Final Results

RNS Number : 3806Z
Plaza Centers N.V.
15 March 2012
 



 

15 March 2012

PLAZA CENTERS N.V.

 

Full Year results for the year ended 31 December 2011

 

Plaza REPORTS STRONG REVENUE GROWTH AND OPERATIONAL PROGRESS

- SUCCESSFUL Realization of US investment IN A DEAL VALUED AT US$1.4 Bn -

 

Plaza Centers N.V. ("Plaza" / "Company" / "Group"), a leading property developer and investor with operations in Central and Eastern Europe, India and the USA, today announces its full year results for the year ended 31 December 2011.

 

Financial highlights:

·      Total assets of €1.3 billion (31 December 2010: €1.4 billion)

·      Revenues increased 52% to €57 million (31 December 2010: €38 million) as a result of an increased number of active shopping centres operational for a full year in CEE, increased income derived from the US portfolio and improved occupancy rates across the portfolio

·      Net Asset Value decreased by 11% to €601 million (31 December 2010: €675 million) primarily through the impairment of assets in Romania and Latvia

·      Net Asset Value per share of £1.69 (31 December 2010: £1.96), a decline of 14%, attributable mainly to the above mentioned impairment

·      Profit before income tax of €29 million (31 December 2010: €13 million profit) arising from the increased income derived from operating shopping centres and an increase in net finance income

·      Basic and diluted EPS of €0.03 (31 December 2010: €0.03)

·      Cash position at year end (including restricted bank deposits, short term deposits and available for sale financial assets) of €108 million (31 December 2010: €195 million) with working capital of €585 million (31 December 2010: €713 million); current cash position of circa €100 million

·      Conservative gearing position maintained, with debt comprising 59% of balance sheet (31 December 2010: 56%)

·      Over the year, the Board of Plaza approved two buyback programmes of a total of up to NIS 300 million (approximately €60.5 million) of its Series A and Series B Notes, which are traded on the Tel Aviv Stock Exchange

·      On 14 September 2011, the Board of Directors approved the payment to shareholders of an interim cash dividend payment of €0.1010 per share amounting to total distribution of €30 million.

 

 

Operational highlights:

·      Plaza delivered on its strategy to take advantage of weak market conditions and depressed values in the United States, with the completion of the acquisition by the Company's joint US subsidiary of all of the outstanding units of EDT Retail Trust ("EDT") and thereby a US$1.4 billion portfolio of retail assets. The total cost to Plaza of the acquisition was US$82 million for the 22.7% stake. During the year, Plaza also received its US$5.9 million share of a dividend payment from EDT. Subsequent to the year end the vast majority of the assets were sold to a joint venture between Blackstone Real Estate Advisors VII L.P. ("Blackstone Real Estate") and DDR Corp.

·      Torun Plaza, Plaza's tenth retail scheme in Poland and its 31st shopping centre in the CEE, was completed and opened in November 2011. The 40,000 sqm GLA centre includes an eight screen cinema complex, a Fantasy Park entertainment centre and a Delima delicatessen, as well as over 120 shops comprising international and local brands such as H&M, C&A, KappAhl, Zara, Bershka, Stradivarius, Pull & Bear, Massimo Dutti, Reserved, Cropp House, Mohito, Mango, New Yorker, Rossmann, Douglas and Sephora. Torun Plaza is currently approximately 80% let with ongoing interest from potential tenants

·      The construction of Plaza's first retail scheme in Serbia, Kragujevac Plaza, was completed, with the centre due to open to the public on 20 March 2012. The 22,000 sqm GLA centre is already 90% pre-let, with a further 6% of space in advanced negotiations and strong interest in the remaining units. Kragujevac Plaza is the first shopping centre to be completed outside the capital Belgrade, and will therefore enjoy a catchment area of approximately 590,000 inhabitants

 

Key highlights since the period end:

·      After the balance sheet date, Plaza's US based joint venture, EPN Group, entered into an agreement to sell 47 of its 49 US based assets to BRE DDR Retail Holdings LLC, a joint venture between Blackstone Real Estate and DDR Corp. in a transaction valued at US$1.428 billion. Once closed in June 2012, the transaction is likely to generate a cash inflow of US$120 million (€93 million) to the Company before taxes and transaction costs

·      Following the sale of the 47 properties, EPN Group will continue to hold two properties located in the United States that are valued at approximately US$43 million with total non-recourse secured debt of approximately US$14 million

·      Phase one of the Kharadi Plaza project known as "Matrix One", a 50:50 joint venture with a local partner, was completed in February 2012. Located in Pune, India, 'Matrix One', a 28,000 sqm GLA office, was 70% pre-sold upon opening. The construction of the second office building, out of a total of four offices planned for the development, is expected to start in Q2 2012

·      Koregaon Park Plaza mall, also located in Pune, India, was completed and a successful soft public opening was held on 2 March 2012 with the grand opening scheduled for H2 2012. The 48,000 sqm total built area (excluding parking) shopping centre is circa 85% let with signed lease agreements, with a further 5% committed under memoranda of understanding

 

 

Commenting on the results, Ran Shtarkman, the President and CEO of Plaza Centers, said:

"Plaza has delivered a strong set of results for the reporting period, with the Company again reporting large increases in revenues and profits before income tax while maintaining good operational progress.

 

"Against a background of continuing economic and market uncertainty, it is pleasing to have been able to report a 52% increase in revenues.

 

"Our scheduled programme of developing a limited number of centres into markets with the highest retail demand continues to progress strongly. Two of our major retail schemes, Toruń Plaza in Poland and Koregaon Park Plaza in Pune, India, came on stream in Q4 of 2011 and March 2012, respectively. We also continue to be encouraged at the apparent strength of the occupier market in these regions, especially Poland, where top-quality retail and leisure assets continue to attract major pan-European occupiers who are drawn by the notion of western-style retail design in strong regional centres as opposed to the weaker markets such as Bulgaria and Romania where we have had to reflect an impairment loss for the year. For this reason, although we have traditionally sold the majority of our shopping centre developments, we will continue to retain our major schemes until we see clear evidence that sale prices will properly reflect their existing and potential valuation. Therefore, as of the end of March 2012, Plaza will own and operate seven active malls across the CEE region and India.

 

"The other key event of the year and the beginning of 2012 was the realisation of the majority of our investment in EDT, through which Plaza achieved its aim of utilising its expertise to reposition a portfolio of highly yielding properties in the US. The subsequent agreement to sell these assets is anticipated to generate a pre-tax Return on Equity (ROE) of nearly 50% over a period of little over 18 months. To ensure that Plaza continues to be conservatively geared, the proceeds of this sale, once completed, will be used to pay down some of the Company's debt and to continue to drive our development projects.

 

"We remain mindful of the challenging and volatile economic conditions in Europe. As a result, we will continue to pursue a conservative approach to our business, de-risking our development programme and skilfully managing both our finances and investment assets to maximise value for our shareholders."

 

 

For further details please contact:

 

Plaza

Ran Shtarkman, President and CEO

Roy Linden, CFO

 

+36 1 462 7221

+36 1 462 7222

 

FTI Consulting

Stephanie Highett/Daniel O'Donnell

 

 

+44 20 7831 3113

 

Notes to Editors

 

Plaza Centers N.V. (www.plazacenters.com) is a leading property developer and investor with operations in Central and Eastern Europe, India and the USA. 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 dual listed on the Main Board of the London Stock Exchange and, as of 19 October 2007, the Warsaw Stock Exchange (LSE:"PLAZ", WSE: "PLZ/PLAZACNTR"). 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. Plaza Centers is a member of the Europe Israel Group of companies which is controlled by its founder, Mr Mordechay Zisser. It has been active in real estate development in emerging markets for over 16 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.

 

PRESIDENT AND CHIEF EXECUTIVE OFFICER'S STATEMENT

 

I am pleased to report that Plaza has delivered an excellent set of financial results for 2011. The Company has consolidated upon its return to profitability in 2010 and substantially grown its revenues, delivering a 52% increase during the year. This improved top line is the beginning of the realisation of Plaza's decision to position its development programme to ensure that it can deliver shopping centres into markets with the highest retail demand.

 

In addition to the strong financial performance, Plaza has continued to progress its targeted development programme across the CEE region and India, achieving a number of development milestones, most notably the completion of its 31st shopping centre in the CEE region, Torun Plaza, Poland. Torun Plaza represents Plaza's tenth shopping centre and our third currently owned and managed asset in Poland, a country which, although not immune to the wider European economic context, has continued to demonstrate its resilience during the recent downturn.

 

2011 was also an eventful year for our US portfolio. Alongside our joint venture partners, we completed the takeover of the EDT Retail Trust and embarked upon a programme which repositioned the portfolio, reduced the level of debt, improved portfolio occupancy and transferred the company's management from Australia to the US to ensure a more detailed oversight of the assets. In January 2012, our actions bore fruit and in spite of an uncertain market with few comparable transactions we received and accepted an offer from a joint venture between Blackstone Real Estate and DDR Corp. for 47 of the portfolio assets in a deal totalling $1.43 billion. This highly profitable investment and subsequent return will provide Plaza with further capital to drive our development programme and pay down debt.

 

Despite a backdrop of prolonged economic uncertainty, Plaza has continued not only to advance its targeted development programme but also to identify investment opportunities and generate substantial and timely returns from these. Our financial position remains robust, with the Company consolidating upon its return to profitability in 2010 with increased revenues and net profits; furthermore our active balance sheet management has ensured that the Company remains conservatively geared with a healthy cash balance.

 

Key Events

During the year, Plaza delivered on its strategy to generate shareholder value by taking advantage of weak market conditions and depressed values in the United States, with the completion of the acquisition by the Company's joint US subsidiary of all of the outstanding units of EDT Retail Trust ("EDT") and thereby a US$1.4 billion portfolio of retail assets. The total cost to Plaza of the acquisition was US$82 million for a 22.7% stake. During the year, Plaza also received its US$5.9 million share of a dividend payment from EDT. Subsequent to the year end, the majority of the assets were sold (subject to the fulfilment of certain conditions) to a joint venture between Blackstone Real Estate and DDR Corp.

 

The Company has invested a total of €115 million in cash across its entire portfolio of projects under development since January 2011 including its US portfolio (€44 million).

 

Plaza also completed and opened to the public its 40,000 sqm GLA shopping centre in Torun in Poland in November 2011.

 

Subsequent to the year end the Company completed its first shopping centre in India. The Koregaon Park Plaza mall in Pune held a soft public opening on 2nd March 2012 with the grand opening scheduled for H2 2012. Phase one of the Kharadi project, also in Pune, India, was also completed subsequent to the year end. The 28,000 sqm GLA office opened in February 2012, with construction of phase two due to commence in Q2 of 2012.

 

Results

Plaza ended the 2011 financial year with a net profit attributable to the owners of the Company of €9 million. This was mainly as a result of the higher income derived from operating assets in the Company's portfolio - partly offset by the impairment of trading properties - and the net finance income from the fair value change of debentures and derivatives for hedging purposes.

 

Plaza invested a total of €71 million during the year in new acquisitions and in real estate inventories under construction in CEE and India, primarily in Torun, Poland, Kragujevac in Serbia and Koregaon Park Plaza, India

 

The Company had a robust cash position (including restricted bank deposits, short term deposits and available for sale financial assets) of approximately €108 million at the period end (and circa €100 million as at today's date). This ensures Plaza remains on a solid financial footing to continue its development programme and make opportunistic investments or acquisitions where there is clear potential to create shareholder value.

 

The Company's debt position remains conservative, with gearing of 59% at the year end.

 

NAV

The Company's property portfolio (CEE and India) was valued by Jones Lang LaSalle as at 31 December 2011 and their summary valuation is shown below.

 

Net Asset Value per share has decreased by 14%, attributable primarily to the impairment of trading property amounting to €48 million. 73% of the impairment charge relates to assets in Romania and Latvia. The write down in value reflects the depressed rental levels in those countries as well as low transaction volumes from a constrained supply of debt. The majority of written down assets comprise land with associated planning consent, which management values at the lower of cost or net realisable value, and we will continue to evaluate the local economic context before any development programme is commenced as well as looking at other alternatives to monetise the land bank if development is not economically viable. The decrease was partly offset by the completion of Torun Plaza.

 

The Company's NAV was calculated as follows:

 

Use

EUR (Thousand)

Market value of land and projects by Jones Lang LaSalle (1)

864,080

Assets minus liabilities as at 31 December 2011 (2)

(263,127)

Total

600,953

 

(1)  per valuation attached below

(2)  excluding book value of assets which were valued by Jones Lang LaSalle, but including Plaza's proportionate share of the US portfolio at market value which was based upon the purchase price offer presented to and accepted by EPN Group from a third-party post year end. The two remaining US properties not purchased were valued by the management of EDT.

 

 

Portfolio progress

 

Currently the Company is engaged in 28 development projects and owns six operational assets, located across the Central and Eastern European region and in India. The location of the projects and assets under development, as at 15 March 2012, is summarised as follows:

 


Number of assets (CEE and India)

Location

Active

Under development

Offices

Romania

-

8

1

India

1

5

-

Poland

3

4

-

Hungary

-

3

1

Serbia

-

3

-

Czech Republic

1

2

-

Bulgaria

-

2

-

Greece

-

1

-

Latvia

1

-

-

Total

6

28

2

 

During the year, the Company invested a total of €115 million in cash to acquire the EDT portfolio in the US, and into the projects under development in CEE and India. Out of the total investment €53 million was financed by bank loans.

 

Liquidity & Financing

 

We ended 2011 with a strong liquidity position, with cash (including restricted bank deposits, short term deposits and available for sale financial assets) of €108 million, compared to €195 million at the end of 2010. Working capital at 31 December 2011 totalled €585 million (31 December 2010: €713 million). The Company's current cash position is circa €100million.

 

The principal impacts on the decrease in the cash position were the investment in the EDT portfolio, bond buybacks and repayment of bonds and the interim dividend payment to the shareholders partially offset by the new bonds issued at the beginning of the period. The Group continues to pursue a conservative financing policy, with the level of debt being only 59% of the balance sheet (2010: 56%). The increase in gearing was mainly a result of the drawing down of the funding Plaza obtained for its projects in Torun, Poland and Kragujevac, Serbia and the bond raising. The raised development debt, totalling circa €85 million, represents 70% of the development costs for the projects and demonstrates that Plaza, through the combination of a strong balance sheet and exceptional track record, has the ability to secure development funding in what is largely a closed market for new finance.

 

 

Strategy and Outlook

 

As we enter our 16th year of activity in the Central and Eastern Europe region, Plaza has established an unrivalled track record in the region from which the Company will continue to leverage and benefit. 2011 has not delivered the levels of economic recovery that many had hoped for; however the long term fundamentals of this market remain strong. Our continued belief in the strength of the region was underlined by the completion and opening during the year of Plaza's 31st CEE shopping centre. To date, 26 of these centres have been subsequently sold with an aggregate gross value of circa €1.16 billion. These disposals comprise 17 shopping centres in Hungary, seven in Poland and two in the Czech Republic. Plaza now retains six shopping and entertainment centres in the region as operational assets, three of which are located in Poland, one in the Czech Republic, one in Latvia and one in India. This will increase to seven upon the opening of Kragujevac Plaza, Serbia, on 20 March 2012.

 

Whilst the retreat of banks from real estate finance continues to suppress transactional activity, Plaza will continue to implement its development strategy but will also hold completed developments on its balance sheet, enjoying the income these assets produce, until sales prices which appropriately reflect their current and existing potential are achieved. Plaza will continue to actively manage these assets to attract premium local and international brands in an effort to maximise the value derived for shareholders.

 

Beyond the CEE, the progress made with our Indian developments has been extremely encouraging with phase one of the Kharadi project, the office development 'Matrix One', and the Koregaon Park Plaza mall both completed post year end with encouraging occupancy levels. The sentiment towards the Indian real estate market remains extremely positive, underpinned by fundamentals which are driving the country's long term economic growth. With five developments in India due to be delivered in the next five years, our substantial local platform means Plaza is strategically placed to create shareholder value from this growth market.

 

Plaza's highly successful investment into the US market is set to realise nearly 50% total pre tax return on equity once completed. Through its US joint venture, Plaza still retains a stake in two US based shopping centres. We continue to see opportunities within the US market to acquire high-yielding properties, which through our expertise in active asset management, can be repositioned to enhance value. The proceeds from our US divestment will be used to pay down debt to ensure that Plaza continues to be conservatively geared and to continue to drive our development programme.

 

With two new developments completed in 2012 already and a third, Kragujevac Plaza, our first completed development in Serbia, expected in a week, 2012 has started on a positive note. We will aim to continue this momentum throughout the year and increase our volume of activity to ensure that Plaza continues to build upon the strong results reported today.

 

 

 

Ran Shtarkman

President and Chief Executive Officer                                                            

                                                                                   

15 March 2012                                                                         

 

OPERATIONAL REVIEW

 

Over the course of the reporting period and since the year end, Plaza has continued to make good progress against its operational and strategic objectives, whilst delivering improved profitability.

 

Highlights for the financial year included:

 

§ Openings:Torun Plaza in Poland, Koregaon Park Plaza and 'Matrix One', Plaza's first completed developments in India, were all opened during 2011 or in 2012 to date

§ Acquisition of projects:Acquisition through a jointly controlled investment of the remaining 52% of a listed trust holding and operating 48 community shopping centres across the US, to which the trust added a further centre during the year.

§ Investments: Total gross investment in current projects and new pipeline activity in 2011 of €115 million (including the US portfolio)

§ Financial strength and flexibility:Plaza's current cash position stands at circa €100 million.

 

As of the reporting date, Plaza has 36 assets in nine countries out of which 28 are under development across the CEE region and India. Of these, eight are located in Romania, five in India, four in Poland, three in Hungary, three in Serbia, two in the Czech Republic, two in Bulgaria and one in Greece. In addition to these developments, Plaza retains the ownership of and operates six shopping and entertainment centres in Poland, Czech Republic, India and Latvia and two office buildings in Budapest and Bucharest.

 

The development projects are at various stages of the development cycle, from the purchase of land through to the planning and completion of construction, with Plaza's first shopping and entertainment centre in Serbia, Kragujevac Plaza, due to open to the public on 20 March 2012.

 

The Company's current assets and pipeline projects are summarised in the table below:



 

Asset/Project

Location

Nature of asset

Size sqm (GLA)

Plaza's effective ownership

%

Status (*)

Arena Plaza Extension

Budapest, Hungary

Office scheme

40,000

100

Under planning.

Construction scheduled to commence in 2014; completion scheduled for 2015

Dream Island

(Obuda)

Budapest, Hungary

Major business and leisure resort

350,000 (GBA) (for rent and sale)

43.5

Initial excavation and archaeological works commenced; Staged completion scheduled for 2014-2016.

Exclusive casino licence obtained

Uj Udvar

Budapest, Hungary

Retail and entertainment scheme

16,000

35

Operating, currently working on refurbishment plans, Building permit expected to be granted by 2013

David House

Budapest, Hungary

Office

2,000

100

Operational office

Suwalki Plaza

Suwalki, Poland

Retail and entertainment scheme

20,000

100

Operating, opened in May 2010

Lodz (Residential)

Lodz, Poland

Residential scheme

80,000

(GBA)

100

Under planning

Lodz Plaza

Lodz, Poland

Retail and entertainment scheme

45,000

100

Construction scheduled to commence in H1 2013; completion scheduled for 2014

Zgorzelec Plaza

Zgorzelec, Poland

Retail and entertainment scheme

13,000

100

Operating, opened in March 2010

Torun Plaza

Torun, Poland

Retail and entertainment scheme

40,000

100

Operating, opened in November 2011

Kielce Plaza

Kielce,

Poland

Retail and entertainment scheme

33,000

100

Construction scheduled to commence in 2013; completion scheduled for 2014-2015

Leszno Plaza

Leszno,

Poland

Retail and entertainment scheme

16,000

100

Construction scheduled to commence in 2014; completion scheduled for 2015-2016

Prague 3

Prague, Czech Rep.

Office, for future residential use

61,600 (residential for sale)

100

Currently operational as an office building, re-zoning for future residential use is in progress, expected to be obtained in 2012

Liberec Plaza

Liberec, Czech Rep.

Retail and entertainment scheme

17,000

100

Operating, opened in March 2009

Roztoky

Prague,

Czech Rep.

Residential units

14,000

(GBA)

100

Zoning is in place. Construction scheduled to commence in 2013; completion scheduled for 2014 - 2015

Casa Radio

Bucharest, Romania

Mixed-use retail and leisure plus office scheme

600,000 (GBA including parking)

75

Under planning, completion scheduled for 2014-2016; approval from the Urban Technical Commission has been obtained

Timisoara Plaza

Timisoara,

Romania

Retail and entertainment scheme

38,000

100

Construction scheduled to commence in 2013; completion scheduled for 2014

Csiki Plaza

Miercurea Ciuc,

Romania

Retail and entertainment scheme

14,000

100

Construction commenced in late 2008; awaiting external financing for completion

Iasi Plaza

Iasi,

Romania

Retail, entertainment and office scheme

62,000

100

Construction scheduled to commence in 2013; completion scheduled for 2014-2015

Slatina Plaza

Slatina,

Romania

Retail and entertainment scheme

17,000

100

Construction scheduled to commence in 2014; completion scheduled for 2015

Hunedoara Plaza

Hunedoara,

Romania

Retail and entertainment scheme

13,000

100

Construction scheduled to commence in 2014; completion scheduled for 2015

Targu Mures Plaza

Targu Mures,

Romania

Retail and entertainment scheme

30,000

100

Construction scheduled to commence in 2014; completion scheduled for 2015-

Constanta Plaza

Constanta,

Romania

Retail and entertainment scheme

18,000

100

Construction scheduled to commence in 2013; completion scheduled for 2014

Palazzo Ducale

Bucharest,

Romania

Office

700

100

Operational

Belgrade Plaza

Belgrade,

Serbia

Apart-hotel and business centre with a shopping gallery

70,000 (GBA)

100

Construction scheduled to commence in 2013; completion scheduled for 2015

Sport Star Plaza

Belgrade,

Serbia

Retail and entertainment scheme

40,000

100

Construction scheduled to commence in 2013; completion scheduled for 2014-2015

Kragujevac Plaza

Kragujevac,

Serbia

Retail and entertainment scheme

22,000

100

Construction commenced in Q4 2010; completion scheduled for 20 March, 2012

Shumen Plaza

Shumen,

Bulgaria

Retail and entertainment scheme

20,000

100

Construction scheduled to commence in 2013; completion scheduled for 2014-2015

Sofia Plaza Business Center

Sofia,

Bulgaria

Retail, entertainment and office scheme

44,000

51

Currently in negotiations with a hyper-market operator. Under planning

Riga Plaza

Riga,

Latvia

Retail and entertainment scheme

49,000

50

Operating; opened in March, 2009

Pireas Plaza

Athens, Greece

Retail and entertainment scheme

26,000

100

Construction scheduled to commence in 2013-2014; completion scheduled for 2014 - 2015

Koregaon Park Plaza

Pune,

India

Retail, entertainment and office scheme

110,000 (GBA)

100

Operating; opened in March, 2012

Kharadi

Pune,

India

Office Scheme

250,000 (GBA)

50

Construction commenced in late 2010; Phase One completed (28,000 sqm GLA), expected overall completion in 2015

Trivandrum

Trivandrum, India

Residential scheme

120,000 (GBA)

50

Under planning

Bangalore

Bangalore, India

Mixed-use multi level residential units and villas

320,000 (GBA)

23.75

Under planning;

construction scheduled to commence in late 2012; completion scheduled for 2013-2018

Chennai

Chennai, India

Mixed-use of high quality villas and high rise residential buildings with local retail facility

1,060,000 (GBA)

38

Under planning;

construction scheduled to commence in 2013; completion scheduled for 2014-2018

Kochi Island

Kochi, India

High-end residential apartment buildings, office complexes, a hotel and serviced apartments complex, retail area and a marina

575,000 (GBA)

23.75

Under planning

 

 

(*) all completion dates of the projects are subject to securing external financing.

Details of these activities by country are as follows:

 

Hungary

 

Plaza owns a plot of land which will serve as an office extension next to the previously built Arena Plaza shopping centre. The extension will comprise an office complex with approximately 40,000 sqm of GLA. Arena Plaza, which the Company developed and sold in 2007, remains one of the most high profile and successful shopping centres in Budapest.

 

Plaza currently holds a stake of 43.5% in the Dream Island large scale, mixed-use development in Budapest. The consortium now comprises an 87% holding interest of the 50:50 joint venture partnership between Plaza and MKB Bank (a leading Hungarian commercial bank which is a subsidiary of the German Bayerische Landesbank), a company controlled by the managing director of the consortium (10% interest) and a further 3% owned by other minority shareholders.

 

The Dream Island project is a prestigious development on the Obuda Island in central Budapest, with a land area of 320,000 sqm. It will be developed into a major resort including hotels, recreation facilities, a casino and a business and leisure complex with a development budget of circa €900 million and 350,000 sqm of GBA. Preliminary design, excavation and archaeological works are continuing at the site. In addition, a concession licence was obtained in 2008 for the 20-year operation of a large-scale casino (the first in Budapest) with an option to extend for an additional 10 years. The project is intended to be completed in phases between 2014-2016.

 

In accordance with its strategy to acquire operating shopping centres that show significant redevelopment potential for refurbishment and subsequent sale, in September 2007 the Company bought a 35% stake in the Uj Udvar shopping centre in Budapest, Hungary. The shopping centre is currently operational and Plaza's co-shareholders are working on a new design to be implemented. A new zoning permit was awarded for the project and the process for obtaining the building permit is at an advanced stage and is expected to be received by year end.

 

The Group continues to own its office building in Budapest, David House on Andrassy Boulevard.

 

Poland

 

During the reporting period, Plaza completed and opened to the public a shopping and entertainment centre in Torun. Comprising approximately 40,000 sqm of GLA, it represents Plaza's tenth completed centre in Poland. The centre was approximately 80% let on opening including local and international brands such as Cinema City, H&M, C&A, KappAhl, Zara, Bershka, Stradivarius, Pull & Bear and Massimo Dutti.

Plaza's two other owned and operated Polish shopping and entertainment centres, Suwalki Plaza and Zgorzelec Plaza (comprising approximately 20,000 sqm and 13,000 sqm of GLA, respectively) continue to perform in line with expectations and have improved their occupancy rate to circa 89% (80%, 2010) and 79% (75%, 2010) respectively.

 

In addition, Plaza continued the feasibility and planning studies of four development schemes; in Kielce (comprising approximately 33,000 sqm of GLA); in Leszno (comprising approximately 16,000 sqm of GLA); and two schemes in Lodz, Lodz Residential (designated for residential use) and Lodz Plaza (comprising approximately 45,000 sqm of GLA).

 

Czech Republic

 

Plaza continues to hold Liberec Plaza shopping and entertainment centre (approximately 17,000 sqm GLA), which was opened in March 2009. Plaza has agreed lettings totalling 78% of the centre's GLA to tenants including Billa, Gate, Dracik, Schleker, Triumph, Sephora, Fantasy Park and Dino Park.

 

Dino Park is expected to be a considerable ongoing attraction to the asset and has already substantially increased footfall to the mall.  Open 365 days a year, its technologically advanced features and portrayal of two prehistoric eras is viewed as a substantial draw to local and national visitors. During the reported period, Plaza continued the feasibility and planning studies for its residential developments at Roztoky (14,000 sqm) and Prague 3 (61,600 sqm). The latter is held as an income generating office and warehouse building and a Re-zoning permission is expected to be received in 2012.

 

 

Romania

 

Plaza holds a 75% interest in a company in partnership with the Government of Romania to develop Casa Radio (Dambovita), the largest development plot in central Bucharest. It willcomprise approximately 600,000 sqm of GBA, including a 170,000 sqm GBA shopping mall and leisure centre (one of the largest in Europe), offices, hotel, an apartment hotel, casino, hypermarket and a convention and conference hall. The Company has obtained the approval of the Urban Technical Commission of Bucharest and completion of the first phase is scheduled for 2014.

 

In the second half of 2008, the Group commenced the construction of its development in Miercurea Ciuc (14,000 sqm GLA). However, as external finance is not currently available for this project, the Group will only resume development once such financing has been secured.

 

The Company continues the feasibility and planning phases of its development schemesin Timisoara, Iasi, Slatina, Constanta, Hunedoara and Targu Mures.

 

 

In addition, Plaza has a 50.1% stake in the Plaza-BAS joint venture. Currently the joint venture holds seven projects in Bucharest, Brasov and Ploiesti:

 


Fountain Park

Acacia

Park

Primavera Tower

Green

Land

Poiana Brasov

Primavera Tower

Pinetree

Glade

Total

Location

Bucharest

Ploiesti

Ploiesti

Ploiesti

Brasov

Brasov

Brasov

-

Plaza-Bas

Share

25%

50%

50%

50%

50%

50%

50%

-

Nature

Residential

Residential

Offices

Residential

Residential

Offices

Residential

-

Size (sqm)

16,600

32,000

10,500

25,800

138,000

10,800

40,000

273,700

 

Latvia

 

In March 2009, Plaza completed and opened its Riga Plaza project, which comprises approximately 49,000 sqm of GLA, in which Plaza owns a 50% stake. The scheme is located on the western bank of the River Daugava by the Sala Bridge. In July 2010, an eight screen cinema multiplex was opened, bringing occupancy at the centre to 84%, which has risen to 90% at the reporting date. Discussions are ongoing with potential occupiers for the remaining space at the centre and Plaza hopes to conclude further lettings shortly.

 

Serbia

On 20 March 2012 Plaza will open its first Serbian shopping and entertainment centre to the public in Kragujevac, a city of 180,000 inhabitants. Kragujevac Plaza comprises 22,000 sqm of GLA and is already over 90% let to tenants including Nike, Adidas, Aldo, New Yorker, Deichmann, TerraNova, Fashion and Friends, H&O, Oviesse, Fox, Chicco and Home Center. Kragujevac Plaza is the first shopping centre to be completed outside the capital Belgrade, and will therefore enjoy a catchment area of approximately 590,000 inhabitants.

 

Plaza initially established its presence in Serbia in 2007 with the acquisition of three plots. The first of these was a state-owned plot and building in Belgrade, which Plaza secured in a competitive tender. The building was formerly occupied by the federal ministry of internal affairs of the former Yugoslavia and is located in the centre of Belgrade in a neighbourhood of government offices and foreign embassies. On completion, the scheme, Belgrade Plaza, will comprise a shopping gallery, an apartment-hotel and business centre totalling circa 70,000 sqm of GBA. Construction is planned to commence in 2013 and completion is scheduled for 2015. The project is now in the local planning and permitting process.

 

In December 2007, the Company won a second competitive public auction announced by the Government of Serbia for the development of a new shopping and entertainment centre in Belgrade called Sport Star Plaza with a proposed total GLA of approximately 40,000 sqm. Concept design has been submitted. Construction is planned to commence in 2013 and the completion is scheduled for 2014-2015.

 

Greece

 

Plaza owns a 15,000 sqm plot of land centrally located in Piraeus Avenue, Athens. During 2010 Plaza obtained updated building permits for the construction of a shopping centre totalling approximately 26,000 sqm of GLA. Construction is planned to start in 2013-2014 (subject to securing external financing) and completion is scheduled for 2014-2015.

 

Bulgaria 

 

The Group owns a 25,000 sqm plot of land in Shumen, the largest city in Shumen County, which it intends to develop into a new shopping and entertainment centre with a total GLA of 20,000 sqm. Construction is expected to commence in 2013, subject to securing financing.

 

In 2009, Plaza acquired an additional plot in Sofia by purchasing a 51% stake (with an option to increase to up to 75%) in a development project from a local developer for a total consideration of €7.14 million. The consideration consists of a cash payment of €2.78 million and the assumption of €4.36 million of debt financed by a foreign bank, representing 51% of the project's debt liability. The planned scheme will comprise 44,000 sqm GLA of retail, entertainment and offices. The project has a valid planning permit for the office scheme and is currently being leased to a hypermarket operator.

 

India

 

Plaza has begun to deliver on some of the strong long-term potential it has identified in India and completed its first shopping centre in the country, Koregaon Park Plaza. A successful soft opening was held on 2 March 2012 with a grand opening scheduled for H2 2012. Koregaon Park Plaza mall, located in Pune, comprises 48,000 sqm of total built area (excluding parking) and is part of a wider 110,000 sqm development which includes 16,500 sqm office development. The mall was 85% let upon opening with memoranda of understanding signed for a further 5% of the space.

 

During 2007, Plaza acquired two additional development projects in a 50:50 joint venture. The first is located in the Kharadi district of Pune, opposite to EON Park Project (the best quality IT park in the region), and totals approximately 250,000 sqm of total built area (including parking). The second is in Trivandrum, the capital city of the State of Kerala, and totals approximately 120,000 sqm GBA. The entire Kharadi development consists of four office buildings and a small retail area, and the Trivandrum development is designed for a large residential development.

 

Plaza has completed the construction of the first phase of Kharadi, a 28,000 sqm GLA office building known as 'Matrix One'. To date, Plaza has pre-sold 70% of the saleable area and handover started in March 2012. This first office building has a total expected development cost of $21.5 million and, based on accumulated sales of office space to date inclusive of underground parking revenues, will have an end development value of approximately US$32.5 million. Plaza therefore anticipates this will deliver a development pre-tax profit of approximately US$11.0 million.

 

During 2008, Plaza formed a joint venture with Elbit Imaging ("JV") to develop three mega mixed-use projects in India located in the cities of Bangalore, Chennai and Kochi. Under this agreement Plaza acquired a 47.5% stake in Elbit India Real Estate Holding Limited, which already owned stakes of between 50% and 80% in three mixed-use projects in India, in conjunction with local Indian partners. This joint venture's voting rights are split 50:50 between Elbit and Plaza.

 

These three projects are as follows:

 

Bangalore - This mixed-use project, 50% owned by the JV and 50% owned by a prominent local developer, is located on the eastern side of Bangalore, India's fifth largest city with a population of more than 8 million inhabitants. With a total built-up area of over 320,000 sqm excluding parking, it will comprise over 1,000 luxury residential villas.

 

In 2010, the JV has signed a new framework agreement which entitles the JV to receive 70% of the net proceeds from the project until a target 20% IRR is received. Once the JV has received this 20% IRR on its investment, the JV will exit the project.

 

Chennai - A mixed-use development, which is 80% owned by the JV and 20% owned by a prominent local developer, will be developed into an integrated mixed-use project consisting of high rise residential units, high quality villas and a local retail facility, with a total built up area of 1,060,000 sqm. Chennai is India's fourth largest city with a population of more than 8 million inhabitants.

 

Kochi Island - A 50:50 partnership with a prominent local developer, this mixed-use project will comprise more than 575,000 sqm of high-end residential apartment buildings, office complexes, a hotel and serviced apartments complex, retail area and a marina. It is located on a backwater island adjacent to the administrative, commercial and retail hub of the city of Kochi, in the state of Kerala, with a local population of more than two million inhabitants.

 

The construction of the JV's first project in Bangalore is planned to commence in late 2012, in Chennai the construction is scheduled to commence in 2013 and the Kochi Island development is in the design phase.

 

The joint venture will also look for further large-scale mixed-use development opportunities in India, predominantly led by either residential, office or hotel schemes. In addition, Plaza will independently continue to develop, manage and look for new opportunities for shopping centre led projects in India.

 

USA

 

Plaza identified a window of opportunity for investment in the United States as result of the dislocation of the property market, specifically within the retail sector, created by recent economic conditions.

 

During the period from April to June 2010, EPN (a real estate investment venture jointly formed by Elbit Plaza USA, L.P. (a subsidiary of Elbit Imaging Ltd. and Plaza) and Eastgate Property LLC ('Eastgate'), entered into a series of agreements to acquire a stake in EDT Retail Trust ('EDT'), an Australian investment trust which holds and manages two US REIT portfolios.

 

EPN, in which Plaza owns a circa 22.7% stake, became the major shareholder of EDT in June 2010 in a transaction valued at US$116 million. The ownership process was completed in August 2011 by finalizing an off-market takeover bid for the remaining EDT units at a cost of circa US$242 million and de-listing the EDT Retail Trust from the Australian Stock Exchange. Subsequently, in September 2011, EDT distributed an interim dividend payment of US$26 million to EPN.

 

Since the acquisition EPN undertook the following actions to restructure, reposition and improve the EDT portfolio:

·    Repaid the entire corporate company level debt of $108 million;

·      Relocated management from Australia to the US in order to improve the Company's oversight of the assets;

·      Refinanced or assumed circa $500 million of portfolio debt;

·      Increased Net Operating Income by approximately 5%;

·      Actively managed the assets to increase portfolio occupancy by nearly 3% since 2009 and improve tenancy maturities;

·      Undertook redevelopment plans for underperforming assets which will generate substantial cash flow growth in 2013 and 2014.

 

EPN holds interests in 49 operating retail properties covering approximately 11.1 million sq ft of leasable area across 20 states in the US. The portfolio provides access to over 420 existing tenants operating in the stores, with over 70% of base rent generated from nationally recognized retailers and generates over US$100 million Net Operating Income per annum.

 

The portfolio's occupancy rate is approximately 89% with a weighted average lease term of 4.5 years. The value of the portfolio was approximately $1.47 billion and the secured non-recourse debt related to it amounted to circa $947 million as of 31 December 2011.

 

In January 2012, EPN reached an agreement, subject to the satisfaction of certain closing conditions, to sell 47 of the 49 US based shopping centres in a deal totalling US$1.428 billion. The centres are to be acquired by BRE DDR Retail Holdings LLC, a joint venture between Blackstone Real Estate and DDR Corp. Of the transaction value of US$1.428 billion, a total of US$934 million (as of the agreement date) shall be paid by the way of assumption of the property level debt. In addition, all excess cash within EDT, which upon signing the agreement amounted to US$30 million, will be retained by Plaza and its joint venture partners. By the reporting date the purchasers had satisfactorily completed the due diligence process associated with the transaction.

 

Following the sale of the 47 properties, EPN Group will continue to hold two properties located in the United States that are valued at approximately US$43 million with total non-recourse secured debt of approximately US$14 million.

 

The transaction is expected to close in June 2012 and EPN will receive the rental income upon the aforementioned 47 properties until such time.

 

Once completed, the transaction is expected to realise a cash inflow of US$120m before taxes and transaction costs for Plaza which corresponds to nearly 50% pre-tax ROE.



 

FINANCIAL REVIEW

 

Results

 

During 2011, Plaza strengthened its first investment in the US real estate market by becoming the 22.7% owner of the shopping mall portfolio of EDT, with 47 out of 49 of the malls disposed of subsequent to the year end. The Company also successfully opened its 31st shopping mall in CEE.

 

As Plaza focuses its business on the development and sale of shopping and entertainment centres, the Group classifies its current projects under development or self developed projects as trading properties rather than investment properties. Accordingly, revenues from the sale of trading properties are presented at gross amounts. The Group does not revalue its trading properties, and profits from these assets therefore represent actual cash-based profits due to realisations. On the other hand an impairment of value is booked in the consolidated income statement where applicable.

 

Revenue for 2011 largely comprised rental income, management fees from operating malls and income derived from the Group's subsidiary, Fantasy Park, which provides gaming and entertainment services in active shopping centres, accounting for €7.1 million (2010: €7.4 million) during the year.

 

Revenue increased to €57 million (2010: €38 million) due to the higher number of owned and managed shopping centres operating over the entire course of the year and the additional income derived as a result of the Company's consolidated full year US acquisition activity. In addition, the portfolio experienced an increase in overall occupancy rates and a €8.1 million (2010: €4.6 million) uplift in the fair value of the Group's US investment properties also contributed to the increase.

 

The total cost of operation amounted to €74 million (2010: €28 million). The increase is largely attributable to the €48 million impairment charge recorded in connection with the value of trading properties, as compared to a charge of €6.7 million in the prior year. 73% of the write down was in respect of assets in Romania (€26.5 million), and in Latvia (€8.5 million). Cost of property operation and maintenance has also increased in line with growing rental activity from €14 million in 2010 to €19 million in 2011, which also takes into account the operation over a full year of the US portfolio. Other items have remained in the same level compared to the previous year.

 

Administrative expenses amounted to €19.5 million (2010: €18 million). The cost of non cash share-based payments increased to €3.7 million (2010: €2.5 million) being the principal factor behind the total increase. The cost of professional services has slightly increased to €4.3 million from €3.7 million in 2010. The other components have remained at the same level as of 2010.

 

Other income decreased to €1.7 million from €42.6 million with the prior year comparator reflecting that the vast majority of the accounting gain resulting from the EDT transaction was recognized in 2010.

 

Other expenses consist of the impairment of fixed assets.

 

Net finance income has increased to €65 million compared to net finance loss of €21 million in 2010. The change is caused by a number of factors including €79 million (2010: €60 million loss) of income attributed to the decrease in fair value debentures and related foreign exchange gains measured through the profit and loss account. This was partially offset by the loss upon the fair value of derivatives (mainly hedging instruments for the bonds issued in ILS and linked to the Israeli CPI).

 

Tax expenses represent a deferred tax liability recorded in connection with the fair value changes of the debentures measured through the profit and loss, and deferred taxes associated with the anticipated completion of the sale of 47 out 49 of the US portfolio of assets.

 

As a result of the above, the net profit for the year amounted to circa €13.9 million in 2011, compared to €14.2 million net profit in 2010. Net profit attributed to owners of the Company amounted to circa €9 million in 2011, compared to €10 million in 2010.

 

Basic and diluted earnings per share for 2011 and 2010 were both €0.03.

 

Balance sheet and cash flow

 

The balance sheet as at 31 December 2011 showed current assets of €1.01 billion compared to current assets of €1.06 billion at the end of 2010. This decrease was largely driven by the cash effect of bond repayments and buybacks and partially offset by an overall increase in the value of trading property as a result of the investment in our pipeline of development projects.

 

The Company's cash position deriving from cash, short term deposits, restricted cash deposits and available for sale financial assets decreased to €108 million (2010: €195 million), with the decrease reflecting the above mentioned bond repayments and buybacks. The gearing position remained conservative with debt comprising only 59% of balance sheet (31 December 2010: 56%).

 

Trade receivables have increased from €4 million to €5 million as a result of receivables from tenants in the US, as well as in the new operating shopping mall in Torun, Poland, in addition to the other centres already operational in 2010.

 

Derivatives assets recorded in 2010 (€53 million) as current and non-current assets (swap transactions to hedge interest rates and foreign exchange risks associated with NIS and PLN denominated bonds), were mostly settled during the course of 2011, they are measured at a liability of €3.6 million, and are presented as a non-current liability as at the year end.

 

The value of the investment property increased in 2011 due to the completion of the EDT acquisition, fair value increases and exchange rate gains.

 

Long term deposits and balances have remained at a similar level (2011: €51 million, 2010: €53 million) consisting mainly of investment in long term financial instruments.

 

Total bank borrowings (long and short term) amounted to €449 million (2010: €366 million). This increase is primarily the result of loans drawn down in respect of the shopping malls under construction, or completed during the course of 2011 (Koregaon Plaza in India, Torun Plaza in Poland and Kragujevac Plaza in Serbia).

 

Apart from bank financing, Plaza has on its balance sheet a liability of €252 million (with an adjusted par value of circa €310 million) from issuing debentures on the Tel Aviv Stock Exchange and to Polish institutional investors. These debentures are presented at their fair value with the exception of the debentures issued from August 2009 onward, which are presented at amortised cost. Plaza has substantially hedged the future expected payments in Polish Zloty to correlate with the Euro and the Euribor interest rate, using cross currency interest rate swaps, and, in the case of its currency risk exposure of its NIS denominated bonds, by selling call options to correlate with changes in the EUR/NIS rate. At 31 December, 2011 the aggregate liability associated with these hedging transactions amounted to circa €2.2 million. In 2011 the Company initiated a bond buyback programme, which, in addition to the bond of principal repayments and fair value changes, amounted to a €127 million decrease in liabilities from 2010.

 

Trade payables increased to €27 million (2010: €11 million), due to the completion of Torun Plaza in Poland in the latter part of 2011.

 

Non-controlling interest decreased to €8 million at 31 December 2011, as the Company's joint venture completed the takeover of EDT in the course of 2011.

 

At the 2011 year end, the net balance of the Plaza Group with its controlling shareholders is a liability of approximately €2.2 million, of which €0.4 million is due to a provision in respect of project management fees charged by the Control Centers group. These fees relate to the project supervision services granted in respect of the extensive schemes within the Group. The remaining net balance of €1.8 million includes a liability regarding charges from Elbit Imaging group companies to the Company.

 

Other current liabilities have increased in line with the higher number of malls that the Company owns and operates upon which payments in advance are collected.

 

In summary, Plaza's balance sheet reflects a strong level of liquidity, conservative gearing and substantial total equity of approximately €550 million. Liquidity will further improve with the expected proceeds to be received in respect of the sale of US portfolio. In addition, gross assets of over €1.3 billion and a debt to balance sheet ratio of circa 59%, provides the Company with a robust platform to strengthen its market position, develop its current portfolio and make opportunistic purchases of new projects in the best performing markets. During the coming year, Plaza will add further active shopping and entertainment centres, including Kragujevac and the full opening of Koregaon Park Plaza, resulting in an active portfolio of seven shopping and entertainment centres in the CEE region and India. The additional material income expected to be received from these new centres will further enhance Plaza's ability to produce strong levels of income and deliver future value enhancement.

 

 

Roy Linden

Chief Financial Officer

15 March 2012



Valuation Summary by Jones Lang LaSalle as at 31 December 2011 (in EUR)

Country

Project name

Market Value upon completion

Market Value upon completion

Market Value of the land and project

Market Value of the land and project

 31 December 2010

 31 December 2011

 31 December 2010

 31 December 2011

Hungary

Arena Plaza extension

64,270,000

69,838,000

9,100,000

8,700,000


Dream Island

467,225,000

452,652,000

62,865,000

51,300,000


David House

4,180,000

4,000,000

4,180,000

4,000,000


Uj Udvar

3,045,000

3,010,000

3,045,000

3,010,000

Poland

Kielce Plaza

89,300,000

15,200,000

6,500,000

4,800,000


Torun Plaza

100,000,000

121,200,000

25,000,000

121,200,000


Suwalki Plaza

48,000,000

48,600,000

48,000,000

48,600,000


Lodz (Resi)

252,600,000

n/a(*)

12,600,000

11,000,000


Lodz Plaza

114,500,000

105,200,000

8,500,000

8,700,000


Zgorzelec Plaza

24,000,000

21,400,000

24,000,000

21,400,000


Leszno Plaza

5,800,000

n/a(*)

2,000,000

1,800,000

Czech Republic

Prague 3

156,700,000

138,090,000

16,180,000

14,180,000


Liberec Plaza

33,710,000

31,600,000

33,710,000

31,600,000


Roztoky

19,260,000

19,030,000

3,100,000

3,100,000

Romania

Miercurea Ciuc Plaza

26,800,000

20,127,000

14,580,000

7,700,000


Timisoara Plaza

95,100,000

63,615,000

16,400,000

11,700,000


Casa Radio Plaza

772,535,000

331,700,000

182,400,000

170,325,000


Iasi Plaza

113,800,000

97,252,000

17,500,000

14,700,000


Slatina Plaza

32,500,000

n/a(*)

2,020,000

1,900,000


Palazzo Ducale

1,900,000

2,060,000

1,900,000

2,060,000


Targu Mures Plaza

55,900,000

n/a(*)

6,070,000

6,400,000


Constanta Plaza

19,900,000

14,427,000

11,250,000

10,500,000


Hunedoara Plaza

26,000,000

n/a(*)

2,990,000

3,100,000

Latvia

Riga Plaza

50,500,000

42,150,000

50,500,000

42,150,000

Greece

Helios Plaza

125,900,000

106,400,000

34,300,000

25,000,000

India

Koregaon Park Plaza

89,990,000

78,800,000

59,425,000

68,000,000


Kharadi Plaza

66,675,000

70,870,000

19,000,000

18,100,000


Trivandrum Plaza

50,010,000

47,707,000

10,100,000

7,618,000


Bangalore

153,200,000

178,665,000

49,090,000

40,077,000


Chennai

219,145,000

169,145,000

20,965,000

21,069,000


Kochi Island

155,013,000

n/a(*)

3,335,000

4,876,000

Bulgaria

Shumen Plaza

37,568,000

37,800,000

6,070,000

5,200,000


Sofia Plaza Business centre

44,480,000

41,433,000

7,466,000

7,395,000

Serbia

Belgrade Plaza

162,400,000

142,700,000

24,800,000

21,700,000


Sport Star Plaza

117,000,000

107,200,000

20,400,000

20,300,000


Kragujevac Plaza

54,300,000

44,700,000

21,400,000

35,000,000

Total


3,853,206,000

2,626,571,000

840,741,000

878,000,000

 

(*) Assets were valued with the comparative sales price method, no value at completion was estimated



 

Notes

·      All values of land and project assume full planning consent for the proposed use.

·      Plaza Centers has a 50% interest in the Riga Plaza shopping centre development.

·      Plaza Centers has a 35% interest in the Uj Udvar Shopping Centre development.

·      Plaza Centers has a 50% interest in Kharadi Plaza and Trivandrum Plaza.

·      Plaza Centers has a 43.5% interest in Dream Island.

·      Plaza Centers has a 75% share of Casa Radio Plaza.

·      Plaza Centers has a 23.75% share of Bangalore.

·      Plaza Centers has a 38% share of Chennai.

·      Plaza Centers has a 23.75% share of Kochi Island.

·      Plaza Centers has a 51% interest in Sofia Plaza Business centre.

·      All the figures reflect Plaza's share.



 

CONSOLIDATED INCOME STATEMENT IN '000 EUR

 

 



For the year ended



December 31,


Note

2011

2010





Revenues

13

57,074

37,641





Impairment losses - trading properties

5

(47,987)

(6,710)

Cost of operations

14

(25,798)

(20,853)





Gross profit (loss)


(16,711)

10,078





Administrative expenses (*)

15

(19,536)

(17,923)

Other income


1,692

42,603

Other expenses


(1,588)

(260)





Results from operating activities


(36,143)

34,498





Finance income

16

103,018

49,596

Finance costs

16

(37,672)

(70,773)

Net finance income (costs)


65,346

(21,177)









Share in loss of equity-accounted investee


(153)

(381)









Profit before income tax


29,050

12,940





Tax benefit (expense)

17

(15,186)

1,308





Profit for the year


13,864

14,248





Profit attributable to:








Owners of the Company


9,346

10,273





Non-controlling interests


4,518

3,975







13,864

14,248





Basic and diluted earnings per share (in EURO)

12

0.03

0.03









 

 

(*) Including non-cash expenses due to the share option plans in the amount of EUR 3.7 million (2010- EUR 2.5 million)



 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION IN '000 EUR



December 31,

December 31,

 


Note

2011

2010

 

ASSETS




 

Cash and cash equivalents

3

58,261

137,801

 

Restricted bank deposits


21,428

29,954

 

Short-term deposits


3,102

-

 

Available for sale financial assets


25,568

27,098

 

Trade receivables


5,432

4,064

 

Other receivables and prepayments

4

46,030

47,828

 

Derivatives


-

10,535

 

Trading properties

5

850,229

807,887

 

Total current assets


1,010,050

1,065,167

 





 

Long term deposits and other investments


51,330

52,559

 

Deferred tax assets


316

282

 

Derivatives


-

42,110

 

Property and equipment


9,026

11,361

 

Investment property

6

272,348

238,702

 

Restricted bank deposits


4,961

15,751

 

Other non-current assets


495

364

 

Total non-current assets


338,476

361,129

 

Total assets


1,348,526

1,426,296

 





 

LIABILITIES AND SHAREHOLDERS' EQUITY


 

Interest bearing loans from banks

7

296,235

232,902

 

Debentures at fair value through profit or loss

9

32,930

48,318

 

Debentures at amortized cost

10

22,831

20,762

 

Trade payables


27,329

11,260

 

Related parties

8

2,228

3,758

 

Provisions


15,597

15,597

 

Other  liabilities


27,464

19,474

 

Total current liabilities


424,614

352,071

 





 

Interest bearing loans from banks

7

152,387

133,514

 

Debentures at fair value through profit or loss

9

110,320

211,997

 

Debentures at amortized cost

10

86,052

97,979

 

Other liabilities


5,757

5,330

 

Derivatives


3,561

-

 

Deferred tax liabilities


15,673

956

 

Total non-current liabilities


373,750

449,776

 





 

Share capital

11

2,972

2,967

 

Translation reserve

11

(10,672)

8,074

 

Capital reserve due to transaction with Non-controlling interests


(19,342)

-

 

Other reserves

11

31,954

31,272

 

Share premium


261,773

261,773

 

Retained earnings


275,437

296,109

 

Total equity attributable to equity holders of the Company

542,122

600,195

 

Non-controlling interests


8,040

24,254

 

Total equity


550,162

624,449

 

Total equity and liabilities


1,348,526

1,426,296

 





 

 

March 14, 2012





 



Ran Shtarkman


Shimon Yitzchaki

 

Date of approval of the

financial statements


Director, President and Chief Executive Officer


Director and Chairman of the Audit Committee



 

CONSOLIDATED STATEMENT OF CASH FLOWS IN '000 EUR



                 For the year ended



                December 31,


Note

2011

2010

 

Cash flows from operating activities




 

Profit for the year


13,864

14,248

 

Adjustments necessary to reflect cash flows used in operating activities:



 

Depreciation and impairment of equipment and other assets


2,517

2,243

 

Write-down of Trading properties

5

47,987

6,710

 

Change in fair value of investment property

6

(8,084)

(4,647)

 

Net finance costs (income)

16

(65,346)

21,177

 

Interest received


9,356

8,631

 

Interest paid


(45,233)

(28,234)

 

Equity-settled share-based payment transaction


3,658

2,540

 

Gain from a bargain purchase


(1,523)

(42,039)

 

Loss (gain) on sale of property and equipment


(4)

212

 

Share of loss in equity-accounted investees


153

381

 

Proceeds from disposal of trading property, net of cash disposed ( for 2010 see appendix B)


712

965

 

Loss on sale of trading property


-

133

 

Tax expense (tax benefit)

17

15,186

(1,308)

 



(26,757)

(18,988)

 

Changes in:




 

Trade receivables


(1,298)

390

 

Other accounts receivables


(2,300)

9,881

 

Restricted cash


-

(9,030)

 

Advance payments on account of trading properties


-

(4,035)

 

Trading properties

5

(70,629)

(62,693)

 

Trade payables


543

(6,343)

 

Other liabilities, related parties and provisions


5,093

3,904

 



(68,591)

(67,926)

 





 

Taxes paid


(58)

(121)

 

Net cash used in operating activities


(95,406)

(87,035)

 





 

Purchases of property, equipment and other assets


(380)

(466)

 

Purchase of Investment Property

6

(1,204)

-

 

Proceeds from sale of property and equipment


30

3,135

 

Capital expenditure on Investment properties

6

(2,438)

(1,168)

 

Acquisition of subsidiaries, net of cash acquired


-

(14,354)

 

Purchase of available for sale financial assets


(9,307)

(21,935)

 

Proceeds from sale of available for sale financial assets


9,051

10,195

 

Short and long term deposits, net


(3,213)

(33)

 

Net cash used in investing activities


(7,461)

(24,626)

 





 

Cash from financing activities




 

Proceeds from bank loans and financial institutions

7

80,098

53,274

 

Proceeds from loans from partners


-

5,130

 

Proceeds from utilization and settlement of derivatives


39,331

9,259

 

Proceeds from selling options strategy


5,212

-

 

Acquisition of non-controlling interest


(40,370)

-

 

Repurchase of debentures at amortized cost


(29,966)

-

 

Dividends paid


(30,018)

-

 

Changes in restricted cash


17,694

-

 

Proceeds from issuance of long term debentures

10

62,895

77,968

 

Long term bank loans and debentures repaid


(80,742)

(18,694)

 

Net cash from financing activities


24,134

126,937

 

Effect of exchange rate fluctuations on cash held


(807)

(71)

 

Increase (decrease) in cash and cash equivalents during the year


15,205

 

Cash and cash equivalents at 1st of January


137,801

122,596

 

Cash and cash equivalents at 31st of December


58,261

137,801

 



 

CONSOLIDATED STATEMENT OF CASH FLOWS IN '000 EUR (Cont.)

 


For the year ended


December 31,


2011

2010

Appendix B - Disposal of Subsidiary


-

Other receivables

-

41

Trading properties

-

1,057

Net identifiable assets and liabilities disposed

-

1,098




Cash from sale of subsidiaries

-

965

Less - Cash and cash equivalents of subsidiaries disposed

-

-


-

965

 

 

Selective Notes to the consolidated financial information in ‘000 EUR


NOTE 1 -  STATEMENT OF COMPLIANCE

 

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union ("EU").

 

These consolidated financial statements are not intended for statutory filing purposes. The Company is required to file consolidated financial statements prepared in accordance with The Netherlands Civil Code. At the date of approving these financial statements the Company had not yet prepared consolidated financial statements for the year ended December 31, 2011 in accordance with the Netherlands civil code.

 

The consolidated financial statements were authorized for issue by the Board of Directors on March 14, 2012.

 

 

NOTE 2 -  BASIS OF PREPARATION

 

a.    Basis of measurement

 

The consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the statement of the financial position:

·   Investment property are measured at fair value

·    Liabilities for cash-settled share-based payment arrangements are measured at fair value

·   Available for sale financial assets are measured at fair value

·   Derivative financial instruments are measured at fair value

·   Financial instruments at fair value through profit or loss are measured at fair value.

 

b.    Functional and presentation currency

 

These consolidated financial statements are presented in EURO, which is the Company's functional currency. All financial information presented in EURO has been rounded to the nearest thousand, unless otherwise indicated.

 

c.     Use of estimates and judgments

 

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 

The accounting policies have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities, except as explained in note 2(d), which addresses changes in accounting policies.


 

d.    Changes in accounting policies

 

(i) Accounting for business combinations

 

From January 1, 2010 the Group has applied IFRS 3 Business Combinations (2008) in accounting for business combinations.

 

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.

 

Acquisitions on or after January 1, 2010.

 

For acquisitions on or after January 1, 2010, the Group measures goodwill at the acquisition date as:

 

·      the fair value of the consideration transferred; plus

·      the recognised amount of any non-controlling interests in the acquiree; plus

·      if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less

·      the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

 

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

 

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

 

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

 

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

 

When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree's employees (acquiree's awards) and relate to past services, then all or a portion of the amount of the acquirer's replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree's awards and the extent to which the replacement awards relate to past and/or future service.


 

Acquisitions prior to January 1, 2010

 

For acquisitions prior to January 1, 2010, goodwill represents the excess of the cost of the acquisition over the Group's interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess was negative, a bargain purchase gain was recognised immediately in profit or loss.

 

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurred in connection with business combinations were capitalised as part of the cost of the acquisition.

 

(ii) Accounting for acquisitions of non-controlling interests

From January 1, 2010 the Group has applied IAS 27 Consolidated and Separate Financial Statements (2008) in accounting for acquisitions of non-controlling interests. The change in accounting policy has been applied prospectively and has had no impact on earnings per share.

 

Under the new accounting policy, acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary.

 

Previously, goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction.

 

(iii) Accounting for results of non-controlling interests

Starting January 1, 2010, the total comprehensive income is attributed to the owners of the parent and to the non- controlling interests even if this results in the non controlling interests having a deficit balance.

 

NOTE 3 -  CASH AND CASH EQUIVALENTS

 

Bank deposits and cash

Interest rate as of

December 31,

December 31,

December 31,

denominated in

2011

2011

2010

EURO ("EUR") (1)

0%-4.25%

34,437

111,789

United States Dollar (USD)

0.25%-2.64%

9,944

14,587

Polish Zlotys (PLN)

Mainly 4.3%-4.9%

7,369

6,171

Indian Rupee (INR)

Mainly 7%

3,550

3,282

New Israeli Shekel (NIS)

Mainly 0%

1,028

541

Hungarian Forints (HUF)

Mainly 0%

640

422

Serbian Dinar (RSD)

Mainly 0%

628

23

Romanian Lei (RON)

Mainly 0%

253

285

Czech Crowns (CZK)

Mainly 0%

167

458

Latvian Lat (LVL)

Mainly 0%

182

226

in other currencies

Mainly 0%

63

17

Total


58,261

137,801

 

(1) As at December 31, 2011, cash in banks is deposited for periods up to 3 months. The Group has deposits in several commercial banks. Fixed deposits bear interest rates varying between 0.2% and 4.25%, while floating deposits bear interest rates as determined by various benchmarks (e.g. EURIBOR).

 

NOTE 4 -  OTHER RECEIVABLES AND PREPAYMENTS

 



December 31,

December 31,



2011

2010





Advances for plot purchases (1)

29,828

33,090

VAT receivables (2)


6,125

3,323

Loans to partners in jointly controlled entities

2,930

3,379

Prepaid expenses


2,009

711

Accrued interest receivable

1,685

2,027

Advances to suppliers

1,252

3,028

Related parties

1,227

1,185

Others


974

1,085



46,030

47,828

 

(1)     As of December 31, 2011 and 2010, including mainly advance payments in the amount of EUR 28.3 million and EUR 31.8 million, respectively. For the purchase of plots in India, as part of the Joint venture with EI. Out of this amount, an amount of EUR 5 million (2010: EUR 4.8 million) is guaranteed by EI.

(2)     As of December 31, 2011, VAT receivable is mainly due to projects in Poland (EUR 4 million) and Serbia (EUR 1 million).

 

NOTE 5 -  TRADING PROPERTIES

 




December 31,

December 31,




2011

2010






Balance as at 1 January



807,887

707,287

Acquisition and construction costs



84,827

74,111

Capitalized borrowing costs (1)



29,154

19,742

Write-down of trading properties (2)



(47,987)

(6,710)

Effect of movements in exchange rates



(23,652)

14,514

Trading properties disposed



-

(1,057)

Balance at 31 December (3)



850,229

807,887

 

Completed trading properties



202,769

146,626

Trading properties under construction



117,526

107,825

Trading properties under planning and design stage (3),(4)



529,934

553,436

Total



850,229

807,887

 

(1)  Suspension of capitalizing borrowing costs - In certain cases, where the efforts to develop a project are significantly diminished due to lack of external finance, or problems in obtaining permits, the Company suspends the capitalization of borrowing costs to the relevant project.

 

(2)  Write-down of trading properties to net realisable value was performed based on independent valuation reports. In the course of 2011 write-downs were recognized in respect of projects in Romania (EUR 26.5 million), Latvia (EUR 8.5 million), Poland (EUR 7 million), Bulgaria (EUR 3 million), the Czech Republic (EUR 2.5 million) and Greece (EUR 0.5 million).

 

(3)  Including cost of Large scale projects (Bangalore in India, Casaradio in Romania and Dream Island in Hungary) in a total amount of EUR 230 million (2010 - EUR 225 million).  The abovementioned projects are expected to generate an operating cycle closer to eight years comparing to other projects the Company holds.

 

(4)  The value of the Casaradio project in Romania is including two gas turbines with a total book value of EUR 11 million.

 

 

 

As of December 31, 2011, the Company has trading properties in Poland, Czech Republic, Latvia, India, Romania, Serbia, Bulgaria, Hungary and Greece. The properties are in various stages of development as shopping and entertainment centres, residential units, offices or mixed use.

 

As of December 31, 2011, a total carrying amount of EUR 377 million (December 31, 2010 - EUR 275 million) of the abovementioned trading property is pledged against bank loans.

 

As of December 31, 2011, trading properties include accumulated capitalization of share based payments in the amount of EUR 10.7 million (December 31, 2010 - EUR 10.5 million).

 

NOTE 6 -   INVESTMENT PROPERTY

 




December 31,

December 31,




2011

2010

Balance at 1 January



238,702

13,399

Capital expenditures on investment properties



2,438

1,168

Effect of movements in exchange rate



8,923

(24,776)

Acquisitions



14,201

256,477

Exclusion of MV LLC



-

(12,213)

Fair value revaluation



8,084

4,647

Balance at 31 December



272,348

238,702

 

Investment property in the United States

 

The below information relates to US Investment property which is held through a joint venture which acquired a large portfolio of shopping centres in June 2010 through business combination, which totalled EUR 259 million as of the date of 31 December 2011 (2010 comparative):

 

(i) Valuation basis

Fair value was assigned to investment properties as of December 31, 2011 based upon a purchase price offer presented to and accepted by EPN Group from a third-party received in January 2012 for 40 properties owned by REIT I and seven properties owned by REIT II.

 

Internal valuations were performed by EPN Group on two properties which were not included in the proposed purchase price with an assessed fair value of USD 43 million at 31 December 2011.

 

(ii) Non-current assets pledged as security

 

All Investment properties held in the US are pledged as security to loans provided by financial institutions, which totalled EUR 181 million, as of December 31, 2011.


 

(iii) Leasing arrangements

 

Investment properties are normally leased to tenants under long term operating leases with rentals payable monthly. Minimum lease payments receivable on leases of investment properties (Plaza Group part) are as follows:

 




December 31,

December 31,




2011

2010






Minimum lease payments under non-cancellable operating lease of investment properties not recognized in the financial statements are receivable as follows:





Within One year



19,728

17,066

More than one year up to five years



51,266

48,154

More than five years



24,206

22,026

Balance at 31 December



95,200

87,246

 

Investment property in the Czech Republic

 

The Company has one logistic building in Prague that is leased to third parties. Generally, leases contain an initial period of 6 months to 2 years.

 

Subsequent renewals are negotiated with the lessees. The vast majority of the contracts for the Prague logistic building are denominated in, or linked, to the EUR.

 

The yield used for fair value valuation was 7.3% for both 2011 and 2010, and the value determined was EUR 13.6 million for both 2011 and 2010.

 

NOTE 7 -   INTEREST BEARING LOANS FROM BANKS

This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings, which are measured at amortised cost. All interest bearing loans from banks are secured.  Terms and conditions of outstanding loans were as follows:

 

 



December 31,

December 31,

 



2011

2010

 

Non-current loans




Investment property secured bank loans


140,335

130,601

Other secured bank loans


12,052

2,913



152,387

133,514

Current loans (including current maturities of long term loans)




Trading properties secured bank loans


227,624

170,546

Investment property secured bank loans


22,402

17,904

Other secured bank loans


46,209

44,452

 



296,235

232,902

 



 

 

(1)   Secured bank loans taken in respect of structured deposits. These loans were extended for a period of 3 months and 1 year, respectively in February 2012. The Company is required to secure certain amount of cash upon request from the issuing bank as collateral for the credit facilities granted by the issuing bank to finance part of these structures. The amount of the collateral is determined based on formula which includes, among other parameters, the fair value of the structures calculated by the issuing bank. As of the end of the reporting period the Company had secured total amount of EUR 9.8 million in respect to both structures.

 

(2)   On January 10, 2012, USD 85 million investment property secured loan (Company part is EUR 14.7 million), which matured on January 11, 2012, was refinanced with a new USD 85 million loan secured by the same investment properties.  The loan bears interest at LIBOR+1% per annum and has a scheduled maturity date of March 30, 2012.  On February 1, 2012, the loan was extended based upon delivery of the binding sales contract. US group Companies have guaranteed the loan and DDR Macquarie Longhorn Holdings LLC has pledged its membership interests to the lender.

 

NOTE 8 -   RELATED PARTIES



December 31,

December 31,


Currency

2011

2010

EI Group- ultimate parent company - expenses recharged

EUR, USD

1,389

1,803

Other related parties (*)

EUR

452

404

Former vice chairman of EI

INR

-

1,164

EUL (parent company)

EUR, USD

387

387



2,228

3,758

 

(*)       Liability to Control Centers group, a group of companies which provides project consulting and supervision services and controlled by the ultimate parent company's controlling shareholder.

 

Transactions with related parties are priced at an arm's length basis.

 

NOTE 9 - LONG TERM DEBENTURES AT FAIR VALUE THROUGH PROFIT OR LOSS

 

The Company is presenting part of its debentures series A (raised in July 2007) and debentures series B (raised in February and May 2008) are presented at fair value through profit or loss. Both debentures principal are linked to the change in the Israeli Consumer Price Index ("CPI"). Accrued interest on both debentures is paid every six months. Debentures Series A and Series B raised from 2009 onwards are presented at amortized cost. Below is a summary of information on the debentures presented at fair value through profit or loss:

 


Series A debentures

Series B debentures


Fair value

CPI adjusted

Par value

Fair value

CPI adjusted

Par value

January 1, 2011 (NIS)

310,514

303,760

266,994

922,834

880,381

797,957

Repayment 2011 (NIS) (*)



(38,142)



(159,591)

December 31, 2011 (NIS)

170,839

266,986

228,852

536,547

722,212

638,366

January 1, 2011 (EUR)

65.538

64,113

56,353

194,777

185,817

168,420

December 31, 2011 (EUR)

34,596

54,067

46,344

108,654

146,253

129,274

 

(*) One seventh of Series A bond was repaid at December 30, 2011 and one fifth of debentures Series B was repaid at July 1, 2011 



  

Both debentures series are rated (effective March 2012) ilBBB+ by S&P Maalot Ltd. on a local scale and ilA3/Negative by Midroog Ltd., the Israeli Credit Rating Agency and an affiliate of Moody's Investors Service ("Midroog").  Debentures series A bears an annual interest (paid semi-annually) rate of 4.5% with 8 annual equal principal instalments between December 2010 and 2017.  Debentures series B bears an annual interest rate (paid semi-annually) of 5.4% with 5 annual equal principal instalments between July 2011 and 2015.

 

NOTE 10 - LONG TERM DEBENTURES AT AMORTISED COST

 

Bonds issuance in Israel

 

 


Series A debentures

Series B debentures







Par value

Par value

Total

CPI adjusted

CPI adjusted

 


TNIS

TNIS

TNIS

TNIS

TEUR

 

January 1, 2011 (NIS) (1)

-

452,217

452,217

498,909

105,302

 

Issued in 2011 (2)

86,429

181,020

267,449



 

Repayment (3)

(9,042)

(125,227))

(134,269)



 

Buyback programme

(25,235)

(142,854)

(168,089)



 

December 31, 2011

52,152

365,156

417,308

473,959

95,980(4)

 

 

(1)  Issued in the course of 2009 through 2010.

 

(2)  In January 2011, following the public offering in Israel of unsecured nonconvertible Series A and B debentures, pursuant to the Company's prospectus, it was agreed with Israeli Investors to issue an additional principal amount of approximately NIS 86 million (approximately EUR 19 million) in principal amount of Series A Debentures for an aggregate consideration of approximately NIS 99 million (approximately EUR 21 million), and an additional principal amount of approximately NIS 181 million (approximately EUR 39 million) in principal amount of Series B Debentures  for an aggregate consideration of approximately NIS 201 million (approximately EUR 44 million) by way of a private placement. The purpose of the issuance is purported to refinance debt principal. For credit rating refer to note 9. The terms of all Additional Debentures are identical to the terms of the Series A and B Debentures issued under the Company's prospectus dated July 2007 and February 2008, respectively (refer to note 9).

 

(3)  One seventh of Series A bond was repaid at December 30, 2011 and one fifth of Series B debentures was repaid at July 1, 2011

 

(4)  Before offset of unamortized cost of raising debentures in the amount of EUR 0.6 million.

 

Bonds issuance in Poland

 

On November 16, 2010, the Company completed the first tranche of a bond offering to Polish institutional investors. The Company raised a total of PLN 60 million (approximately EUR 15.2 million).   The unsecured bearer bonds governed by Polish law (the "Bonds") have a three year maturity and will bear interest rate of six months Wibor plus 4.5%. Interest is paid every six months and principal after three years. As of December 31, 2011, the amortized cost is EUR 13.4 million (December 31, 2010- EUR 14.9 million).



 

NOTE 11 -            EQUITY





December 31,





2011

2010



Remarks


Number of shares







Authorized ordinary shares of par value EUR 0.01 each




1,000,000,000

1,000,000,000

Issued and fully paid:






At the beginning of the year




296,722,129

294,195,700

Exercise of share options


See (a) below


452,386

2,526,429







At the end of the year




297,174,515

296,722,129

 

a.      In the course of 2010, 3,954,541 vested options were exercised into 2,526,429 shares of EUR 0.01. In the course of 2011, 951,564 vested options were exercised into 452,386 shares of EUR 0.01.

 

Other Capital reserve due to share option plans

 

Capital reserve is in respect of Employee Share Option Plans in the total amount of EUR 33,470 as of December 31, 2011 (2010 - EUR 31,029).

 

Translation reserve

 

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations in India and in the US.

 

Dividend policy

 

The payment of dividends is dependent on the financial performance and condition of the Group, the Company's financial position and the capital and anticipated working capital requirements of the Group.  The distribution of dividend is based upon the statutory report's distributable results and retained earnings of the Company itself. Subject to mandatory provisions of Dutch laws, and the agreement reached with bond holders, the dividend policy will reflect the long-term earnings and cash flow potential of the Group, taking into account the Group's capital requirements, while at the same time maintaining an appropriate level of dividend cover.



 

NOTE 12 -      EARNINGS PER SHARE

 

The calculation of basic earnings per share at 31 December 2011 was based on the profit attributable to ordinary shareholders of EUR 9,346 thousand (2010: profit of EUR 10,273 thousand) and a weighted average number of ordinary shares outstanding of 296,995 thousand (2010: 296,454 thousand).

 

Weighted average number of ordinary shares



 

In thousands of shares with a EUR 0.01 par value

December 31,


2011

2010

Issued ordinary shares at 1 January

296,722

294,196

Share based payment - exercise of options

273

2,258

Weighted average number of ordinary shares at 31 December

296,995

296,454

 

The calculation of diluted earnings per share for comparative figures is calculated as follows:

 

Weighted average number of ordinary shares (diluted)



In thousands of shares with a EUR 0.01 par value

December 31,


2011

2010


Weighted average number of ordinary shares (basic)

296,995

296,454

Effect of share options on issue

4,521

15,287

Weighted average number of ordinary shares (diluted)

at 31 December

301,516

311,741

 

The average market value of the Company's shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the period that the options were outstanding.

 

NOTE 13 - REVENUES


For the year ended



December 31,



2011

2010

 




 

Rental income from tenants (1)

35,523

20,576

 

Adjustment to fair value of investment property

8,084

4,647

 

Operation of entertainment centres (2)

7,121

7,442

 

Management fees

4,859

2,861

 

Revenue from selling trading properties (3)

712

924

 

Other

775

1,191

 

Total

57,074

37,641

 

 

(1)  Rental income relates either to revenues from investment properties the Company holds in a total amount of EUR 26.4 million (2010 - EUR 13.4 million), or from the trading properties the Company holds in a total amount of EUR 9.1 million (2010 - EUR 7.2 million). As of the end of the reporting period, the main rental income is derived from projects in the US, Latvia, Poland and the Czech Republic.

 

(2)  Revenue from operation of entertainment centres is attributed to special subsidiary of the Company trading as "Fantasy Park" which provides gaming and entertainment services in active shopping centres. As of December 31, 2011, these subsidiaries operate in 13 shopping centres.

 

(3)  Revenue from selling trading properties in 2011 is due to selling residential units in Romania.

 

NOTE 14 - COST OF OPERATIONS

 


For the year ended


December 31,


2011

2010

 

Direct expenses:



 

Property operations and maintenance (*)

19,159

13,589

 

Cost of sold trading properties

603

1,057

 

Salaries and related expenses

1,877

1,899

 

Initiation costs

713

812

 

Doubtful debts

-

120

 

Local taxes

1,391

1,438

 




 


23,743

18,915

 




 

Other operating expenses

1,630

1,623

 


25,373

20,538

 




 

Depreciation and amortization

425

315

 


25,798

20,853

 

 

(*) 2011 - Includes EUR 7.2 million of energy related expenses, EUR 9.9 million due to other utilities expenses, and EUR 2.1 due to rent expenses of Fantasy Park. 2010 - Includes EUR 5.4 million of energy related expenses, EUR 6.1 million due to other utilities expenses, and EUR 2.1 due to rent charged to Fantasy Park subsidiaries.

 

Total cost of revenues resulting from investment properties the Company holds totalled EUR 11 million (2010 - EUR 5.6 million).

 

NOTE 15 - ADMINISTRATIVE EXPENSES


For the year ended



December 31,



2011

2010

 

Selling and marketing expenses



 




 

Advertising and marketing

1,423

1,665

 

Salaries and relating expenses

971

941

 

Others

41

36

 


2,435

2,642

 

 

General and administrative expenses








Salaries and related expenses (1)

9,152

7,661

 

Depreciation and amortization

630

1,086

 

Professional services

4,317

3,721

 

Travelling and accommodation

1,077

968

 

Offices and office rent

1,038

1,077

 

Others

887

768

 


17,101

15,281

 




 

Total

19,536

17,923

 

 

General and administrative

 

Including non-cash expenses due to the share option plan in the amount of EUR 3.7 million (2010- EUR 2.5 million)

NOTE 16 - NET FINANCE INCOME (COSTS)

 


For the year ended



December 31,


Recognized in profit or loss

2011

2010

 

Changes  in debentures measured at fair value through profit or loss (*)

59,891

-

 

Gain from bonds buyback programme

7,879

-

 

Interest income on bank deposits

3,003

2,197

 

Finance income from available for sale financial assets

2,017

2,103

 

Interest income on structured deposits

5,221

5,162

 

Finance income from selling option strategy, net

5,212

-

 

Foreign exchange gain on debentures

19,418

-

 

Changes in fair value of derivatives

-

37,308

 

Interest from loans to related parties

377

136

 

Changes in fair value of structured deposit

-

1,065

 

Foreign exchange gains on deposits, bank loans

-

456

 

Other interest income

-

1,169

 

Finance income

103,018

49,596

 




 

Interest expense on bank loans and debentures (including CPI)

(44,598)

(27,540)

 

Changes in fair value of derivatives

(16,622)

-

 

Interest expenses on loan on structures

(635)

(462)

 

Changes  in debentures measured at fair value through profit or loss (*)

-

(50,112)

 

Foreign exchange losses on debentures at amortized cost

-

(10,366)

 

Changes in fair value of structured deposit

(1,320)

-

 

Foreign exchange losses on bank deposits, bank loans

(3,140)

(742)

 

Other finance expenses

(511)

(1,293)

 


(66,826)

(90,515)

 

Less- borrowing costs capitalized to trading properties under development

29,154

19,742

 

Finance costs

(37,672)

(70,773)

 

Net finance income (expenses)

65,346

(21,177)

 

 

(*) The change in fair value includes a total of EUR 97 million (2010 - EUR 10.6 million) attributable to the credit risk of the Company



 

NOTE 17 - TAX EXPENSE

 


For the year ended


December 31,


2011

2010

Current tax

57

(143)

Deferred tax

15,129

(1,261)

Prior year's taxes

-

96

Total

15,186

(1,308)

 

Deferred tax expense (tax benefit)

 


For the year ended


December 31,


2011

2010

Origination and reversal of temporary differences

20,055

381

Recognition of previously unrecognized tax losses

(4,926)

(1,642)


15,129

(1,261)

Reconciliation of effective tax rate:

 


For the year ended



December 31,



%

2011

2010

 

Dutch statutory income tax rate


25.5%

25%

 





 

Profit before income taxes


29,050

12,940

 





 

Tax at the Dutch statutory income tax rate

25.5%

7,408

3,235

 

Recognition of previously unrecognized tax losses

-17.4%

(5,063)

(1,642)

 

Effect of tax rates in foreign jurisdictions

25.6%

7,434

9,197

 

Deferred taxes not provided for losses.

30.2%

8,775

8,428

 

Variances stemming from different measurement rules applied for the financial statements and those  applied for income tax purposes

-17.8%

(5,173)

(4,557)

 

Non deductible expenses (tax exempt income) (*)

6.2%

1,805

(15,873)

 

Prior years taxes

-

-

(96)

 

Tax Expense (Tax benefit)

52.3%

15,186

(1,308)

 





 

(*) - In 2010 - Relates mainly to non taxable profit is attributable mainly to gain from bargain purchase in the US.

 

 

 

The main tax laws imposed on the Group companies in their countries of residence:

 

The Netherlands

a.      Companies resident in the Netherlands are subject to corporate income tax at the general rate of 25.5% (25% prior to the year 2011).  The first EUR 200,000 of profits is taxed at a rate of 20%. Tax losses may be carried back for one year and carried forward for nine years.   As part of the measures to combat the consequences of the economic crisis, taxpayers can elect for an extension of the loss carry back period to three years (instead of one year). The election is only available for losses suffered in the taxable years 2009, 2010 and 2011. If a taxpayer makes use of the election, two additional limitations apply: (i) the loss carry forward period for the taxable years 2009, 2010 and/or 2011 will be limited to a maximum of six years (instead of nine years); and (ii) the maximum amount of loss that can be carried back to the second and third year preceding the taxable year will be limited to EUR 10 million per year. The amount of loss that can be carried back to the year directly preceding the taxable year for which the election is made will remain unrestricted.

 

b.      Under the participation exemption rules, income (including dividends and capital gains) derived by Netherlands companies in respect of qualifying investments in the nominal paid up share capital of resident or non resident investee companies, is exempt from Netherlands corporate income tax provided the conditions as set under these rules have been satisfied. Such conditions require, among others, a minimum percentage ownership interest in the investee company and require the investee company to satisfy at least one of the following tests:

 

- Motive Test, the investee company is not held as passive investment;

 

- Tax Test, the investee company is taxed locally at an effective rate of at least 10% (calculated based on Dutch tax accounting standards);

 

- Asset Test, the investee company owns (directly and indirectly) less than 50% low taxed passive assets.

 

USA

 

The US federal corporate income tax rate is 35%. Some states may also impose corporate income taxes, which vary from zero to approximately 12%, resulting in an effective corporate tax rate of generally around 40%. The federal tax rate on corporate capital gains is the same as that of ordinary income.     The statutory withholding tax rate on US sourced income is generally 30%, which may be lowered under a relevant tax treaty.



 

India

 

The corporate income tax rate applicable to the taxable income of an Indian Company is 33.2175% (Including surcharge of 7.5% and cess of 3%. Surcharge is applicable only if the gross total income exceeds INR 10 million). Minimum alternate tax (MAT) of 19.93% (Including surcharge of 7.5% and cess of 3%. Surcharge is applicable only if the gross total income exceeds INR 10 million) is applicable in case a Company has book profits. Book profits are computed in accordance with relevant provisions of the Indian Income Tax Act. The final tax payable is higher of the MAT liability or corporate income tax payable. If taxes are paid under MAT, then credit to the extent of MAT paid over corporate income tax is available (MAT credit). MAT Credit can be availed, if the company has future taxable profits in the following ten years. Capital gains on transfer of capital assets (on which tax depreciation has not been claimed) are taxed at the rate of 22.145% (Including surcharge of 7.5% and cess of 3%. Surcharge is applicable only if the gross total income exceeds INR 10 million) provided that they were held for more than 36 months immediately preceding the date of the transfer or 33.2175% (Including surcharge of 7.5% and cess of 3%. Surcharge is applicable only if the gross total income exceeds INR 10 million) if they were held for less than 36 months. Dividends paid out of the profits are subject to Dividend Distribution Tax at the rate of 16.61% (Including surcharge of 7.5% and cess of 3%. Surcharge is applicable only if the gross total income exceeds INR 10 million). There is no withholding tax on dividends distributed by an Indian company and no additional taxes need to be paid by the Shareholder. Business losses can be offset against profits and gains on any business or profession for a period of eight years from the incurrence year's end. There is no limit for carry forward unabsorbed depreciation.

 

Cyprus

 

The taxation of companies incorporated in Cyprus is based on tax residence and all companies are taxed under corporation tax at the rate of 10%. Dividend income paid from overseas subsidiaries that earn more than 50% of their income from trading activities and profits from the sale of shares and other titles of companies are tax exempt. There is no withholding tax on payments of dividends to non-resident shareholders or shareholders that are companies resident in Cyprus. Companies, 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. Defence tax at 17% 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 during the following two years. This defence tax is paid by the company for the account of the shareholders. Non- Cyprus tax resident shareholders are exempt from this taxation.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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