Secure Property Development & Invest PLC/ Index: AIM / Epic: SPDI / Sector: Real Estate

20 October 2016

Secure Property Development & Investment PLC ('SPDI' or 'the Company')

Profitable Sale of Ukrainian Warehouse

Secure Property Development and Investment PLC (AIM: SPDI), the South Eastern European focused property and investment company, is pleased to announce it has signed a Sale and Purchase Agreement ('SPA') with Temania Enterprises Ltd for the sale of its Terminal Brovary warehouse in Kiev at a Gross Asset Value of over US$16 million (before the deduction of the outstanding EBRD loan - the "Transaction").  This compares favourably to the US$13.4 million gross value assigned to the Terminal as at 31 December 2015 and will generate a net profit of over US$2.5million net to SPDI  and a net cash inflow of over US$3 million (see announcement of 9 June 2016 for further details).  The Transaction (including payment) is subject to final approval by the lender (EBRD) and the Ukrainian Antimonopoly Commission which is expected to be received shortly.

The Transaction is in line with the Company's plan to focus on high-yielding South Eastern European countries such as Romania, Bulgaria and Greece while limiting its exposure in Ukraine as both the economy and the political stability in the country do not show concrete signs of improvement. SPDI's strategy is to deliver value to its shareholders from a portfolio of well located income generating properties with blue chip tenants in high-yielding locations that have favourable demand/supply dynamics for modern commercial properties. Such properties still command low prices / high income yields and has the potential for capital appreciation, as yields converge towards the Central Eastern European, and eventually to Western European levels.  This strategy will be boosted both by the cash received from the sale of Terminal Brovary but also by more capital that is expected to be generated to make further property asset acquisitions.    

Following the conclusion of the Transaction, the Company's income producing asset portfolio will include logistics terminals in Athens and Bucharest, offices in Sofia and Bucharest, as well as a big box retail in Craiova, Romania.  In addition to the residential unit portfolio in Bucharest and Sofia, SPDI continues to hold sizeable land assets in Ukraine, all of which have excellent locations and are debt free.   SPDI is currently evaluating various options to generate value from these assets. 

SPDI CEO, Lambros Anagnostopoulos, commented, "This transaction is in line with our strategy to generate value from our prime real estate properties across South Eastern Europe, through both annual cash inflows and profitable exits following cap rate convergence.  Terminal Brovary provides a readymade example of successfully implementing such a strategy as it has been generating consistent cash flows ever since the new management took over the Company, completed the construction of the building and leased out the asset at the end of 2012.  Four years on we have successfully negotiated its sale, which we believe is one of the largest property asset transactions in Ukraine since 2014.  The net proceeds, which will be combined with additional capital we plan to generate, will go towards acquiring more attractively valued prime real estate in high growth countries such as Romania and Bulgaria, where we continue to evaluate additional opportunities.  

"Our aim is not only to expose our shareholders to the European yield compression play and the significant capital appreciation on offer, but also to generate substantial cash from managing our portfolio of property assets.  SPDI has both the locally based team and the network of advisers to effect timely and successful monetisation of assets in the countries we are active in when opportunities to generate value for our shareholders are presented to us.  The profitable exit from Terminal Brovary is in line with our objective as set by our Board of Directors to position ourselves as the 'go to' investment vehicle for investors looking to gain exposure to the region's highly attractive property markets. 

"At the same time, the value achieved highlights the large discount and resulting disconnect that persists between the Net Asset Value of our Company and our share price.  We are determined to close this disconnect so that SPDI's share price fully reflects the real value of our Company's holdings."

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