Net Asset Value(s)

RNS Number : 0216A

Fabian Romania Limited

30 July 2008

 

30 July 2008

Fabian Romania Limited (FAB.LN)

Net asset value as at 30 June 2008

Fabian Romania Limited ("Fabian"), the AIM listed dedicated investor in the Bucharest and wider Romanian real estate market announces its Net Asset Value ("NAV") as at 30 June 2008.

Fabian seeks to generate attractive total returns for its shareholders through a portfolio of income producing buildings, co-development residential, office, logistics and retail projects, with experienced partners and land investments. Fabian receives investment advice from Fabian Capital Limited, an independent investment management firm that specialises in Romanian real estate investment advice (Fabian Capital Limited does not carry out any regulated activities in the UK).

Highlights

●	At 30 June 2008 the NAV per share* of Fabian as determined in accordance with its Articles of Association was €1.667 (31 March 2008 restated: €1.668), a decrease of 0.06 per cent. in the second quarter of 2008, an increase of 0.06 per cent. for the year to date (31 December 2007 restated: €1.666) and an increase of 7.7 per cent. in the last twelve months (30 June 2007 restated: €1.548).
●	Adjusting the current NAV for the estimated future development profits of €0.652 per share indicates a potential future NAV ("Development Profit NAV" or "DPNAV") of €2.319 per share (31 March 2008 restated: €2.190), an increase of 5.9 per cent. in the second quarter of 2008 and an increase of 6.4 per cent. for the year to date (31 December 2008 restated: €2.180).
●	In June 2008, Fabian agreed to enter into a joint venture with SCD Group (a Hungarian developer) to develop residential projects in western Romania. On formation, the joint venture SCD Fabian OSM, completed the acquisition of two residential development sites, one in Oradea and the other in Satu Mare for an initial consideration of €2.5 million with an additional equity requirement of €3.75 million, adding up to a total equity consideration of €6.25 million, to be contributed in equal proportions by Fabian and SCD.
●	The Oradea site comprises 33,862 square metres with the intention to deliver 388 apartments. Construction consent is required from local planners and is expected to be received by the fourth quarter of 2008. The second site in Satu Mare comprises 6,700 square metres and has a building permit for 165 apartments. Construction on both sites is expected to commence in the first quarter of 2009 with practical completion anticipated in the first half of 2011 for Satu Mare and in the fourth quarter of 2012 for Oradea.
●	Construction on the Romana office development project, acquired in March 2008, has now commenced and is on schedule. Practical completion is expected in the second quarter of 2010.
●	The Lakeview office development is now 93 per cent. let with the remaining 7 per cent. under heads of terms with two potential tenants. Construction commenced in this quarter and is progressing on plan with expected completion in the fourth quarter of 2009.
●	The New Town residential scheme, launched in July 2007, continues to accumulate forward sales of its residential units and at the time of writing was 44 per cent. forward sold. During June 2008, the fourth sales phase was launched.
●	The construction works for the Cubic Centre office building, being undertaken by Expert RoInvest, is on schedule with anticipated practical completion in the first quarter of 2009.

* The basis for calculating the value of the development projects was revised in the quarter to exclude the development profit from the project valuation included in the NAV. Prior period valuations have been restated accordingly and a full explanation together with the financial effect is set out below.

Net Assets of €1.667 per share 

Fabian's NAV as at 30 June 2008 is €1.667 per share, a decrease of 0.06 per cent. from the first quarter's NAV of €1.668 (restated) per share and an increase of 0.06 per cent. for the year to date (31 December 2007 restated: €1.666). Over the last twelve months, the NAV has risen by 7.7 per cent. from €1.548 (restated) per share as at 30 June 2007.

The published NAV was calculated according to Fabian's Articles of Association although the basis used to value the development projects was revised in the quarter. Previously, the value attributed to the New Town development project was based on the value of the site as a whole as determined by DTZ Echinox ("DTZ") and included an element of the future profitability from the development to reflect the stage of completion of the development. The Directors however consider it more appropriate to value each development by using the DTZ value of the land prior to the start of construction, to which the cost of the construction work in progress less any advance payments received for sales of units is added. This method ensures the future profits to be generated from the development during the construction of the project are excluded and not recognised until realised on completion. An estimate of these development profits are given in the DPNAV calculation. The effect of the change in calculation basis has resulted in a reduction of the 31 March 2008 NAV per share by €0.035 from €1.703 to €1.668, a decrease of 2.06 per cent., and a reduction of €0.034 from €1.700 at 31 December 2007 to €1.666, a decrease of 2 per cent.. The NAV for 30 September 2007 and earlier is unaffected by the change in the calculation basis.

An analysis of Fabian's NAV by project is summarised below:

30 June 2008	Fabians' share of Market Value	Net debt	Net Worth	Net Equity Invested **
	€m	€m	€m	€m
Cascades	18.5	(9.1)	9.4	2.8
Banu	17.5	(8.7)	8.8	3.4
New Town * ^	23.9	(10.5)	13.4	5.8
Lakeview *^	15.6	(6.9)	8.7	5.3
Cubic Centre	12.5	0.0	12.5	12.5
Baneasa Business Centre	29.0	(19.3)	9.7	4.4
Timisoara * ^	5.5	(2.3)	3.2	1.6
Evo	6.0	(3.7)	2.3	1.8
Romana	3.1	0.0	3.1	2.9
Oradea * +	2.3	(1.6)	0.7	0.8
Satu Mare * +	0.8	(0.2)	0.6	0.7
Net Cash			10.4
Other assets / (liabilities)			1.9
Sub-total	134.7	(62.3)	84.7	42.0
Shares (#)			50,831,130
NAVPS (€)			1.667
Growth in Q2 2008			-0.06%
* represents Fabian's share of the development
** Net equity invested comprises the original acquisition equity less amounts repaid through refinancing
^ includes development WIP less advance payments from customers
+ Net debt represents deferred acquisition costs

Future Development Profit of €0.652 per share

Under the revised methodology of valuing the development property, all future development profits are excluded. Therefore, in order to provide transparency to Fabian's shareholders as to the potential level of such future development profits that may accrue, an estimate of these future development profits is given below. The calculations are based on the DTZ site valuations referred to above, at 30 June 2008 which include estimates of these development profits. These estimates by their very nature are forecasts, relying on future events and accordingly are subject to uncertainty. Shareholders may then choose to discount these profits to estimate their net present value in today's terms based on current market conditions.

The forecast development profit figures are stated gross and do not include all costs that may be incurred by Fabian over the course of the projects (in particular transaction fees and any carried interest payable to the investment manager). The implied share of future development profit figures for the New Town, Timisoara, Oradea and Satu Mare residential schemes and the Cubic Centre, Lakeview, and Romana office schemes, based on Fabian's calculations using DTZ's estimates, is given in the table below:

Project			Implied Fabian Share of future Development Profit (€m)	Final Year of development *
New Town			7.5	2009
Lakeview			9.0	2009
Cubic Centre			4.3	2009
Timisoara			6.0	2010
Romana			1.3	2010
Satu Mare			1.5	2011
Oradea			3.6	2012
NAV contribution (€m)			33.2
NAVPS constribution (€)			0.652
* Fabian estimates (based on DTZ valuations)

Adding these forecast development profits of €33.2 million or €0.652 per share to the NAV produces what the Directors have called the DPNAV of €2.319 per share. This represents a rise of 5.9 per cent. over the 31 March 2008 DPNAV (restated) of €2.190 and a rise of 6.4 per cent. for the year to date (31 December 2008 restated: €2.180).

Mark Holdsworth and Jan-Olof Hansson 

Fabian Capital Limited

30 June 2008

The directors of Fabian Romania Limited accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the directors of the Company (who have taken all reasonable care to ensure that such is the case) the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.

Contacts: 

Fabian Capital Limited
Mark Holdsworth	Tel: [phone]
Monument PR - Financial Public Relations to Fabian
Toby Moore	Tel: [phone]
Deloitte Corporate Finance - Nominated Adviser to Fabian
James Lewis	Tel: [phone]
KBC Peel Hunt - Joint Broker to Fabian
Capel Irwin	Tel: [phone]
Shore Capital Stockbrokers Limited - Joint Broker to Fabian
Dru Danford	Tel: [phone]

 

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