Increase of
share
capital
Increase
of share
capital
Increase
of share
capital
Exercise
of
warrants
Repayment
of
redeemable
preference
shares
31 December
2015
12
August
2015
Exercise of
warrants
Authorised
Ordinary shares
of €0,01
Total equity
Redeemable
Preference Class
A Shares of
€0,01
Redeemable
Preference Class
B Shares of
€0,01
Total
Issued and
fully paid
Ordinary shares
of €0,01
Total equity
Redeemable
Preference Class
A Shares of
€0,01
Redeemable
Preference Class
B Shares of
€0,01
Total
989.869.93
5
989.869.9
35
785.000
990.654.93
5
989.869.935
989.869.935
785.000
8.618.997
999.273.932
8.618.997
8.618.997
33.884.054 23.777.748 18.028.294
33.884.054 23.777.748 18.028.294
-
-
8.785.580
5.539.047
90.014.723
8.785.580
5.539.047
90.014.723
785.000
(392.500)
392.500
34.669.054 23.777.748 18.028.294
(392.500)
8.618.997 8.785.580
5.539.047
99.026.220
8.618.997
8.618.997
Number of Shares during 2014
31
December
2013
20 March
2014
16 May
2014
24 June
2014
28 August
2014
30 October
2014
31 December
2014
Reduction of
Share Capital
Increase of Share Capital
Authorised
Ordinary shares of €0,01
Ordinary Shares of €0,92
Deferred Shares of €0,99
Total equity
Redeemable Preference
Shares of €0,01
Total
Issued and fully paid
Ordinary shares of €0,01
Ordinary Shares of €0,92
Deferred Shares of €0,99
Total equity
Redeemable Preference
Shares of €0,01
Total
989.869.935
1
-
(1)
4.142.727
994.012.66
3
(4.142.727)
(4.142.728)
-
-
-
-
-
994.012.66
-
785.000
3 (4.142.728) 785.000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
989.869.935
-
-
989.869.935
785.000
990.654.935
28.171.833
-
-
616.726
3.934.853
1.160.642
33.884.054
1
4.142.727
(1)
(4.142.727)
32.314.561 (4.142.728)
-
-
-
-
- 616.726
-
-
3.934.853
-
-
1.160.642
-
-
33.884.054
-
32.314.561 (4.142.728) 785.000 616.726
785.000
-
-
-
3.934.853
-
1.160.642
785.000
34.669.054
CONSOLIDATED FINANCIAL STATEMENTS 2015|77
23. Share capital (continued)
Value (€) for 2015
€
31
December
2014
Authorised
Ordinary shares of
€0,01
Total equity
Redeemable
Preference Class
A Shares of €0,01
Redeemable
Preference Class
B Shares of €0,01
9.898.699
9.898.699
7.850
-
Total
9.906.549
13 March
2015
31 May
2015
29 June
2015
1 July
2015
27 July
2015
12 August
2015
31
December
2015
Increase
of share
capital
Increase
of share
capital
Repayment
of
redeemable
preference
shares
Increase
of share
capital
Exercise
of
warrants
Exercise of
warrants
9.898.699
9.898.699
7.850
86.190
9.992.739
86.190
86.190
Issued and fully
paid
Ordinary shares of
€0,01
Total equity
Redeemable
Preference Class
A Shares of €0,01
Redeemable
Preference Class
B Shares of €0,01
Total
Value (€) for 2014
€
338.839
338.839
237.777
237.777
180.283
180.283
87.856
87.856
55.390
55.390
900.145
900.145
7.850
-
(3.925)
346.689
237.777
180.283
(3.925)
86.190
86.190
87.856
55.390
3.925
86.190
990.260
31
December
2013
20 March
2014
16 May
2014
24 June
2014
28
August
2014
30 October
2014
31 December
2014
Reduction of
Share Capital
Increase of Share Capital
Authorised
Ordinary shares of
€0,01
Ordinary Shares of
€0,92
Deferred Shares of
€0,99
Total equity
Redeemable Preference
Shares of €0,01
Total
Issued and fully paid
Ordinary shares of
€0,01
Ordinary Shares of
€0,92
Deferred Shares of
€0,99
Total equity
Redeemable Preference
Shares of €0,01
Total
9.898.699
1
-
(1)
4.101.300
(4.101.300)
14.000.000 (4.101.301)
-
-
-
-
-
14.000.000 (4.101.301)
-
7.850
7.850
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1)
(4.101.300)
281.717
1
4.101.300
4.383.018 (4.101.301)
-
-
-
-
6.167
-
-
6.167
39.349
11.606
-
-
-
-
39.349
11.606
-
4.383.018 (4.101.301)
-
7.850
7.850
-
6.167
-
39.349
-
11.606
9.898.699
-
-
9.898.699
7.850
9.906.549
338.839
-
-
338.839
7.850
346.689
CONSOLIDATED FINANCIAL STATEMENTS 2015|78
23. Share capital (continued)
23.1 Authorised share capital
As at the end of 2014 the authorized share capital of the Company was 989.869.935 Ordinary Shares of €0,01 nominal value each and
785.000 Preference Shares of €0,01 nominal value each.
During the EGM dated 24 June 2015, it was approved by the shareholders of the Company that the authorized share capital of the
Company will be increased to €9.992.739,35 divided into: (a) 989.869.935 ordinary shares of € 0,01 each; (b) 785.000 Redeemable
Preference Shares Class A of €0,01 each; and (c) 8.618.997 Redeemable Preference Shares Class B of €0,01 each by the creation of
8.618.997 Redeemable Preference Shares Class B of €0,01 each. The above approval has effective date of 1st July 2015. The
reorganization of the capital was mandated by the acquisition growth plan of the Company since the creation of the Redeemable
Preference Shares Class B was necessary to be issued to BLUEHOUSE ACCESSION PROPERTY HOLDINGS III S.A.R.L which was the
seller of the income producing real estate asset in Craiova, Romania, which the Company acquired in July 2015.
As at the end of the reporting period the authorized share capital of the Company is 989.869.935 Ordinary Shares of €0,01 nominal
value each, 785.000 Redeemable Preference Class A Shares of €0,01 nominal value each and 8.618.997 Redeemable Preference Class
B Shares of €0,01 nominal value each.
23.2 Issued Share Capital
As at the end of 2014 the issued share capital of the Company was 33.884.054 Ordinary Shares of €0,01 nominal value each, and
785.000 Preference Shares of €0,01 nominal value each.
A.
Further to the resolutions approved at the AGM of 31 December 2014 the Board has proceeded in allocating shares as follows:
1. On 13/3/2015, with the allotment of 23.777.748 ordinary shares of €0,01 each for the purpose of capital raising of
€8.000.000 in the Company by its existing shareholders.
2. On 31/5/2015, with the allotment of 18.028.294 ordinary shares of €0,01 each for the purpose of an in kind contribution
of mixed Portfolio acquisition (Notes 15,16,17). The shares issued for this purpose are locked in for 12 months.
3. On 27/7/2015 and on 12/8/2015, with the allotment of 14.324.627 (8.785.580 and 5.539.047 respectively) ordinary
shares of €0,01 each which were the Class A Warrants exercised (part of the total of 18.028.294 warrants) that have
been provided as part of the in kind contribution of mixed Portfolio acquisition and (Notes 15,16,17).
B.
C.
Furthermore the Company proceeded on 29/6/2015 with payment of half of the issued convertible shares (392.500) but the
cancellation of these shares with the appropriate authorities will be completed during 2016.
Finally, further to the resolutions approved at the EGM of 24 June 2015 the Board has proceeded on 1 st July 2015 in issuing
8.618.997 Redeemable Preference Shares Class B of €0,01 each to BLUEHOUSE ACCESSION PROPERTY HOLDINGS III S.A.R.L
which was the seller of the income producing real estate asset in Craiova, Romania, which the Company acquired in July 2015
(Note 37f).
As at the end of the reporting period the issued share capital of the Company is as follows:
a) 75.690.096 Ordinary Shares of €0,01 nominal value each,
b) 392.500 Redeemable Preference Class A Shares of €0,01 nominal value each, following the above described redemption which shall
be officially finalized during 2016, and
c) 8.618.997 Redeemable Preference Class B Shares of €0,01 nominal value each.
23.3 Option schemes
A. Under the scheme adopted in 2007, each of the directors serving at the time, who is still a Director of the Company is entitled to
subscribe for 2.631 Ordinary Shares exercisable as set out below:
Exercisable until 1 August 2017
Exercisable until 1 August 2017
Exercise Price
US$
57
83
Number of
Shares
1.754
877
B. Under a second scheme also adopted in 2007, director Franz M. Hoerhager is entitled to subscribe for 1.829 ordinary shares
exercisable as set out below:
Exercisable until 1 August 2017
Exercisable until 1 August 2017
Exercise Price
GBP
40
50
Number of
Shares
1.219
610
CONSOLIDATED FINANCIAL STATEMENTS 2015|79
23. Share capital (continued)
23.3 Option schemes (continued)
C. Under a scheme adopted in 2015, pursuant to an approval by the AGM of 31/12/2013, the Company proceeded in 2015 in issuing
590.000 options to its employees, as a reward for their effort and support during the previous year. Each option entitles the Option
holder to one Ordinary Share. Exercise price stands at GBP 0,15. The Option holders lose and thus may not exercise any option
from the moment they cease to offer their services to the Company. The CEO and the CFO of the Company did not receive any
options.
a.
b.
c.
147.500 Options may be exercised within 2016. Out of the Options that may be exercised in 2016, none has been
exercised until the reporting date.
147.500 Options may be exercised within 2017,
295.000 Options may be exercised within 2018.
The Company considers that all option schemes are currently out of money and therefore has not made any relevant provision.
23.4 Class A Warrants issued
During the reporting period the Company acquired the Sec South portfolio (Notes 15,16,17) in exchange of Ordinary shares (issued at
GBP 0,65 each ). To the sellers the Company also provided Class A Warrants giving the right to the Warrant holders to subscribe in
cash at the Exercise Amount for the Ordinary Shares. The Company issued then two sets of Class A Warrants as follows:
1) 18.028.294 warrants corresponding to 18.028.294 ordinary shares, exercisable within 45 days from signing at an exercise price of
£0,10 per ordinary share. By August 2015 (Note 23.2) , 14.324.627 out of a total of 18.028.294 warrants were exercised. Any
remaining warrants have lapsed.
2) 18.028.294 warrants corresponding to 18.028.294 ordinary shares, exercisable by 31 December 2016 at an exercise price of £0,45
per ordinary share.
23.5 Class B Warrants issued
On 8 August 2011 the Company issued an amount of Class B Warrants for an aggregate equivalent to 12,5% of the issued share capital
of the Company at the exercise date. Each Class B Warrant entitles the holder to receive one Ordinary Share. The Class B Warrants
may be exercised at any time until 31st December 2016, pursuant to a decision by the AGM of 30/12/2013. The exercise price of the
Class B Warrants will be the nominal value per Ordinary Share as at the date of exercise. The Class B Warrant Instruments have anti-
dilution protection so that, in the event of further share issuances by the Company, the number of Ordinary Shares to which the holder
of a Class B Warrant is entitled will be adjusted so that he receives the same percentage of the issued share capital of the Company
(as nearly as practicable), as would have been the case had the issuances not occurred. This anti-dilution protection will freeze on the
earlier of (i) the expiration of the Class B Warrants; and (ii) capital increase(s) undertaken by the Company generating cumulative gross
proceeds in excess of US$100.000.000. As of the reporting date, the aggregate amount of class B warrant is 12.859.246.
23.6 Capital Structure as at the end of the reporting period
As at the reporting date the Company's share capital is as follows:
Number of
Ordinary shares of €0,01
Class A Warrants
Class B Warrants
Total number of Shares
Total number of Shares
Options
Issued and Listed in AIM
Non-Dilutive Basis
Full Dilutive Basis
(as at) 31 December
2015
(as at) 31 December
2014
90.014.723
18.028.294
12.859.246
90.014.723
102.873.969
4.460
33.884.054
-
4.840.579
33.884.054
38.724.633
4.460
During the EGM dated 24 June 2015 the shareholders approved the issuance of 785.000 redeemable convertible preference SPDI
shares of nominal value €0,01 each. The Preference Shares have no voting powers or rights to dividend. 392.500 of the Redeemable
Preference Shares Class A were redeemed on 31 January 2015 (“Redemption Date 1”) at a price of €0,89 each. The remaining 392.500
of the Preference Shares may be redeemed by 31 January 2016 (the “Redemption Date 2”) at the price of €0,89. At any time prior to
the Redemption Date the holders have the option to unilaterally convert the Preference Shares into ordinary shares of €0,01 each.
During the EGM dated 24 June 2015, the shareholders approved the reorganization of the Capital of the Company via the reclassification
of the old Redeemable shares as Redeemable Preference Shares Class A and via the issuance of 8.618.997 Redeemable Preference
Shares Class B of €0,01 for the purpose of acquiring Craiova asset in Romania. The above approval has effective date 1st July 2015.
Redeemable Preference Shares Class A
The Redeemable Preference Shares Class A do not have voting or dividend rights. The remaining 392.500 of the Redeemable Shares
Class A may be redeemed by the Company at a price of €0,89 each. The holders of the Redeemable Preference Shares Class A have
notified the Company for redemption and the Company has entered into discussions with them in order to setoff such redemption
amount with rentals owed to Best Day srl by the holders.
CONSOLIDATED FINANCIAL STATEMENTS 2015|80
23. Share capital (continued)
23.6 Capital Structure as at the end of the reporting period (continued)
Redeemable Preference Shares Class B
The Redeemable Preference Shares Class B, amounting to 8.618.997 and issued to BLUEHOUSE ACCESSION PROPERTY HOLDINGS III
S.A.R.L which was the seller of Praktiker Craiova asset (Note 16) do not have voting rights but have economic rights at par with ordinary
shares. The Redeemable Preference Shares Class B, if not converted into ordinary Shares, may be redeemed at the sole discretion of
the holder of the Redeemable Preference Shares Class B by 1st July 2016 (the “Redemption Date”) which may be prolonged by 3
months; the redemption price shall be €0,7056 per Redeemable Preference Share Class B. The Redeemable Preference Shares Class B
have priority on the winding-up of the Company, over any other shares or class of shares issued by the Company from time to time
including without limitation the Redeemable Preference Shares Class A but otherwise rank pari passu with the ordinary shares in all
other respects (Note 37f).
24. Foreign Currency Translation Reserve
Exchange differences related to the translation from the functional currency of the Group’s subsidiaries are accounted by entries made
directly to the foreign currency translation reserve. The foreign exchange translation reserve represents unrealized profits or losses
related to the appreciation or depreciation of the local currencies against the EUR in the countries where the Company’s subsidiaries’
functional currencies are not EUR.
25. Non-Controlling Interests
Non-controlling interests represent the percentage participations in the respective entities not owned by the Group:
%
Group Company
LLC Almaz-Press-Ukraine
Ketiza Limited
Ketiza srl
Ram Real Estate Management Limited
Iuliu Maniu Limited
Moselin Investments Srl
Rimasol Enterprises Limited
Rimasol Real Estate Srl
Ashor Ventures Limited
Ashor Development Srl
Jenby Ventures Limited
Jenby Investments Srl
Ebenem Limited
Ebenem Investments Srl
26. Borrowings
Non-controlling interest
portion
31 Dec 2015
45,00
10,00
10,00
50,00
55,00
55,00
55,76
55,76
55,76
55,76
55,70
55,70
55,70
55,70
31 Dec 2014
45,00
55,00
55,00
-
-
-
-
-
-
-
-
-
-
-
Project
31 Dec 2015
€
31 Dec 2014
€
Principal of bank Loans
European Bank for Reconstruction and Development (“EBRD”)
Banca Comerciala Romana
Bancpost SA
Alpha Bank Romania
Raiffeisen Bank Romania
Bancpost SA
Alpha Bank Bulgaria
Alpha Bank Bulgaria
Bank of Cyprus
Eurobank Ergasias SA
Piraeus Bank SA
Marfin Bank Romania
Loans by non-controlling shareholders
Overdrafts
Total Principal of Bank Loans
Restructuring fees and interest payable to EBRD
Interest accrued on bank loans
Interests accrued on non-bank loans
Prepaid fees to EBRD
Total
Terminal Brovary
Monaco Towers
Blooming House
Romfelt Plaza
Linda Residence
GreenLake – Parcel K
Boyana
Boyana/Sertland
Delia Lebada/Pantelimon
GED Logistics
GreenLake-Phase 2
Praktiker Craiova
12.164.107
1.210.962
1.739.634
869.602
429.858
3.099.639
3.460.813
736.864
4.569.725
12.343.116
2.525.938
4.839.149
2.713.458
26.516
11.808.915
1.783.826
2.157.501
1.184.688
1.093.176
-
-
-
-
-
-
-
-
50.729.381
32.767
2.175.165
743.466
-
53.680.779
18.028.106
29.685
240.619
-
(81.988)
18.216.422
CONSOLIDATED FINANCIAL STATEMENTS 2015|81
26. Borrowings (continued)
Current portion
Non-current portion
Total
EBRD loan related to Terminal Brovary (Note 37b)
31 Dec 2015
€
31 Dec 2014
€
27.417.220
26.263.559
53.680.779
5.960.706
12.255.716
18.216.422
The restructuring of the Brovary construction loan with the EBRD which was signed in December 2014 and became effective in February
2015. According to the agreement the loan repayment was extended to 2022, with a balloon payment of US$3.633.333. The loan has
an interest of 3 M LIBOR + 6,75%.
Under the current agreement the collaterals accompanying the existing loan facility are as follows:
1. LLC Terminal Brovary pledged all movable property with the carrying value more than US$25.000.
2. LLC Terminal Brovary pledged its Investment property, Brovary Logistics Centre the construction of which was finished in
2010 (Note 15), and all property rights on the center.
3. SPDI PLC pledged 100% corporate rights in SL SECURE Logistics Ltd, a Cyprus Holding Company which is the Shareholder
of LLC Terminal Brovary, LLC Aisi Brovary.
4. SL SECURE Logistics Ltd pledged 99% corporate rights in LLC Aisi Brovary.
5. LLC Aisi Brovary pledged 100% corporate rights in LLC Terminal Brovary.
6. LLC Terminal Brovary pledged all current and reserve accounts opened by LLC Terminal Brovary in Unicreditbank Ukraine.
7. LLC Aisi Brovary entered into a call and put option agreement with EBRD, pursuant to which following an Event of Default
(as described in the Agreement) EBRD has the right (Call option) to purchase at the Call Price from LLC Aisi Brovary, 20%
of the Participatory Interest of LLC Terminal Brovary on the relevant Settlement Date.
8. LLC Terminal Brovary has granted EBRD a second ranking mortgage in relation to its own and LLC Aisi Brovary's obligations
under the call and put option agreement.
9. LLC Terminal Brovary has pledged its rights arising in connection with the existing Lease agreements with Tenants.
10. LLC Aisi Brovary has entered with EBRD into a conditional assignment agreement of 20% and 80% corporate rights in LLC
Terminal Brovary.
11. SL Secure Logistics Limited has entered with EBRD into a conditional assignment agreement of 99% corporate rights in LLC
Aisi Brovary.
12. SPDI PLC has issued a corporate guarantee dated 12 January 2009 guaranteeing all liabilities and fulfilment of conditions
under the existing loan agreement remains in force. The maturity of the guarantee is equal to the maturity of the loan.
The existing credit agreement with EBRD includes among others the following requirements for LLC Terminal Brovary and the Group as
a whole:
1. At all times LLC Brovary Logistics shall maintain a balance in the Debt Service Reserve Amount (DSRA) account equal to
not less than the sum of all payments of principal and interest on the Loan which will be due and payable during the next
six months.
2. LLC Terminal Brovary shall achieve a "CNRI"(Contract Net Rental Income is the aggregate of monthly lease payments, net
of value added tax, contracted by the Borrower pursuant to the Lease Agreements as of the relevant testing date and
converted into Dollars at the official exchange rate established by the National Bank of Ukraine as of such testing date)
according to the following schedule:
(1) on 31 December 2015, CNRI of USD 230.000 or more; and
(2) on 30 June and 31 December in each year commencing on the date of 30 June 2016, CNRI of USD 250.000 or
more, in respect of the six month period commencing on any such date.
3. LLC Terminal Brovary shall achieve a "DSCR"(Debt Service Coverage Ratio is the sum of net income minus operating
expenses plus amortization, divided with the sum of paid principal & interest) according to the following schedule:
i. in respect of the 6 months period ending on 30 June 2015 and 31 December 2015, the DSCR of more than 1,15x.
ii.in respect of the 6 months period ending on 30 June or 31 December in any year commencing on the date of 30 June
2016, the DSCR of more than 1,2x.
As certain of the covenants were breached as at the end of the reporting period and also Terminal Brovary LLC was late in repaying
the March 2015 installments, the loan is classified as current (Note 37c). As of the reporting date all March principal installments have
been repaid. As of the reporting date the covenants remain in breach. In addition as at reporting date an agreement has been signed
for the potential disposal of the asset (Note 37b).
Other bank Borrowings
SecMon Real Estate Srl (2011) entered into a loan agreement with Banca Comerciala Romana for a credit facility for financing part of
the acquisition of the Monaco Towers Project apartments. As of the end of the reporting period the balance of the loan was €1.210.962
and bears interest of EURIBOR 3M plus 5%. The loan was repayable in October 2015 and the Company is in discussions for extension
of its maturity. The loan is secured by all assets of SecMon Real Estate Srl as well as its shares.
Ketiza Real Estate Srl entered (2012) into a loan agreement with Bancpost S.A. for a credit facility for financing the acquisition of the
Blooming House Project and 100% of the remaining (without VAT) construction works Blooming House project. As of the end of the
reporting period the balance of the loan was €1.739.634. The loan bears interest of EURIBOR 3M plus 3,5% and matures in May 2017.
The bank loan is secured by all assets of Ketiza Real Estate Srl as well as its shares.
CONSOLIDATED FINANCIAL STATEMENTS 2015|82
26. Borrowings (continued)
SecRom Real Estate Srl entered (2009) into a loan agreement with Alpha Bank- Romania for a credit facility for financing part of the
acquisition of the Doamna Ghica Project apartments. As of the end of the reporting period, the balance of the loan was €869.602, bears
interest of EURIBOR 3M+5,25% and is repaid on the basis of investment property sales. The loan matures in October 2016 and the
Company is in discussion for extension of its maturity. The loan is secured by all assets of SecRom Real Estate Srl as well as its shares.
SecVista Real Estate Srl entered (2011) into a loan agreement with Raiffeisen Bank- Romania for a credit facility for financing part of
the acquisition of the Linda Residence Project apartments. As of the end of the reporting period the balance of the loan was €429.858.
The loan bears interest of EURIBOR 1M+5,2%. The loan is secured by all assets of SecVista Real Estate Srl as well as its shares. As at
the reporting date, and due to a bulk sale of appartment units in the said project, the loan has been fully repaid (Note 37a).
Moselin Investments Srl (2010) entered into a construction loan agreement with Bancpost SA covering the construction works of Parcel
K –Green Lake project. As of the end of the reporting period the balance of the loan was €3.099.639 and bears interest of EURIBOR
3M plus 5%. The loan is repayable from the sales proceeds while it matures in 2017. The loan is secured with the property itself and
the shares of Moselin Investments Srl.
Boyana Residence ood entered (2011) into a loan agreement with Alpha Bank- Bulgaria for a construction loan related to the construction
of the Boyana Residence projects (finished in 2014). As of the end of the reporting period the balance of the loan was €3.460.813 and
bears interest of EURIBOR 3M plus 5,75%. The loan matures in 2017. The loan currently is being repaid through sales proceeds. The
facility is secured through a mortgage over the property and a pledge over the company shares as well as those of Sertland Properties
Limited.
Sertland Properties Limited entered (2008) into a loan agreement with Alpha Bank- Bulgaria for an acquisition loan related to the
acquisition of 70% of Boyana Residence ood. As of the end of the reporting period the balance of the loan was €736.864 and bears
interest of EURIBOR 3M plus 5,75%. The loan matures in 2017. The loan currently is being repaid through sales proceeds of Boyana
Residence apartment sales. The loan is secured with a pledge on company's shares, and a corporate guarantee by SEC South East
Continent Unique Real Estate (Secured) Investments Limited.
SPDI Logistics SA entered (April 2015) into a loan agreement with EUROBANK SA to refinance the then existing debt facility related to
GED Logistics terminal. As of the end of the reporting period the balance of the loan is €12.343.166 and bears interest of EURIBOR 6M
plus 3,2%+30% of the asset swap. The loan is repayable by 2022, has a balloon payment of €8.660.000 and is secured by all assets
of SPDI Logistics SA as well as its shares.
SEC South East Continent Unique Real Estate (Secured) Investments Limited has a debt facility with Piraeus Bank (since 2007) for the
acquisition of the Green Lake project land in Bucharest Romania. As of the end of the reporting period the balance of the loan was
€2.525.938 and bears interest of EURIBOR 3M plus 4% plus the Greek law 128/78 0,6% contribution. The term of the loan facility
extends to 2017.
BBB3 srl (Praktiker Craiova) has a loan agreement with Marfin Bank Romania. As of the end of the reporting period the balance of the
loan was €4.839.149 and bears interest of EURIBOR 6M plus 5% and 3M plus 4,5%. The loan which is repayable by 2020 with a ballon
of €2.110.000 is secured by the asset as well as the shares of the SPV. The Company is in discussions with the lending bank to
reschedule the loan to match the cash flow to be agreed with the tenant (Note 37f).
Delia Lebada Invest Srl, a subsidiary, entered into a loan agreement with the Bank of Cyprus Limited in 2007 to effectively finance a
leveraged buy-out of the subsidiary by the Company. The bank loan amounting to €4.830.000 is secured with a mortgage at 120% of
the loan value and with a corporate guarantee by SEC South East Continent Unique Real Estate (Secured) Investments Limited. The
loan bears 7% fixed interest while the interest is payable quarterly. The balance of the loan as at the end of the reporting period was
€4.569.725 (without any accrued interest and default penalty). The loan is in default and the Bank has initiated insolvency procedures
to take over the Pantelimon lake asset. The Company is currently in discussion with its partner and the bank in an effort to find an
amicable settlement to the case.
Other non bank borrowing include borrowings from non-controlling interests. During the last six years and in order to support the Green
Lake project the minority shareholders of Moselin and Rimasol ltd (other than the Company) have contributed their share of capital
injections by means of shareholder loans. The loans bear interest between 5% and 7% annually and are repayable in 2016 and 2017.
Management expects such loans not to be repaid in the foreseeable future, as these reflect mainly the equity consideration of the
shareholders and will be repaid to them post project completions/sale.
27. Trade and other payables
The fair value of trade and other payables due within one year approximate their carrying amounts as presented below.
Payables to related parties (Note 33.2)
Payables due for construction
Payables to third parties
Deferred income from tenants current
Accruals
Total
31 Dec 2015
€
743.200
405.904
6.209.235
99.554
259.031
7.716.924
31 Dec 2014
€
335.004
202.200
916.827
145.267
270.239
1.869.537
CONSOLIDATED FINANCIAL STATEMENTS 2015|83
27. Trade and other payables (continued)
Current portion
Non – current portion
Total
31 Dec 2015
€
31 Dec 2014
€
3.044.036
4.672.888
7.716.924
1.654.852
214.685
1.869.537
Payables to related parties represent amounts due to board of directors and committee members and accrued management
remuneration as well as the balances with Secure Management Ltd and Grafton Properties (Note 33.2).
Payables for construction represent amounts payable to the contractor of Bela Logistic Center in Odessa. The settlement was reached
in late 2011 on the basis of maintaining the construction contract in an inactive state (to be reactivated at the option of the Group),
while upon reactivation of the contract or termination of it (because of the sale of the asset) the Group would have to pay an additional
UAH5.400.000 (~US$160.000) payable upon such event occurring. Since it is uncertain when the latter amount is to be paid, it has
been discounted at the current discount rates in Ukraine and is presented as a non-current liability. Payables for construction include
an amount of €~245.000 payable to Boyana’s constructor which has been withheld as Good Performance Guarantee.
Payables to third parties represent shareholder payable balances owed to minority partners of the property assets acquired within the
period as well as amounts payable to various service providers including auditors, legal advisors, consultants and third party accountants
related to the current operations of the Group.
Deferred income from tenants represents advances from tenants which will be used as future rental income and utilities charges.
Accruals mainly include the accrued audit fees, administration fees and accounting fees of the year 2015 (expenses not invoiced within
2015).
28. Deposits from Tenants
Deposits from tenants non-current
Deposits from tenants current
Total
31 Dec 2015
€
623.770
132.684
756.454
31 Dec 2014
€
499.831
161.579
661.410
Deposits from tenants appearing under current and non-current liabilities include the amounts received from the tenants of LLC Terminal
Brovary, Innovations, EOS Business Park, Craiova Praktiker, GED Logistics and companies representing residential segment as
advances/guarantees and are to be reimbursed to these clients at the expiration of the leases agreements.
29. Provisions and Taxes Payables
Corporate income
Defence tax
Other taxes including VAT payable
Provision (Notes 11, 34)
Total Provisisons and Tax Liabilities
31 Dec 2015
€
482.389
24.920
314.696
724.445
1.546.450
31 Dec 2014
€
322.727
34.202
74.899
68.253
500.081
Corporate income tax represents taxes payable in Cyprus and Romania.
Other taxes represent local property taxes and VAT payable in Ukraine, Romania, Greece, Bulgaria and Cyprus.
30. Finance Lease Liabilities
As at the reporting date the finance lease liabilities consist of the non-current portion of €11.273.639 and the current portion of €192.083
(31 December 2014: € 11.463.253 and € 181.723, accordingly).
31 Dec 2015
Less than one year
Between two and five years
More than five years
Accrued Interest
Total Finance Lease Liabilities
Note
36.2
&
36.6
Minimum lease
payments
€
775.146
3.592.679
12.373.657
16.741.482
Interest
€
586.626
2.169.534
2.573.824
5.329.984
Principal
€
188.520
1.423.145
9.799.833
11.411.498
54.224
11.465.722
CONSOLIDATED FINANCIAL STATEMENTS 2015|84
30. Finance Lease Liabilities (continued)
31 Dec 2014
Less than one year
Between two and five years
More than five years
Accrued Interest
Total Finance Lease Liabilities
30.1 Land Plots Financial Leasing
Minimum lease
payments
€
766.289
3.424.203
13.285.643
17.476.135
Interest
€
584.677
2.205.329
3.094.876
5.884.882
Principal
€
181.612
1.218.874
10.190.767
11.591.253
53.723
11.644.976
The Group rents in Ukraine land plots classified as finance leases. Lease obligations are denominated in UAH. The fair value of lease
obligations approximate to their carrying amounts as presented above. Following the appropriate discounting finance lease liabilities
are carried at €210.448 under current and non-current portion. The Group's obligations under finance leases are secured by the lessor's
title to the leased assets.
30.2 Sale and Lease Back Agreements
A.
Innovations Logistic Park
In May 2014 the Group concluded the acquisition of Innovations Logistics Park in Bucharest, owned by Best Day Srl, through a lease
back agreement with Piraeus Leasing Romania SA. As of the end of the reporting period the balance is €7.365.404, bearing interest
rate at 3M Euribor plus 4,45% margin, being repayable in monthly tranches until 2026 with a balloon of €5.244.926. At the maturity of
the lease agreement Best Day will become owner of the asset.
Under the current finance lease agreement the collaterals for the facility are as follows:
1. Best Day pledged its future receivables from its tenants.
2. Best Day pledged its shares.
3. Best Day pledged all current and reserved accounts opened in Piraeus Leasing, Romania.
4. Best Day is obliged to provide cash collateral in the amount of €250.000 in Piraeus Leasing Romania, which had been be
deposited as follows, half in May 2014 and half in May 2015.
5. SPDI provided a corporate guarantee in favor of the bank towards the liabilities of Best Day arising from the sale and lease
back agreement.
B. EOS Business Park
In October 2014 the Group concluded the acquisition of EOS Business Park in Bucharest, owned by First Phase Srl, through a sale and
lease back agreement with Alpha Bank Romania SA. As of the end of the reporting period the balance is €3.889.870 bearing interest
rate at 3M Euribor plus 5,25% margin, being repayable in monthly tranches until 2024 with a balloon of €2.653.600. At the maturity of
the lease agreement First Phase will become owner of the asset.
Under the current finance lease agreement the collaterals for the facility are as follows:
First Phase pledged its future receivables from its tenants.
First Phase pledged Bank Guarantee receivables from its tenants.
1.
2.
3. Best Day pledged its shares.
4.
5.
First Phase pledged all current and reserved accounts opened in Alpha Bank Romania SA.
First Phase is obliged to provide cash collateral in the amount of €300.000 in Alpha Bank Romania SA, starting from October
2019.
6. SPDI provided a corporate guarantee in favor of the bank towards the liabilities of First Phase arising from the sales and lease
back agreement.
31. Earnings and net assets per share attributable to equity holders of the parent
a. Weighted average number of ordinary shares
Issued ordinary shares capital
Weighted average number of ordinary shares (Basic)
Diluted weighted average number of ordinary shares
b. Basic diluted and adjusted earnings per share
Earnings per share
Profit/(loss) after tax attributable to owners of the parent
Basic
Diluted
31 Dec 2015
90.014.723
69.460.155
82.631.610
31 Dec 2014
33.884.054
30.037.571
34.204.860
31 Dec 2015
€
(11.015.852)
(0,16)
(0,13)
31 Dec 2014
€
927.337
0,03
0,03
CONSOLIDATED FINANCIAL STATEMENTS 2015|85
31. Earnings and net assets per share attributable to equity holders of the parent (continued)
c. Net assets per share
Net assets per share
Net assets attributable to equity holders of the parent
Number of ordinary shares
Diluted number of ordinary shares
Basic
Diluted
32. Segment information
31 Dec 2015
€
31 Dec 2014
€
42.433.125
90.014.723
102.873.969
0,47
0,41
32.560.472
33.884.054
38.866.775
0,96
0,84
All commercial and financial information related to the properties held directly or indirectly by the Group is being provided to members
of executive management who report to the Board of Directors. Such information relates to rentals, valuations, income, costs and
capital expenditures. The individual properties are aggregated into segments based on the economic nature of the property. For the
reporting period the Group has identified the following material reportable segments:
Commercial-Industrial
Residential
Land Assets
Warehouse segment
Office segment
Retail segment
Residential segment
Land assets
There are no sales between the segments.
Segment assets for the investment properties segments represent investment property (including investment properties under
development and prepayments made for the investment properties). Segment liabilities represent interest bearing borrowings, finance
lease liabilities and deposits from tenants.
Profit and Loss for the year 2015
Warehouse
€
Office
€
Retail
€
Residential
€
Land Plots
€
Total
€
Segment profit
Sales income
Cost of sales
Rental income
Service charges and utilities income
Sale of electricity
Valuation gains/(losses) from
investment property
Gain realized on acquisition of
subsidiaries (Note 16)
Share of profits/(losses) from
associates
Investment properties operating
expenses
Impairment of inventory and
provisions
Goodwill impairment
Segment profit
Gain realized on acquisition of
subsidiaries (Note 16)
Administration expenses
Other (expenses)/income, net
Finance income
Interest expenses
Other finance costs
Foreign exchange losses, net
Income tax expense
Exchange difference on I/C loan to
foreign holdings
Exchange difference on translation
foreign holdings
Available for sale financial assets
gains
Total Comprehensive Income
-
-
3.627.698
470.413
297.962
-
-
523.013
75.563
-
-
-
258.191
-
-
1.725.326
(2.043.649)
196.120
-
-
-
-
-
-
-
1.725.326
(2.043.649)
4.605.022
545.976
297.962
(89.178)
150.000
(2.870.000)
251.500
222.431
(2.335.247)
1.552.134
-
(705.232)
-
-
-
-
-
1.552.134
(539.340)
(1.244.572)
(622.699)
(155.931)
(31.010)
(156.863)
(158.080)
(1.124.583)
-
5.236.330
-
(43.269)
(155.856)
-
(613.813)
(3.256.632)
-
(1.675.659)
(27.566)
(2.150.648)
5.236.330
(155.856)
(3.256.632)
(27.566)
(2.150.648)
(1.675.659)
(657.082)
(354.372)
629.700
(2.981.338)
621.252
63.596
(3.834.696)
(603.495)
(5.071.048)
(80.188)
(13.653.402)
8.064.848
485.529
(16.713.614)
CONSOLIDATED FINANCIAL STATEMENTS 2015|86
32. Segment information (continued)
Profit and Loss for the year 2014
Warehouse
€
Office
€
Residential
€
Land Plots
€
Total
€
Segment profit
Sales income
Cost of sales
Rental income
Service charges and utilities income
Valuation gains/(losses) from
investment property
Segment profit
Gain realized on acquisition of
subsidiaries (Note 16)
Investment properties operating
expenses
Administration expenses
Other (expenses)/income, net
Finance costs (net)
Foreign exchange losses, net
Income Tax expense
Exchange difference on I/C loan to
foreign holdings
Exchange difference on translation
foreign holdings
Total Comprehensive Income
-
-
2.857.904
506.599
-
-
46.601
6.971
107.917
(93.459)
159.370
-
10.328.525
13.693.028
550.000
603.572
(1.581.000)
(1.407.172)
-
-
-
(598.328)
-
-
-
-
(38.869)
-
-
-
-
(23.066)
-
-
-
-
13.094.700
564.703
(1.430.238)
-
-
-
-
-
-
-
-
-
-
-
-
-
107.917
(93.459)
3.063.875
513.570
9.297.525
12.889.428
766.221
(660.263)
(2.743.723)
(136.058)
(1.414.400)
(7.512.640)
(220.476)
(19.746.111)
8.904.153
(9.873.869)
Balance Sheet as at 31 December 2015
Warehouse
€
Office
€
Retail
€
Residential
€
Land plots
€
Total
€
Assets
Investment
properties
Investment property
under development
Prepayments made
for investments
Goodwill
Long-term
receivables
Investments in
associates
Available-for-sale
financial assets
Inventories
Segment assets
Tangible and
intangible assets
Prepayments and
other current assets
Cash and cash
equivalents
Total assets
Interest bearing
borrowings
Finance lease
liabilities
Deposits from
tenants
Redeemable
preference shares
Segment liabilities
Trade and other
payables
Taxes payables
Total liabilities
43.164.324
6.550.000
7.200.000
6.847.538
30.578.609
94.340.471
-
100.000
-
250.000
-
-
-
-
-
-
-
4.887.943
2.783.535
-
-
-
-
-
-
-
-
43.514.324 14.221.478 7.200.000
-
-
-
5.125.389
5.125.389
-
-
100.000
-
1.185
1.731
252.916
-
1
4.887.944
-
6.990.150
13.838.873
-
4.309.850
40.015.580
2.783.535
11.300.000
118.790.255
164.617
4.795.223
895.422
124.645.517
24.539.925
-
4.839.149
4.586.129
19.715.576
53.680.779
7.508.988
3.889.870
614.018
-
-
-
-
66.864
11.465.722
37.444
104.992
756.454
349.325
33.012.256
6.081.211
3.889.870 10.920.360
-
-
4.623.573
-
19.887.432
6.430.536
72.333.491
-
-
33.012.256
-
-
3.889.870 10.920.360
-
-
-
-
4.623.573
-
-
19.887.432
7.716.924
1.546.450
81.596.865
CONSOLIDATED FINANCIAL STATEMENTS 2015|87
32. Segment information (continued)
Balance Sheet as at 31 December 2014
Assets
Investment properties
Investment property under
development
Prepayments made for
investments
Goodwill
Long-term receivables
Segment assets
Tangible and intangible assets
Prepayments and other
current assets
Cash and cash equivalents
Total assets
Interest bearing borrowings
Finance lease liabilities
Deposits from tenants
Redeemable preference
shares
Provisions
Segment liabilities
Trade and other payables
Taxes payables and Provisions
Total liabilities
Warehouse
€
Office
€
Residential
€
Land plots
€
Total
€
31.463.310
-
6.400.000
-
8.373.000
-
7.296.877
5.083.216
53.533.187
5.083.216
624.841
-
-
2.049.378
2.674.219
-
125.909
32.214.060
-
-
43.269
-
6.443.269
-
-
-
-
8.373.000
-
-
-
-
14.429.471
-
-
-
-
-
-
11.756.612
7.594.863
621.129
698.650
-
20.671.254
-
-
20.671.254
-
3.981.252
-
-
-
3.981.252
-
-
3.981.252
6.459.810
-
40.281
-
-
6.500.091
-
-
6.500.091
-
68.861
-
-
68.253
137.114
-
-
137.114
43.269
125.909
61.459.800
200.203
4.251.489
891.938
66.803.430
18.216.422
11.644.976
661.410
698.650
68.253
31.289.711
1.869.537
431.828
33.591.076
Geographical information
Operating income from 3rd parties
Ukraine
Romania
Greece
Bulgaria
Total
Carrying amount of assets (investment properties, associates, inventory and available for
Sale)
Ukraine
Romania
Greece
Bulgaria
Total
33. Related Party Transactions
The following transactions were carried out with related parties:
33.1 Expenses /Income
33.1.1 Expenses
Board of Directors
Management Remuneration
Back office expenses
Total
31 Dec 2015
€
1.835.181
2.182.045
1.163.832
(50.421)
5.130.637
31 Dec 2014
€
2.439.780
1.152.123
-
-
3.591.903
31 Dec 2015 31 Dec 2014
€
€
24.349.860
63.503.944
16.600.000
14.083.535
118.537.339
31.892.781
28.773.000
624.841
-
61.290.622
31 Dec 2015
€
278.417
863.810
8.874
1.151.101
31 Dec 2014
€
171.197
553.379
70.289
794.865
Board of Directors expense represents the remuneration of all the non-executive members of the Board and committees pursuant to
the decision of the Remuneration Committee.
CONSOLIDATED FINANCIAL STATEMENTS 2015|88
33. Related Party Transactions (continued)
33.1 Expenses /Income (continued)
33.1.1 Expenses (continued)
Name
Position
2015 Remuneration
(€)
2014 Remuneration
(€)
Paul Ensor
Antonios Achilleoudis
Barseghyan Vagharshak
Ian Domaille
Franz Horhager
Antonios Kaffas
Kalypso Maria Nomikou
Alvaro Portela
Robert Sinclair
Harin Thaker
Chairman
Non-Executive Director until 22 July 2015
Non-Executive Director since 22 July 2015
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director since 22 July 2015
Non-Executive Director
Non-Executive Director until 22 July 2015
Non-Executive Director
33.132
14.383
16.921
45.141
33.132
38.101
16.921
33.132
13.499
34.055
19.820
22.298
-
27.006
19.820
22.793
-
19.820
19.820
19.820
Management remuneration includes the remuneration of the CEO,the CFO the Group Commercial Director, the Group Investment
Director and that of the Country Managers of Ukraine and Romania pursuant to the decisions of the remuneration committee. During
2015 the remuneration has been increased as the the Gross Asset Value of the Company grew. The increase was as mandated by the
remuneration policy.
33.1.2 Income
Interest Income from loan from associates
Total
33.2 Payables to related parties
Board of Directors & Committees
Grafton Properties
SECURE Management Ltd
Management Remuneration
Total
31 Dec 2015
€
31 Dec 2014
€
2.055
2.055
-
-
31 Dec 2015
€
475.389
123.549
1.062
143.200
743.200
31 Dec 2014
€
193.212
123.548
18.244
-
335.004
33.2.1 Board of Directors & Committees
The amount payable represents remuneration payable to non-Executive Directors until the end of the reporting period. The members
of the Board of Directors pursuant to a recommendation by the remuneration committee and in order to facilitate the Company’s cash
flow, receive their payment in exchange for shares in the Company’s capital. This was approved also by the Annual General Meeting of
the Company’s shareholders.
33.2.2 Loan payable to Grafton Properties
Under the Settlement Agreement of July 2011, the Company undertook the obligation to repay to certain lenders who had contributed
funds for the operating needs of the Company between 2009-2011, by lending to AISI Realty Capital LLC, the total amount of
US$450.000. As of the reporting date the liability towards Grafton Properties, representing the Lenders, was US$150.000, which is
contingent on the Company raising US $50m of capital in the markets.
33.2.3 Management Remuneration
Management Remuneration represents deferred amounts payable to the CEO and CFO of the Company, as well as the Group Commercial
Director, the Group Investment Director and the Country Managers for Romania and Ukraine.
33.3 Loans from SC Secure Capital Ltd to the Company’s subsidiaries
SC Secure Capital Ltd, the finance subsidiary of the Company provided capital in the form of loans to the Ukrainian subsidiaries of the
Company so as to support the acquisition of assets, development expenses of the projects, as well as various operational costs.
Borrower
LLC “TERMINAL BROVARY”
LLC “AISI UKRAINE”
LLC “ALMAZ PRES UKRAINE”
Total
Limit –as of
31 Dec 2015
€
28.827.932
23.062.351
8.236.554
Principal as of
31 Dec 2015
€
Principal as of
31 Dec 2014
€
26.798.804
12.275
140.021
26.951.100
27.578.265
12.275
140.021
27.730.561
All loans from SC Secure Capital Limited to the Company’s subsidiaries are USD denominated and in 2015 they generated a foreign
exchange loss totaling €13.653.402 as a result of the devaluation of the Ukrainian Hryvnia during the reporting period. As settlement
of these loans is not likely to occur in the foreseeable future and in substance is part of the Group’s net investment in its foreign
operations, the foreign exchange loss is recognised in other comprehensive income.
CONSOLIDATED FINANCIAL STATEMENTS 2015|89
33. Related Party Transactions (continued)
33.3 Loans from SC Secure Capital Ltd to the Company’s subsidiaries (continued)
The Loan agreement between SC Secure Capital Limited (old Aisi Capital Limited) (Lender) and Limited Liability Company “Terminal
Brovary” (Borrower) was signed on 19 December 2006 and originally had a Repayment Date of 19 December 2012. Under this agreement
the Lender agrees to provide USD 30.000.000 to the Borrower with the interest rate to be Libor (3 months) plus 7,5% per annum. The
Borrower has the obligation to repay the Loan in full on the Repayment Date together with the accrued interest. In 2015 no interest
was calculated for this loan.
A potential Ukrainian Hryvnia weakening/strengthening by 30% against the US dollar with all other variables held constant, would result
in an exchange difference on I/C loans to foreign holdings of (€8.085.330)/ € 8.996.341 respectively, estimated on balances held at 31
December 2015.
33.4 Loans to associates
Loans to Greenlake Development SRL
Total
34. Contingent Liabilities
34.1 Tax Litigation
31 Dec 2015
€
254.718
254.718
31 Dec 2014
€
-
-
The Group performed during the reporting period a part of its operations in the Ukraine, within the jurisdiction of the Ukrainian tax
authorities. The Ukrainian tax system can be characterized by numerous taxes and frequently changing legislation, which may be applied
retroactively, open to wide and in some cases, conflicting interpretation. Instances of inconsistent opinions between local, regional, and
national tax authorities and between the National Bank of Ukraine and the Ministry of Finance are not unusual. Tax declarations are
subject to review and investigation by a number of authorities, which are authorised by law to impose severe fines and penalties and
interest charges. Any tax year remains open for review by the tax authorities during the three subsequent calendar years; however,
under certain circumstances a tax year may remain open for longer.
The Group performed during the reporting period part of its operations also in Romania, Greece and Bulgaria. In respect of Romanian,
Bulgarian and Greek taxation systems all are subject to varying interpretation and to constant changes, which may be retroactive. In
certain circumstances the tax authorities can be arbitrary in certain cases.
These facts create tax risks which are substantially more significant than those typically found in countries with more developed tax
systems. Management believes that it has adequately provided for tax liabilities, based on its interpretation of tax legislation, official
pronouncements and court decisions. However, the interpretations of the relevant authorities could differ and the effect on these
consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant.
At the same time the Group’s entities are involved in court proceedings with tax authorities; Management believes that the estimates
provided within the financial statements present a reasonable estimate of the outcome of these court cases.
34.2 Construction related litigation
There are no material claims from contractors due to the postponement of projects or delayed delivery other than those disclosed in
the financial statements.
34.3 Delia Lebada srl debt towards Bank of Cyprus
Sec South East Continent Unique Real Estate Investment ltd has provided in 2007 a corporate guarantee to the Bank of Cyprus in
respect to the loan provided by the latter to its subsidiary Delia Lebada srl, the owner of the Pantelimon Lake plot (Note 15). As the
loan is in default, the bank has initiated an insolvency procedure. Depending on the final outcome of the procedure (that may include
an auctioning of the plot), the Bank may call the difference between the price received from the auction and €4.569.725 (without any
accrued interest and default penalty) which is the total liability. The Group is in discussions with the bank and its partner in the project
to find an amicable settlement to the case. Management believes that the case has been adequately being provided for.
34.4 Other Litigation
The Company has a number of legal cases pending. Management does not believe that the result of these will have a substantial overall
effect on the Group’s financial position. Consequently no such provision is included in the current financial statements.
34.5 Other Contingent Liabilities
The Group had no other contingent liabilities as at 31 December 2015.
35. Commitments
The Group had no other commitments as at 31 December 2015.
CONSOLIDATED FINANCIAL STATEMENTS 2015|90
36. Financial Risk Management
36.1 Capital Risk Management
The Group manages its capital to ensure that it will be able to implement its stated growth strategy in order to maximize the return to
stakeholders through the optimization of the debt-equity structure and value enhancing actions in respect of its portfolio of investments.
The capital structure of the Group consists of borrowings (Note 26), trade and other payables (Note 27) deposits from tenants (Note
28), financial leases (Note 30), taxes payable (Note 29) and equity attributable to ordinary or preferred shareholders. The Group is not
subject to any externally imposed capital requirements.
Management reviews the capital structure on an on-going basis. As part of the review Management considers the differential capital
costs in the debt and equity markets, the timing at which each investment project requires funding and the operating requirements so
as to proactively provide for capital either in the form of equity (issuance of shares to the Group’s shareholders) or in the form of debt.
Management balances the capital structure of the Group with a view of maximizing the shareholder’s Return on Equity (ROE) while
adhering to the operational requirements of the property assets and exercising prudent judgment as to the extent of gearing.
36.2 Categories of Financial Instruments
Financial Assets
Cash at Bank
Long Term Receivables
Prepayments made for investments
Prepayments and other receivables
Available for sale investments
Total
Financial Liabilities
Borrowings
Trade and other payables
Deposits from tenants
Finance lease liabilities
Taxes payable and provisions
Redeemable preference shares
Total
Note
31 Dec 2015
€
31 Dec 2014
€
22
15.4c
21
20
26
27
28
30
29
23
895.422
252.916
100.000
4.795.223
2.783.535
8.827.096
891.938
125.909
2.674.219
4.251.489
-
7.943.555
53.680.779
7.716.924
756.454
11.465.722
1.546.450
6.430.536
81.596.865
18.216.422
1.869.537
661.410
11.644.976
431.828
698.650
33.522.823
36.3 Financial Risk Management Objectives
The Group’s Treasury function provides services to its various corporate entities, coordinates access to local and international financial
markets, monitors and manages the financial risks relating to the operations of the Group, mainly the investing and development
functions. Its primary goal is to secure the Group’s liquidity and to minimize the effect of the financial asset price variability on the cash
flow of the Group. These risks cover market risks including foreign exchange risks and interest rate risk as well as credit risk and liquidity
risk.
The above mentioned risk exposures may be hedged using derivative instruments whenever appropriate. The use of financial derivatives
is governed by the Group’s approved policies which indicate that the use of derivatives is for hedging purposes only. The Group does
not enter into speculative derivative trading positions. The same policies provide for the investment of excess liquidity. As at the end of
the reporting period, the Group had not entered into any derivative contracts.
36.4 Economic Market Risk Management
The Group operates in Romania, Bulgaria, Greece and Ukraine. The Group’s activities expose it primarily to financial risks of changes in
currency exchange rates and interest rates. The exposures and the management of the associated risks are described below. There has
been no change in the way the Group to the Group’s manner in which it measures and manages risks.
Foreign Exchange Risk
Currency risk arises when commercial transactions and recognized financial assets and liabilities are denominated in a currency that is
not the Group's functional currency. Most of the Group’s financial assets are denominated in the functional currency. Management is
monitoring the net exposures and adopts policies to contain them so that the net effect of devaluation is minimized.
Interest Rate Risk
The Group's income and operating cash flows are substantially independent of changes in market interest rates as the Group has no
significant interest-bearing assets. On December 31st, 2015, cash and cash equivalent financial assets amounted to € 895.422 (2014: €
891.938) of which approx. € 40.000 in UAH and €570.000 in RON (Note 22) while the remaining are mainly denominated in either USD
or €.
The Group is exposed to interest rate risk in relation to its borrowings amounting to €53.680.779 (31 December 2014: €18.216.422) as
they are issued at variable rates tied to the Libor or Euribor. Management monitors the interest rate fluctuations on a continuous basis
and evaluates hedging options to align the Group’s strategy with the interest rate view and the defined risk appetite. Although no
hedging has been applied for the reporting period, such may take place in the future if deemed necessary in order to protect the cash
flow of a property asset through different interest rate cycles.
CONSOLIDATED FINANCIAL STATEMENTS 2015|91
36. Financial Risk Management (continued)
36.4 Economic Market Risk Management (continued)
The Group’s exposures to financial risk are discussed also in Note 5.
Management monitors the interest rate fluctuations on a continuous basis and evaluates hedging options to align the Group’s strategy
with the interest rate view and the defined risk appetite. Although no hedging has been applied for the reporting period, such may take
place in the future if deemed necessary in order to protect the cash flow of a property asset through different interest rate cycles.
As at 31 December 2015 the average interest rate for all the interest bearing borrowing and financial leases of the Group stands at
5,00% (31 December 2014: 5,77%).
The sensitivity analysis for LIBOR and EURIBOR changes applying to the interest calculation on the borrowings principal outstanding as
at 31 December 2014 is presented below:
Weighted average interest rate
Influence on yearly finance costs
5,00%
-
6,00%
(648.116)
7,00%
(1.296.232)
Actual
as at 31.12.2015
+100 bps
+200 bps
The Group’s exposures to financial risk are discussed also in Note 5.
36.5 Credit Risk Management
The Group has no significant credit risk exposure. The credit risk emanating from the liquid funds is limited because the Group’s
counterparties are banks with high credit-ratings assigned by international credit rating agencies. The Credit risk of receivables is
reduced as the majority of the receivables represent VAT to be offset through VAT income in the future. In respect of receivables from
tenants these are kept to a minimum of 2 months and are monitored closely.
36.6 Liquidity Risk Management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which applies a framework for the Group’s short,
medium and long term funding and liquidity management requirements. The Treasury function of the Group manages liquidity risk by
preparing and monitoring forecasted cash flow plans and budgets while maintaining adequate reserves. The following table details the
Group’s contractual maturity of its financial liabilities. The tables below have been drawn up based on the undiscounted contractual
maturities including interest that will be accrued.
31 December 2015
Financial assets
Cash at Bank
Prepayments and other receivables
Available for sale investments
Long Term Receivables
Prepayments made for investments
Total Financial assets
Financial liabilities
Borrowings
Trade and other payables
Deposits from tenants
Finance lease liabilities
Redeemable preference shares
Taxes payable
Total Financial liabilities
Total net liabilities
Carrying
amount
€
Total
Contractual
Cash Flows
€
895.422
4.795.223
2.783.535
252.916
100.000
8.827.096
895.422
4.795.223
2.783.534
252.916
100.000
8.827.096
Less than
one year
From one to
two years
More than two
years
€
-
€
-
€
895. 422
4.795.223
2.783.534
252.916
100.000
8.827.096
53.680.779
56.037.869
24.198.982
7.716.924
756.454
11.465.722
6.430.536
1.546.450
81.596.865
72.069.769
7.716.924
756.454
16.741.482
6.430.536
1.546.450
89.229.715
80.402.619
3.044.036
132.684
775.146
6.430.536
1.546.450
36.127.834
27.300.738
-
14.649.577
-
-
840.158
-
-
15.489.735
15.489.735
-
17.189.310
4.672.888
623.770
15.126.178
-
-
37.612.146
37.612.146
CONSOLIDATED FINANCIAL STATEMENTS 2015|92
36. Financial Risk Management (continued)
36.6 Liquidity Risk Management (continued)
31 December 2014
Carrying
amount
€
Total
Contractual
Cash Flows
€
Financial assets
Cash at Bank
Prepayments and other receivables
Total Financial assets
891.938
4.251.489
5.143.427
891.938
4.251.489
5.143.427
891.938
4.251.489
5.143.427
Less than
one year
From one to
two years
More than two
years
€
€
-
-
-
€
-
-
-
Financial liabilities
Interest bearing borrowings
Trade and other payables
Deposits from tenants
Finance lease liabilities
Taxes payable
Total Financial liabilities
Total net liabilities
36.7 Net Current Liabilities
18.216.422
1.869.537
661.410
11.644.976
698.650
33.090.995
27.947.568
22.319.389
1.869.537
661.410
17.476.135
698.650
43.025.121
37.881.694
6.665.533
1.654.852
161.579
766.289
349.325
9.597.578
4.454.151
2.743.797
73.841
68.973
769.922
349.325
4.005.858
4.005.858
12.910.059
140.844
430.858
15.939.924
-
29.421.685
29.421.685
The current liabilities amounting to €38.763.009 exceed current assets amounting to €16.990.645 by €21.772.364. This difference is
primarily a result of:
a)
b)
the bank borrowings related to the residential portfolio €11.117.514 that are repayable by ongoing sales proceeds, which
according to the IFRS appear to be repayable within the next 12 months.
the EBRD Terminal Brovary debt, amounting to €12.164.107 which is also presented as a current liability due to the breach
of certain covenants should be viewed as under transfer upon completion of the sale of Terminal Brovary (Note 37b).
Based on the above, current assets are in effect higher than current liabilities by €1.509.257. An additional €429.858 have been repaid
by May 2016 to the lending bank of the Linda project, with the related loan being fully repaid (Note 37a).
37. Events after the end of the reporting period
a.
Sale of Linda
In May 2016, the Company signed a binding agreement to sell its Linda Residences residential property sub-portfolio (part of its
Residential portfolio) in East Bucharest, Romania for €660.000 (gross of debt). The Linda Residences portfolio, which was purchased in
an all-share transaction as part of a broader property portfolio in 2014 is located at Pantelimon lake in East Bucharest in a heavily
populated area and comprises of 16 apartment units in different property blocks. Pursuant to the sale, the related bank debt amounting
to ~€225.000 at the time (Note 26) has been fully repaid.
b. Announcement for the rental and disposal of Terminal Brovary
In January 2016 the Group received an unsolicited offer to sell the Terminal Brovary to Rozetka, the leading Ukrainian internet retailer,
partly owned by the Horizon Private Equity Group. Following negotiations the Group agreed with the potential buyer on a price for the
acquisition, subject to a number of steps including an agreement with the lending bank, EBRD. As such steps may take time, Rozetka
agreed to lease all unlet warehouse areas of the Terminal, bringing its warehouse occupancy up to 100%, through a four year lease
agreement, that would be valid even if the sale does not take place. If the sale is concluded by October 2016, such lease payments by
Rozetka will be set off against the consideration. The Letter of Intent for the sale and the firm lease agreement were signed on 6 June
2016.
c.
EBRD loan
While the negotiations for the sale of the Terminal Brovary continued and EBRD is in discussions with the buyer for agreeing a loan roll-
over or repayment, the Company has not repaid the installment due to EBRD in March 2016. In view of this the EBRD loan is in default,
yet all three parties (buyer, the Company and EBRD) are focusing on the sale transaction. As of the reporting date all March principal
installments have been paid.
d.
Innovations Park- Nestle
Nestle- Ice Cream, the anchor tenant of the Innovations portfolio notified the Group of their intention to break the lease agreement
and leave the premises. As the rental agreement is based on a closed contract until September 2018, Nestle and the Company entered
into discussion to find an amicable solution that would facilitate both parties and agreed in principle for Nestle to leave. Such agreement
to be implemented, needs the consent of the lending bank, (as lending came in the form of sale and lease back agreement, the effective
owner of the asset) Bank of Piraeus Romania. The Bank of Piraeus has still not formally provided such consent, and discussions are
ongoing, while neither Nestle is paying its rental dues to the Group, nor the Bank of Piraeus demanding its lease payment due by the
Group since January 2016. The Group has retained legal advisors to explore all its legal rights in case the agreement is at the end not
successfully implemented.
CONSOLIDATED FINANCIAL STATEMENTS 2015|93
37. Events after the end of the reporting period (continued)
e. Delia – BOC Loan
Delia Lebada Invest Srl, a subsidiary, entered into a loan agreement with the Bank of Cyprus Limited in 2007 to effectively finance a
leveraged buy-out of the subsidiary by Sec South. The bank loan amounting to €4.830.000 is secured with a mortgage and a corporate
guarantee by SEC South. The balance of the loan as at 31 December 2015 is €4.569.725 (without any accrued interest and default
penalty). Following acquisition by the Group in mid 2015, and as the loan was already in default and the Bank initiated insolvency
procedures to take over the Pantelimon lake asset. The insolvency procedure may culminate in auctioning off the land plot within the
second half of 2016. The Group is currently in discussion with its partner and the bank in an effort to find an amicable settlement, prior
to auctioning off the land plot.
f.
Praktiker Craiova
The Company is in discussions with the tenant of its retail unit is Craiova, Praktiker, to extend the lease agreement for an additional
five years until December 2025, in exchange for reducing the annual rent to the levels of the temporary reduction that the tenant and
previous owner had agreed for the last few months of 2015, namely to ~€600k. At the same time the Company is in discussions with
the lending bank to reprofile the payment schedule of the debt, to match the new rental conditions. As such the redemption value of
the redeemable convertible shares is also under discussion with their owners (Notes
16 & 23.6).
g. United Kingdom possibility of exiting the European Union
On Thursday 23rd June 2016, the United Kingdom passed a referendum for exiting the European Union. The final decision of Britain to
exit the European Union, which may materialize in the next few years, may affect the UK stockmarkets and GBP foreign exchange rates
and thus the Group’s share price as it is listed on the AIM Market of the London Stock Exchange and its share price is quoted in GBP.
The Group’s operations are in South East Europe and denominated in other currencies, which are not expected to be affected.
CONSOLIDATED FINANCIAL STATEMENTS 2015|94