Eastern European Property Fund (EEP) reported a net loss for the year ended 31 December 2016 of £1.2 million (2015: loss of £1.0 million), which it says represents a loss per Ordinary Share of 7.80p (2015: loss of 6.30p). it says that a loss of £0.8 million on revaluation of investment properties, and a realised loss on the disposal of the Romanian subsidiary of £0.5 million, are the main reasons for the deterioration in financial performance during the year. EEP says that its operating expenses increased by 8.7% (before accounting for performance fees) during the year ended 31 December 2016, mainly due to increased legal and professional fees arising from the successful settlement of legal action for unpaid rent from a previous tenant. Reflecting these developments, EEP’s consolidated net asset value at 31 December 2016 was £14.9 million, equivalent to 95.76p per Ordinary Share (2015: £15.8 million; 101.46p per Ordinary Share). The Company’s share price decreased by 0.25p during the year to 50.50p at 31 December 2016, with the discount to NAV narrowing from 50.3% at 31 December 2015 to 47.3% at 31 December 2016.
Portfolio activity
EEP says that its Romanian subsidiary containing the Gara Progresului, Business and Logistics Centre was sold in December 2016 for a total of €1.5 million (£1.3 million). €1.2 million was received on completion and the balance is payable in instalments by 30 June 2018. EEP says that the deferred consideration is secured by a charge on the property.
EEP says that all remaining units within the Nil Passage property were sold during the first half of 2016 for a total of US$1.0 million (£0.7 million) (including VAT). Disposal proceeds were marginally above the 31 December 2015 independent valuation. EEP no longer has any interest in the Nil Passage property.
EEP’s two remaining properties continue to be marketed for sale.
EEP’s says that its two remaining properties continue to be marketed for sale and that the aggregate value of these two investment properties at 31 December 2016 decreased to the equivalent of £15.0 million during the year and resulted in a net unrealised loss on revaluation of £845,000 (2015: loss of £55,000). It says that, consistent with previous years, independent valuations of the properties were commissioned and these provide the basis of the carrying values used in the results.
EEP says that it remains challenging to realise its remaining buildings in the central districts of both Sofia and Istanbul at appropriate valuations. It says that, although illiquidity, opaque market practices and scarcity of buyer finance have been ongoing challenges for the Property Manager and Investment Advisers, to date, most of its property investments have been sold close to the carrying values.
EEP says that its valuation of the Markiz building at 31 December 2016 is supported by the pricing achieved in a recent purchase and sale of a neighbouring property of comparable size and location. It says that, although further substantial new activity in the prime Istanbul property market is unlikely during the traditional ‘quiet’ period spanning Ramadan and the summer months, the Property Manager and Turkish Investment Adviser will continue to negotiate the offers currently on the table and actively pursue any new interests that may materialise. EEP says that local business confidence should improve if the recent political calm and stability continue, which the Board hopes will facilitate the sale of the Markiz building. It says that new efforts, in respect of use and different target potential buyers, are also being made to improve the marketability of its building in Sofia.
Distributions
EEP says that it remains its Board’s intention to distribute to Shareholders substantially all net proceeds of property sales, subject to the need to retain sufficient funds for EEP’s ongoing operation. However, it says that, following the disposal of the Romanian subsidiary and receipt of sale proceeds, the Board decided to retain the cash and not to immediately undertake further buybacks of Ordinary Shares whilst options for the disposal of the Markiz property are pursued. It says that this policy remains under regular review.
About Eastern European Property Fund
Eastern European Property Fund was established in 2006 to take advantage of opportunities that exist in the property markets of Turkey, Romania and Bulgaria (the “Target Countries”). The investment objective is to provide Shareholders with a high level of income and potential for significant capital growth by investing in property in the major urban centres of the Target Countries
Eastern European Property Fund reports a loss making year : EEP