PLAZACNTR (PLZ): THIRD QUARTER INTERIM MANAGEMENT STATEMENT AND INTERIM FINANCIAL INFORMATION - raport 50
UNI - EN REPORT No50/2016
STABLE PERFORMANCE RECORDED ACROSS OPERATING ASSETS AND FURTHER PROGRESS IN LINE WITH COMPANY’S STRATEGY
Plaza Centers N.V. (LSE: PLAZ) (“Plaza” / the “Company” / the “Group”), a leading emerging markets property developer, today announces its interim management statement relating to the period from 30 June 2016 to 30 September 2016 (the “Period”) and unaudited interim financial information for the three month period ended 30 September 2016, together with an update on ongoing activity to the date of this announcement.
Stable performance at core CEE shopping centres during the Period:
• Following the disposal of three operating shopping centres in the twelve months prior to the period end occupancy across the Company’s two shopping and entertainment centres in the CEE increased to 97.3% in the nine months to 30 September 2016, compared to 95% at 31 December 2015:
o At Torun Plaza, Poland, occupancy remained stable at 96% (2015 September: 94%). Although footfall decreased by 2.3%, turnover slightly increased by 1.1% compared to the same period in 2015. A new lease agreement was signed with Toys ’R’ Us, while new lease renewals were completed during the third quarter, including with Orsay and Sowa.
o Suwalki Plaza, Poland, continues to deliver a strong performance, with turnover up by 24.7% in the nine months to 30 September. The occupancy has increased to 98.7% (30 September 2015: 95.4%), while footfall also increased by 11.1%, compared to the same period in 2015. In the third quarter new lease agreements were signed with Time Trend, Rainbow Tours and MK Bowling, following lettings to children’s retailer, Ochnik and 50style which were signed at the end of June, as well as a lease renewal with KIK.
Portfolio activity during and after the Period:
Disposals to a total value of €77.7 million have been undertaken by the Company in the first nine months of the year and till date, as follows:
As announced on 16 May 2016, a subsidiary of Plaza, in which the Company has a 50% stake, entered into a business sale agreement with respect to the disposal of Riga Plaza shopping and entertainment centre in Riga, Latvia, to a global investment fund. The agreement reflects a value for the business of circa €93.4 million (reflecting 100% of the asset value), which is in line with the last reported book value. In line with the Company’s stated restructuring plan, 75% of the net cash proceeds from Plaza’s share of the sale of the business (€17.8 million in cash after repayment of banks loan (representing Plaza’s share of the sale of the business), with an additional €0.6 million expected to be received within the next 25 months), will be distributed to Plaza’s bondholders. The transaction was completed on 15 September 2016.
On May 17, 2016, Plaza announced the disposal of its wholly owned subsidiary which held the “MUP” plot and related real estate in Belgrade, Serbia, for €15.9 million, well above the previously reported book value of circa €13.5 million. In addition to the €15.9 million transaction consideration, Plaza will also be entitled to an additional pending payment of €600,000 once the purchaser successfully develops at least 69,000 sqm above ground. The first instalment of €11 million was received on 29 June 2016 and upon the receipt of each stage payment, in line with the Company’s stated restructuring plan, 75% of the net cash proceeds were distributed to Plaza’s bondholders in the following quarter.
On 14 July 2016 Plaza disposed of an 18,400 sqm plot in a suburb of Ploiesti, Romania to a local investor for €280,000.
On 2 August 2016 Plaza’s Indian subsidiary ("SPV"), through Elbit Plaza India Real Estate Holdings Limited (in which Plaza holds a 50% stake with its joint venture partner, Elbit Imaging Ltd.) (“EPI”), signed a Joint Development Agreement (“JDA”) relating to its 74.7 acre plot in Chennai, India. Under the terms of the JDA, the SPV has conferred the property development rights to a reputable local developer (the “Developer”) who carries full responsibility for all of the project costs and liabilities, as well as for the marketing of the scheme. The JDA also stipulates specific project milestones, timelines and minimum sale prices. 67% of the land has been allocated for the sale of plotted developments (whereby a plot is sold with the infrastructure in place for the development of a residential unit by the end purchaser), while the remainder will comprise residential units fully constructed for sale. The SPV will receive 73% of the total revenues from the plotted development and 40% of the total revenues from the sale of the fully constructed residential units. In order to secure its obligation, the Developer will pay a total refundable deposit of INR 35.5 Crores (approximately €4.8 million), with INR 10 Crores (approximately €1.35 million) having been paid upon the signing and registration of the JDA, INR 17 Crores (approximately €2.3 million) payable when planning permission for the first phase of the development project is obtained (the “Project Commencement Date”), and the remaining INR 8.5 Crores (approximately €1.15 million) payable six months after the Project Commencement Date.
On 14 September, further to the announcement of 30 June 2016 regarding a Debt Repayment Agreement (“DRA”) with the financing bank (the “Bank”) of Zgorzelec Plaza Shopping Centre in Poland, Plaza completed the sale of its shares in Zgorzelec Plaza. A Share Purchase Agreement was signed with an Appointed Shareholder nominated by the Bank, after which the DRA process was completed and a mortgage over the asset of the Company in Leszno, Poland (valued at €0.8 million) settled. Plaza expects to recognise a profit of circa €10 million, stemming from the release of €23.0 million of the outstanding (and partially recourse) loan (including accrued interest thereof), against an outstanding asset valued at €12 million as of 30 June 2016.
On 28 September 2016 Plaza completed the sale of a 20,700 sqm plot of land in Lodz, Poland, to a residential developer for €2.4 million. On exchange, Plaza received an initial payment of €1.04 million, to be followed by €180,000 in November 2016, €220,000 in December 2016 and a final instalment of €0.96 million in June 2017. In line with the Company’s stated restructuring plan, 75% of the cash received was and will be distributed to Plaza’s bondholders as part of the Bonds prepayment.
On 13 October 2016 Plaza signed a preliminary sale agreement for the disposal of a 2.47 hectare plot in the centre of Kielce, Poland for €2.3 million. As part of the sale process, Plaza has received a down payment of €465,000, while the outstanding amount will be paid within eight months of the date of this agreement. On completion of the transaction, in line with the Company’s stated restructuring plan, 75% of the net cash proceeds will be distributed to Plaza’s bondholders.
The current consolidated cash balance of the Company is circa €28.8 million, including approximately €8.9 million of restricted cash mainly held in the operating shopping centres.
In terms of active development projects, construction of Belgrade Plaza (Visnjicka) is progressing well and is on schedule. Plaza is experiencing strong tenant demand - over 60% of the shopping centre is now pre-let including lease agreements with international retailers including H&M and Inditex. Opening of the centre is expected in the second quarter of 2017.
Following an in-depth assessment of the opportunity, and taking into consideration the City Council’s decision to reject proposals for a shopping centre development, the Board of the Company has taken the strategic decision not to develop Lodz Plaza shopping centre in Lodz and will instead look to crystallise the value of the asset through a disposal.
At this stage the Company is still considering the development of Timisoara Plaza and currently there is no certainty that this project will be undertaken.
Update on the proposed amendment to the Restructuring Plan:
The purpose of the Plan Amendment, as outlined in the announcement of 7 November 2016, including the Proposed Amendments, is to provide the Company with the ability to preserve value for its creditors by giving it time to resolve its liquidity situation and thereby avoiding a liquidation scenario. This will primarily be achieved through the postponement of the Early Prepayment Date by up to four (4) months, and the reduction of the total amount of the required early prepayments to at least NIS 382,000,000 (a reduction of 12% on the original amount).
Projected Cash Flow
The below is the projected cash flow for the two years following the approval of the Plan Amendment. The projected cash flow details the sources the Company is expected to generate that are expected to be used in order to meet its obligations towards its creditors during the aforesaid two years.
The information regarding the Company's financial results and cash flows as a result of its commercial operation during the next two years constitutes forward-looking information as defined under the Securities Law. The information is based on subjective estimates of the Company's management on the development of the Company's business, the Company's work plans, and forecasts regarding the Company’s revenues, the development of the real estate industry in which the Company and its subsidiaries and affiliates operate in, reviews and information known to Company's management at that time, and other information relating to future events or conditions, whose realisation is uncertain and depends not only on the Company but on other external factors as well and based on the assumption of required early prepayment of EUR 382 million.
Forward-looking information is based substantively, in addition to the information that the Company has at that time, on expectations and assessments of the market status in which the Company operates and its macro-economic data, as well as on future developments in such market.
A variety of factors, many of which are beyond the Company's control, affect the Company's operations, performance and results and could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking information. These factors include, in particular, but are not limited to, market yields of operating shopping centres, value of SQM of plots intended to be disposed of, as well as the matters as detailed, in Risk Management section in the Annual Report.
The projected cash flow below includes cash balances of the Company, and is based on the assumption that the Plan is approved and consummated.
Description Footnote 9/30/2016 1/1/2017 1/1/2018
(details and assumptions) Till Till Till
12/31/2016 12/31/2017 12/31/2018
(Million EURO)
Cash and Cash equivalents - Opening balance 1 17.3 3.7 14.5
Solo resources:
Cash inflow from operating activity:
proceeds from selling trading properties 2 3.6 113.9 43.2
Cash inflow from finance activity:
Distributions from operating subsidiaries (through loan repayments) 3 1.7 0 0
Other income 0 1.1 0
Total sources: 5.3 115.0 43.2
Expected use
Cash outflow from operating activity:
Administrative expenses 4 1.5 4 4
Cash outflow from investment activity:
Repayment of Recourse Loan 5 1.46 0.00 0.00
Cash outflow from finance activity:
Principal repayment to Noteholders 6 12.6 90.4 41.0
Interest repayment to Noteholders 6 3.3 9.8 5.5
Total uses: 18.8 104.2 50.8
Cash and cash equivalents -Closing balance: 3.7 14.5 6.9
(1) Consolidated cash position, without restricted cash in subsidiaries in a total amount of
€7.2 million, due to bank facilities restrictions. The Company is expected to be able to collect these balances upon the sale of the operating shopping centres.
(2) Q4/2016: Comprised from sold plots; 2017: from plots disposals and sale of two shopping centres in Poland and one shopping centre in Belgrade.
(3) Based on expected Net Operating Income (“NOI”) from subsidiaries, less expected
payment to bank financing in subsidiaries. The Company expects to retrieve the funds
through repayment of existing intercompany loans. The vast amount of the retrieve is
from Polish operating shopping malls.
(4) Management estimation
(5) Expected repayment of Brasov loan
(6) Assuming EUR/NIS rate of 4.1 and EUR/PLN rate of 4.3. The repayment schedule also takes into consideration that in case of disposal of a subsidiary, at least 75% of the proceeds are used for the early prepayment of the Unsecured Debt in accordance with the terms of the Restructuring Plan.
Actual Vs Forecasted Cash flows
In its prospectus dated 27 May 2014, the Company published its expected cash flow for the following 24 months. Below is a summary table of comparison between forecasted and actual cash flow, with explanations on the differences on cash flow published for the six months period ending June 30, 2016.
Description Footnote (details and assumptions) January 1, 2016 till June 30, 2016 (Forecasted) January 1, 2016 till June 30, 2016 (Actual)
(MEUR)
Cash and cash equivalents - Opening balance Solo resources: (1) 27 12.1
Cash inflow from operating activity:
proceeds from selling trading and investment properties (2) 48.3 20.5
Cash inflow from finance activity:
Distributions from operating subsidiaries (through loan repayments) (3) 6.1 0.9
Other financial income (treasury bonds, interest on deposits) 0.9 -
Total sources: 82.3 33.5
Expected use
Cash outflow from investing activity:
Investment in projects under construction (4) - 4.5
Cash outflow from operating activity:
Administrative expenses (5) 3.5 3.0
Cash outflow from finance activity:
Principal repayment to Noteholders (6) 29.8 3.6
Interest repayment to Noteholders (7) 4.3 6.5
Principal and interest repayment to banks in subsidiaries (8) 8.1 -
Total uses: 45.7 17.6
Closing balance: 36.6 15.9
Restricted deposit - -
Total cash, including restricted deposit 36.6 15.9
The below explains the main reasons for deviation between expected cash flow projections and actual cash flow:
(1) Please refer to annual accounts of 2015 for reasoning for the decrease.
(2) The Company projected main 2016 proceeds from Kragujevac (EUR 16.5 million) and Belgrade MUP (EUR 18 million) and remaining proceeds from Koregaon and Torun (EUR 10.9 million). However, the Company disposed of Kragujevac already in 2014 for a total amount of EUR 12.5 million, and the proceeds from Koregaon was already obtained in 2015 (EUR 7.4 million) and proceeds received from the Belgrade MUP project sold in H1 2016 were EUR 11 million out of a total proceeds of EUR 15.9 million. Apart from that, Liberec shopping mall was sold for a net of EUR 9.5 million in H1 2016.
(3) The Company was not able to withdraw considerable amounts in the first six months of 2016 due to bank restrictions.
(4) Investment in the Belgrade Plaza project.
(5) Decrease in level of G&A comparing expectations.
(6) Low repayment due to low amount of transactions and proceeds collected.
(7) Higher interest due to higher outstanding principal amounts
(8) No bank loans were repaid from solo sources in the period.
Commenting on activity in the year to date, Dori Keren, Acting Chief Executive Officer of Plaza Centers N.V., said:
“The first nine months of the year have been intensive as we have continued to focus on the implementation of our restructuring plan, while also strengthening our operating assets and improving our income streams through the disposal of non-core and matured assets, alongside successful asset management activity at our yielding assets. Our efforts in this regard continue apace in order to deliver maximum value from the ongoing disposal programme and, therefore, maximize the proceeds we can return to them. We appreciate the ongoing support of both our bondholders and shareholders as we progress the overall resilient underlying performance and delivery on our strategy.”
Further information can be found about the results for the three month period ending on 30 September 2016 on the Company’s website:
http://www.plazacenters.com/index.php?p=company_presentation
For further details please contact:
Plaza Centers N.V.
Dori Keren, Acting Chief Executive Officer
+48 22 231 99 00
FTI Consulting
Dido Laurimore / Claire Turvey / Tom Gough
+44 20 3727 1000
Plaza Centers N.V. (www.plazacenters.com) is an emerging markets developer of shopping and entertainment centres with operations in Central and Eastern Europe and India. It focuses on constructing new centres and, where there is significant redevelopment potential, redeveloping existing centres in both capital cities and important regional centres. The Company is listed on the Main Board of the London Stock Exchange, the Warsaw Stock Exchange and, as of 27 November 2014, the Tel Aviv Stock Exchange (LSE: “PLAZ”; WSE: “PLZ/PLAZACNTR”; TASE: “PLAZ”). Plaza Centers N.V. is an indirect subsidiary of Elbit Imaging Ltd. (“EI”), an Israeli public company whose shares are traded on both the Tel Aviv Stock Exchange in Israel and the NASDAQ Global Market in the United States. It has been active in real estate development in emerging markets for over 20 years.
Forward-looking statements
This press release may contain forward-looking statements with respect to Plaza Centers N.V. future (financial) performance and position. Such statements are based on current expectations, estimates and projections of Plaza Centers N.V. and information currently available to the company. Plaza Centers N.V. cautions readers that such statements involve certain risks and uncertainties that are difficult to predict and therefore it should be understood that many factors can cause actual performance and position to differ materially from these statements. Plaza Centers N.V. has no obligation to update the statements contained in this press release, unless required by law.
