TIDMPLAZ
RNS Number : 4414T
Plaza Centers N.V.
29 March 2016
29 March 2016
PLAZA CENTERS N.V.
Preliminary results for the year ended 31 December 2015
FOCUS ON OPERATIONAL PERFORMANCE, KiCK STARTING DEVELOPMENT
PROJECTS AND DISPOSING OF NON-CORE ASSETS
Plaza Centers N.V. ("Plaza" / the "Company" / the "Group"), a
leading property developer and investor with a focus on operations
in Central and Eastern Europe ("CEE"), today announces its
preliminary full year results for the year ended 31 December
2015.
Financial highlights:
-- Reduction in total portfolio value to EUR392 million (31
December 2014: EUR466 million), following strategic disposals
(mainly of Koregaon Park Plaza and the Iasi plot of land) and
write-down and uplift changes at trading properties and equity
accounted investees (related to assets in the Czech Republic
(EUR6.2 million), Romania (EUR9.2 million), Poland (EUR6 million),
other regions (EUR3.7 million) and an uplift in Serbia (EUR4.8
million)). Cash proceeds from disposals were used to repay
liabilities from bonds issued, in line with the restructuring
plan.
-- While disposals resulted in an 8% decrease in Group NOI,
excluding the impact of the sale of Kragujevac Plaza in 2014, the
Group recorded a 10% increase in NOI (from EUR14.9 million to
EUR16.4 million) from the operation of its other shopping centres
including equity accounted investee.
-- Net Asset Value decreased to EUR114 million (31 December
2014: EUR153 million) primarily as a result of an increased NIS
against the EUR, as well as the write-down of assets, mainly in the
Czech Republic, Romania and Poland.
o Net Asset Value per share of GBP0.12 (31 December 2014:
GBP0.17), attributable to the abovementioned factors.
-- Losses in the period reduced significantly to EUR46 million
(31 December 2014: loss of EUR120 million), stemming from a
non-cash EUR19.4 million impairment of trading properties and
equity accounted investee (31 December 2014: EUR87.5 million of
impairments), and an overall mostly non-cash net finance cost of
EUR31 million (2014: EUR36 million).
o Basic and diluted loss per share of EUR0.07 (31 December 2014
loss per share of EUR0.39).
-- Consolidated cash position at year end (including restricted
bank deposits, short term deposits and held for trading financial
assets) of EUR20.4 million (31 December 2014: EUR41.7 million) and
current cash position of circa EUR18 million (EUR5.5 million
restricted).
-- Gearing increased to 79% (31 December 2014: 74%) as a result
of write-down and finance costs incurred during the year.
Operational and Group highlights:
-- On 13 May 2015, Plaza announced the agreement to sell its
Indian shopping mall located in Pune, India, for c. EUR35 million.
The net cash proceeds (after repayment of the related bank loan,
other liabilities and transaction costs) from the sale were c.
EUR7.4 million (525 million INR), which are being put towards
Plaza's future investments and used for general corporate
purposes.
-- On 24 June 2015, Plaza reached an agreement to sell its
46,500 sqm development site in Iasi, Romania, in two separate
transactions (one for the sale of 37,334 sqm and the other for the
sale of 9,166 sqm), for a gross consideration of EUR7.3 million.
There was no bank debt secured against the property. In line with
the Company's stated restructuring plan, 75% of the net cash
proceeds from the transactions were distributed to the Company's
bondholders at the end of September 2015 as an early principal
repayment.
-- Plaza's subsidiary, Elbit Plaza India Real Estate Holdings
Limited (in which Plaza holds a 50% stake with its joint venture
partner, Elbit Imaging Ltd.) ("EPI"), on 2 December 2015 signed an
agreement to sell 100% of its interest in a special purpose vehicle
which holds a site in Bangalore to a local investor. The total
consideration for the sale is INR 321 Crores (circa EUR45.4
million) which will be paid when the transaction closes. Following
this closing, 50% of the proceeds will go to Plaza, of which 75%
will be repaid to the Company's bondholders in line with the
Company's stated restructuring plan. The transaction is subject to
certain conditions precedent, and closing will take place once
these conditions are met and no later than 30 September 2016. The
investor is providing certain security in order to guarantee this
deadline.
-- A stable occupancy level was recorded across the Company's
existing shopping and entertainment centres in the CEE, with the
overall portfolio occupancy level at 94.96% as of 31 December 2015
(31 December 2014: 95.34%).
o At Torun Plaza, Poland, occupancy increased to 96.08% (2014:
92.5%) and turnover remained stable despite a slight decrease of
3.2% in the footfall.
o Riga Plaza in Latvia recorded an 8.6% increase in turnover
along with a 2.2% increase in footfall, compared to 2014. A small
decrease in the occupancy level to 97% (2014: 99.5%) was a direct
result of a small number of retailers exiting the Latvian market
altogether.
o Suwalki Plaza, Poland, continued to perform well, with a 2.5%
increase in turnover in 2015 and 5.7% increase in footfall,
compared to the same period in 2014. Occupancy decreased very
slightly to 96.5% compared to the same period in 2014 (97.7%).
o Zgorzelec Plaza delivered a 2.8% increase in turnover compared
to the same period in 2014, while footfall remained stable. The
increase was despite a reduction in occupancy from 95.2% to 88.91%
after the closure of the Stokrotka supermarket, following which
successful discussions with tenants resulted in most of them
agreeing to remain at the centre.
o A 10.6% turnover increase was recorded at Liberec Plaza,
compared to 2014, while occupancy remained stable at 83.67% (2014:
84%).
-- Considerable letting success was achieved across the
portfolio and contracts were agreed with a number of significant
new tenants. This improved the overall tenant strength and mix in
the portfolio, and included agreements with KIK, Kinder Planeta,
Pink and Cliff Sport. In the second half of the year, Adidas,
Drogas, Calzedonia, Subway and other well-known brands opened
stores in Latvia at Riga Plaza. Both Suwalki Plaza and Zgorzelec
Plaza successfully agreed to extend their first five-year lease
agreements which helped to keep a high occupancy level and will
deliver a more resilient, higher quality income over the coming
years.
-- On 21 December 2015 Mr. Ron Hadassi was reappointed as
Chairman of the Board of Directors following a meeting of the
Board.
Key highlights since the period end:
-- Since the year end, on 28 January 2016 Plaza announced the
appointment of Dori Keren and Yitshak (Izzie) Elias to the roles of
Acting Chief Executive Officer and Chief Financial Officer,
respectively. Both roles will become effective on 1 April 2016
while Dori Keren will become Chief Executive Officer on 1 January
2017.
-- On 4 March 2016, Plaza agreed to sell its subsidiary holding
Liberec Plaza, a shopping and entertainment centre in the Czech
Republic, for EUR9.5 million. In line with the terms of the
agreement, the buyer deposited 15% of the consideration in escrow.
The due diligence process, final closing and settlement is expected
to conclude by the end of March. The disposal follows an agreement
announced by Plaza on 29 September 2015 whereby a wholly owned
subsidiary of Plaza ("PCE") won a tender to buy the loan to the
holding and operating company for Liberec Plaza for EUR8.5 million.
Upon completion of the Liberec Plaza disposal, PCE will receive
EUR8.5 million on account of the bank loan it previously purchased.
Out of the remaining proceeds, 75% will be distributed to the
Company's bondholders by the end of June this year.
-- On 24 March 2016 Plaza completed the sale of its 23,880 sqm
site in Slatina, Romania, to a third party developer for EUR0.66
million, consistent with the asset's last reported book value. In
line with the Company's stated restructuring plan, 75% of the cash
proceeds will be distributed to the Company's bondholders by the
end of June this year as an early repayment.
-- Today, 29 March 2016, Plaza announces that Sarig Shalhav, a
Non-Executive Director of the Company, has indicated his intention
to retire from the Board in June 2016 to allow him to focus on
other interests. The Board wishes to thank Mr Shalhav for his
contribution over previous years, and will confirm any changes to
the Board if and as required in due course.
Commenting on the results, Roy Linden, CFO and Acting CEO of
Plaza Centers, said:
"Having completed the restructuring process in the prior year,
2015 was very much about delivering on our plan to create a more
streamlined, better performing business. With the successful sale
of non-core assets and subsequent delivery of proceeds to
bondholders, together with a stronger operational performance
across the shopping and entertainment centres portfolio and several
development and asset management milestones achieved, in particular
two new building permits in Belgrade and Timisoara, we are pleased
with what we have accomplished during the year.
"There is still plenty more progress to be made, but our
portfolio and underlying business is now in a stronger position and
the new management team has a clear mandate for further development
in 2016 and beyond."
Ron Hadasi, Chairman of Plaza Centers said: "On behalf of the
Board of Directors and our shareholders, I would like to thank Roy
Linden sincerely for his many years of hard work and dedication to
the Company in his role as CFO, and his significant efforts during
the last several months as Acting CEO. We wish him the very best of
luck in the next stage of his career.
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
"Roy leaves the Company in good hands as we welcome the new
management team of Dori Keren and Izzie Elias to Plaza. Under their
guidance we look to the remainder of the year with confidence as we
continue with an orderly disposal of non-core or mature assets,
work hard to reduce debt levels and bring our development projects
to fruition. The progress being made at Belgrade Plaza, which is
currently the biggest commercial construction site in Serbia, as
well as the sale of Liberec Plaza and the negotiation for the
disposal of our share in Riga Plaza are all reflective of the
opportunities we have to deliver the strategy and meet our
objectives."
For further details please contact:
Plaza
Roy Linden, CFO and Acting
CEO +36 1 462 7222
FTI Consulting
Dido Laurimore / Claire Turvey
/ Tom Gough +44 20 3727 1000
Notes to Editors
Plaza Centers N.V. (www.plazacenters.com) is a leading property
developer and investor with a significant presence across Central
and Eastern Europe. It focuses on constructing new shopping and
entertainment centres and, where there is significant potential,
redeveloping existing centres in both capital cities and important
regional centres. The Company is listed on the Main Board of the
London Stock Exchange, the Warsaw Stock Exchange and, as of 27
November 2014, the Tel Aviv Stock Exchange (LSE: "PLAZ", WSE:
"PLZ/PLAZACNTR"; TASE: "PLAZ"). Plaza Centers N.V. is an indirect
subsidiary of Elbit Imaging Ltd. ("EIL"), an Israeli public company
whose shares are traded on both the Tel Aviv Stock Exchange in
Israel and the NASDAQ Global Market in the United States. It has
been active in real estate development in emerging markets for over
20 years.
Forward-looking statements
This press release may contain forward-looking statements with
respect to Plaza Centers N.V. future (financial) performance and
position. Such statements are based on current expectations,
estimates and projections of Plaza Centers N.V. and information
currently available to the company. Plaza Centers N.V. cautions
readers that such statements involve certain risks and
uncertainties that are difficult to predict and therefore it should
be understood that many factors can cause actual performance and
position to differ materially from these statements. Plaza Centers
N.V. has no obligation to update the statements contained in this
press release, unless required by law.
EXECUTIVE OFFICER'S STATEMENT
2015 was an important year for Plaza as we progressed our plans
to create a more streamlined, better performing business. Our focus
on the disposal of non-core assets continued as we reduced total
assets to EUR392 (31 December 2014: EUR466). This approach has been
allowing us to concentrate on superior assets in our prime areas of
focus within Central and Eastern Europe, whilst at the same time
delivering proceeds to bondholders and creating a stronger business
for our shareholders.
Performance across our shopping centres has been stable during
the year, with an overall portfolio occupancy level of 94.96% as of
31 December 2015 (31 December 2014: 95.34%)
Rental income fell during the year to EUR18.7 million compared
with EUR22.1 million at the end of December 2014. This reduction
reflects the fewer properties managed by Plaza (reduction of EUR3.1
million) however, importantly, the quality of the income is now
higher and more resilient, reflecting the superior portfolio of
assets. To that end, taken on a like for like basis, rental income
of the assets Plaza increased during the period.
Our total loss for the year reduced significantly to EUR46
million, compared with EUR120 million at the end of December 2014.
This was helped by a reduction in our net finance costs, a decrease
in the operating costs of our shopping centres, as well as lower
central administration costs. Crucially, it was also supported by
considerably reduced property write-down costs compared with the
previous year.
Over the course of 2015, in line with the restructuring plan
agreed in 2014, we repaid 75% of proceeds from disposals to
bondholders, totalling EUR19.3 million. Since the restructuring
plan was approved, Plaza has now returned EUR47 million (of which
EUR19 milion is principal and the remainder interest) to
bondholders, in addition to 13.21% of shares in the Company.
Pleasingly, at the start of 2015, Plaza's credit rating by Standard
& Poor's also improved from "D" to "BBB-" on a local Israeli
scale with a stable outlook.
More generally, we have been seeing economic improvement across
our core geographies but the Board remains vigilant to wider macro
economic factors. Without a doubt, 2015 was a year of significant
progress and we look ahead towards further improving performance
across our assets in 2016, with construction starting on key
developments, and taking action to reduce leverage and provide
proceeds to bondholders through the ongoing disposal of non-core
and matured assets.
Key Events
Plaza undertook the disposal of the following non-core assets
during the year:
-- On 13 May 2015, Plaza announced the agreement to sell its
Indian shopping mall located in Pune, India, for c. EUR35 million.
The net cash proceeds (after repayment of the related bank loan,
other liabilities and transaction costs) from the sale were c.
EUR7.4 million (525 million INR).
-- On 24 June 2015, Plaza reached an agreement to sell its
46,500 sqm development site in Iasi, Romania, in two separate
transactions (one for the sale of 37,334 sqm and the other for the
sale of 9,166 sqm), for a gross consideration of EUR7.3 million.
There was no bank debt secured against the property. In line with
the Company's stated restructuring plan, 75% of the net cash
proceeds from the transactions were distributed to the Company's
bondholders at the end of September 2015 as an early principal
repayment.
-- On 10 September 2015, Plaza announced that it has reached an
agreement to sell Palazzo Ducale, an office building of 823 sqm GLA
in the centre of Bucharest, Romania, for EUR1.085 million,
consistent with the asset's reported book value. In line with the
Company's stated restructuring plan, 75% of the net cash proceeds
from the transaction were distributed to the Company's bondholders
at the end of September 2015 as an early principal repayment.
-- Plaza's subsidiary, Elbit Plaza India Real Estate Holdings
Limited (in which Plaza holds a 50% stake with its joint venture
partner, Elbit Imaging Ltd.) ("EPI"), on 2 December 2015 signed an
agreement to sell 100% of its interest in a special purpose vehicle
which holds a site in Bangalore to a local investor. The total
consideration for the sale is INR 321 Crores (circa EUR45.4
million) which will be paid when the transaction closes. Following
this closing, 50% of the proceeds will go to Plaza, of which 75%
will be repaid to the Company's bondholders in line with the
Company's stated restructuring plan. The transaction is subject to
certain conditions precedent, and closing will take place once
these conditions are met and no later than 30 September 2016. The
investor is providing certain security in order to guarantee this
deadline.
-- On 14 December 2015, Plaza provided an update on the sale of
the Cina property in Bucharest as its Romanian subsidiary concluded
the transaction to waive its leasing rights in the asset which has
been sold by the owner. The expected gross cash proceeds due to
Plaza's subsidiary is circa EUR2.7 million (out of a total
consideration of EUR4 million) and the expected net proceeds, after
related taxes and transaction costs, are circa EUR2.26 million. In
line with the Company's stated restructuring plan, 75% of the net
cash proceeds from the transaction will be distributed to the
Company's bondholders by the end of March 2016 as an early
principal repayment.
-- During 2015 Plaza took the strategic decision to dispose of
the Chennai, India asset, rather than to proceed with the
development project. On 16 September 2015, EPI (an Indian joint
venture of Plaza) obtained a backstop commitment for the purchase
of the Chennai scheme. EPI, which had been in discussions regarding
the sale of the Chennai Project SPV, obtained a commitment that,
subject to the fulfilment of certain conditions precedent, the sale
transaction would be completed by 15 January 2016 (the "Long Stop
Date") for the consideration of approximately EUR21.6 million (INR
1,617 millions), net of all transaction related costs. However, it
was agreed that, should completion not take place by the Long Stop
Date, then EPI's stake in the Chennai Project SPV would be
increased to 100%. In line with the Sale Transaction agreement,
since the local Indian partner (the "Partner") failed to complete
the transaction by the Long Stop Date, EPI has exercised its right
to the Partner's 20% holding in the Indian company, Kadavanthara
Builders Private Limited.
Plaza also achieved a number of development milestones during
year:
-- On 29 September 2015, Plaza announced that a wholly owned
subsidiary of the Company won a tender to buy the loan to the
wholly owned holding and operating company for Liberec Plaza
shopping and entertainment centre in the Czech Republic. The
EUR20.4 million bank loan was provided by two commercial banks and
which Plaza has agreed to buy for EUR8.5 million, reflecting a
discount of 58%. Subsequently, the Company [recorded] a profit on
the discount (circa EUR12 million) in its financial statements for
the second half of 2015. Liberec Plaza also recorded a net
operating income of circa EUR850,000 in 2015, which reflects a
yield of approximately 10% on the loan purchase price. On 4 March
2016, after the reporting date, Plaza sold the shares of the SPV
holding the shopping and entertainment centre to a local investment
group for a consideration of EUR9.5 million.
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
-- The Company is in negotiations to sell its 50% share in its
Riga Plaza (Latvia) project to a third party. The sale price is
expected to be close at the asset's book value. More information
will be provided upon the closing of the transaction.
-- On 21 July 2015, Plaza announced that it had received the
building permit to develop Timisoara Plaza, a circa 40,000 sqm GLA
shopping and entertainment centre in Timisoara, western Romania. A
binding financing offer was also agreed with the Hungarian
Export-Import Bank Plc (Exim bank) for circa 65% of the project
cost. A tender process is now underway to select a general
constructor for the project, which is expected to complete during
the second half of 2017.
-- On 9 July 2015, Plaza announced that it had received the
building permit to develop Belgrade (Visnjicka) Plaza, a 32,000 sqm
GLA shopping and entertainment centre. Located on Visnjicka Street,
adjacent to the Danube River in old Belgrade, the new development
will include approximately 110 retail units, a supermarket and a
multi-screen cinema complex. Construction began in 2015, with
demolition works and pile works completed and skeleton construction
underway, the completion is targeted for the first half of 2017. To
date, the Company has agreed pre-let terms for circa 45% of the
lettable area demonstrating the significant tenant demand that
exists for space in the new centre. The Company has received a bank
financing offer for approximately 55% of the construction cost and
expects to finalise in the next quarter.
Plaza has also continued to make operational and asset
management progress across its shopping centre portfolio.
Group management update
-- Since the year-end, on 28 January 2016, the Board of Plaza
took the decision to appoint Dori Keren and Yitshak (Izzie) Elias
to the roles of Acting Chief Executive Officer and Chief Financial
Officer, respectively. Both roles will become effective on 1 April
2016 while Dori Keren will become Chief Executive Officer on 1
January 2017.
-- On 21 December 2015, Plaza announced the reappointment of Mr.
Ron Hadassi as Chairman of the Board of Directors following a
meeting of the Board.
Results
As stated, Plaza's total comprehensive loss for the year
narrowed to EUR37 million compared with EUR116 million at the end
of December 2014 or a EUR46 million loss attributable to the owners
of the Company (EUR120 million: 2014). The most significant factor
in this was a large reduction in property net write-down costs of
EUR19 million compared to EUR89 million in 2014. These write-down
costs are ascribed mainly to the revaluation of Liberec Plaza,
Czech Republic (EUR6 million) and Casa Radio in Romania, while the
remaining write-down and loss from disposals is mainly due to the
sale of Koregaon Plaza in India (realisation on foreign currency
translation adjustments).
Plaza successfully reduced net finance costs, shopping centre
operating costs and central administration costs during the period.
As at 31 December 2015, Plaza had cash and cash equivalents of
EUR20.4 million, including EUR4.8 million of cash held as
restricted cash deposits.
Debt restructuring plan
In line with the debt restructuring plan agreed in 2014, Plaza
repays 75% of proceeds from disposals to bondholders. In 2015,
Plaza paid EUR19.3m to bondholders and, since the restructuring
plan was approved in 2014, a total of EUR47m (of which EUR19
million for principal and rest for interest) has been distributed
as well as 13.21% of shares in the Company. For background on this
restructuring, please refer to the Company announcement of 10 July
2014.
Cash flow projection
Following the closing of the Company's restructuring plan, the
Company's consolidated financial statements include liabilities to
bondholders for the aggregate principal amount of EUR203
million.
The following table sets out the cash flow forecast of the
Company until mid-2017 in order to achieve the abovementioned
repayments, as they fall due.
According to the Plan, if by 1 December 2016 the Company manages
to repay the principal debentures of NIS 434 million (EUR102
million), then the remaining principal payments shall be deferred
for an additional year ("the Deferral"). Since the Plan came into
effect, up until 31 December 2015, the Company has repaid circa NIS
89 million (EUR19 million) of the debentures.
The remaining NIS 345 million (EUR81 million) of debentures
(achieved through the sale of assets), together with the interest
of approximately EUR13 million, are still to be paid by 31 December
2016, if the Company strives to achieve the abovementioned
condition in the Plan.
Since parts of series B debentures are held in treasury, the
total required net principal repayment in 2016 is NIS 338 million
(EUR79 million) and has reclassified accordingly this amount as an
amount payable within the next 12 months.
The Company regards the below scenario as the most probable,
although these repayments are not falling due, unless the below
mentioned assets in this scenario are disposed of.
Forecasted cash flow
(in MEUR)
In the year In the six
ending December months ending
31, 2016 June 30, 2017
Opening balance of consolidated
cash (1) 20 37
Sources of cash during the
period
Net proceeds from disposal
of operating shopping centres
(2) 98 -
Proceeds from disposal of
plots held (3) 54 15
Net operating income from
shopping centres (4) 14 1
----------------- ---------------
Total sources expected 186 53
----------------- ---------------
Items added
Principal repayment of debentures,
net (5) (108) (11)
Interest repayment of debentures,
net (13) (3)
Investment in projects under
construction (6) (15) (1)
Repayment of bank facilities
in subsidiaries (principal
+interest) (7) (1)
General and administrative
expenses (6) (3)
----------------- ---------------
Total uses expected (149) (19)
----------------- ---------------
Closing balance of consolidated
cash (7) 37 34
----------------- ---------------
(1) Opening balance - as appeared in the consolidated statement
of financial position, including restricted cash (which will be
released upon the disposal of the operating shopping centres).
(2) 2016 - Expected net payment from the sale of four shopping
centres (Riga, Liberec, Suwalki and Torun).
(3) 2016 - The Company expects extensive disposals of plots held
in CEE and in India. The main 2016 disposals are expected in India
and Serbia. In 2017, themain disposals are due in India.
(4) As the operating shopping and entertainment centres are to
be disposed of in 2016, in 2017 Net Operating Income is generated
from the Belgrade Plaza (Visnjicka) shopping centre to be opened in
the first half of 2017.
(5) 2016 - Due to be paid by 1 December 2016. The gross amount
is expected at EUR110 million, less the expected repayment due to
treasury series B bonds held in the amount of EUR2 million.
(6) 2016 - Main investment in Belgrade Plaza (Visnjicka project)
and in Timisoara project (Romania).
(7) 2016 - Immaterial restricted cash amounts. 2017 - Including
restricted cash in Visnjicka of EUR3 million.
NAV
The Company's property portfolio (CEE and India) was valued by
Cushman and Wakefield as at 31 December 2015 and a summary
valuation is shown below.
Net Asset Value per share decreased to 0.17 EUR/share from 0.22
EUR/share at the year-end in 2014 .
The Company's NAV was calculated as follows:
EUR Million
Net Financial
Debt (314)
Asset values
(*)
Operating assets 210
Development
Assets (**) 162
Pipeline assets 52
Office Building 3
Total 427
Other assets
and liabilites 1
NAV 114
* - Based on Cushman and Wakefield valuation
** - Including 100% of Casa Radio due to the material owners
loan
Portfolio progress
The Company currently has a land bank of 15 plots, which are
under development or awaiting planning decisions, and owns five
operational shopping and entertainment centre assets and one office
scheme across the CEE and in India. The location of the projects,
as at 29 March 2016, is summarised as follows:
Number of assets (CEE and India)
---------------- --------------------------------------
Location Active Under development/ Offices
planning/land
bank
---------------- ------- ------------------- --------
Romania - 4 -
---------------- ------- ------------------- --------
India - 2 -
---------------- ------- ------------------- --------
Poland 3 4 -
---------------- ------- ------------------- --------
Hungary - 1 1
---------------- ------- ------------------- --------
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
Serbia - 2 -
---------------- ------- ------------------- --------
Czech Republic 1 - -
---------------- ------- ------------------- --------
Bulgaria - 1 -
---------------- ------- ------------------- --------
Greece - 1 -
---------------- ------- ------------------- --------
Latvia 1 - -
---------------- ------- ------------------- --------
Total 5 15 1
---------------- ------- ------------------- --------
Liquidity & Financing
For a detailed liquidity analysis refer to the debt
restructuring section above. Plaza ended the year with a
consolidated cash position (including restricted bank deposits) of
approximately EUR20.4 million, of which circa EUR4.8 million of
cash is held as restricted cash on a consolidated basis. Working
capital as at 31 December 2015 totalled negative EUR98 million
chiefly due to the reclassification of EUR80 million mentioned
above and as trading properties were classified as non-current
assets in the Financial Statements, The Company's current cash
position is circa EUR18 million (of which EUR5.5 million is
restricted).
Plaza continued to focus on deleveraging its balance sheet
during the period but, as a result of impairment losses recorded in
the period and finance costs incurred, the gearing level increased
to 79% in 2015.
At the start of 2016, Plaza's credit rating by Standard &
Poor's was maintained on "BBB-" on a local Israeli scale with a
negative outlook.
Strategy and Outlook
In 2016, Plaza will continue to focus on improving the
performance of the shopping centre portfolio, applying the
Company's strong asset management capabilities.
There will be additional emphasis on reducing leverage as well
as the further rationalisation and strengthening of the portfolio
by disposing of non-core properties.
Focus on Central and Eastern Europe will continue, creating a
strong-performing portfolio. Plaza will also look to make progress
on its developments, including Timisoara Plaza and Belgrade
(Visnjicka) Plaza, and will explore partnership and financing
opportunities for the Casa Radio project as well as to advance
permits for the Belgrade Plaza (MUP) and Lodz projects.
While the markets in which Plaza operates showed positive
economic signs during 2015, the Company remains vigilant towards
wider macro-economic impacts.
Plaza's focus remains on building a strong portfolio, unlocking
the value of land through developments where possible, reducing
debt levels and delivering on behalf of bondholders and
shareholders.
Roy Linden
CFO and Acting CEO
29 March 2016
OPERATIONAL REVIEW
Plaza recorded a number of important operational and strategic
achievements during 2015 and took action to improve the performance
of its portfolio as well as the wider business.
Highlights for the financial year included:
-- Operations: Improving performance of its operating shopping
and entertainment centres focused on Central and Eastern Europe,
and achieving key development milestones at Timisoara Plaza and
Belgrade (Visnjicka) Plaza.
-- Disposals: Focus remained on disposing of non-core assets to
reduce leverage and provide payments to bondholders in line with
the restructuring plan. Since the approval of the restructuring
plan, circa EUR47 million has now been paid to bondholders.
-- Financial position: As at 31 December 2015, Plaza had cash
and cash equivalents of EUR20.4 million including EUR4.8 million of
cash held as restricted cash deposits.
As of the reporting date, Plaza has 21 assets in nine countries,
of which 15 are under various stages of development or under
feasibility study across the CEE region as well as India. Of these
developments, five are located in Romania, two in India, four in
Poland, two in Serbia, and single assets in Bulgaria, Greece and
Hungary. In addition to these developments, Plaza retains the
ownership of and operates five shopping and entertainment centres
in Poland, Czech Republic (agreed to be sold) and Latvia, as well
as an office building in Hungary.
The development projects are at various stages of the
development cycle, from landholdings through to those with planning
and permits.
The Company's current assets and pipeline projects are
summarised in the table below:
Asset/Project Location Nature of Size Plaza's Status (*)
asset sqm (GLA) effective
ownership
%
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Operating Shopping and Entertainment Centres
------------------------------------------------------------------------------------------------------------------
Operating,
Suwalki Suwalki, Retail & entertainment opened in
Plaza Poland scheme 20,000 100 May 2010
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Operating,
Zgorzelec Zgorzelec, Retail & entertainment opened in
Plaza Poland scheme 13,000 100 March 2010
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Operating,
Torun Torun, Retail & entertainment opened in
Plaza Poland scheme 40,000 100 November 2011
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Liberec, Operating,
Liberec Czech Retail & entertainment opened in
Plaza Rep. scheme 17,000 100 March 2009
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Operating;
Riga, Retail & entertainment opened in
Riga Plaza Latvia scheme 49,000 50 March, 2009
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Development Assets
------------------------------------------------------------------------------------------------------------------
Casa Radio Bucharest, Mixed-use 467,000 75 In planning
Romania retail and (GBA including and permitting
leisure plus parking phase
office scheme spaces)
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Construction
scheduled
to commence
in 2016; completion
Timisoara Timisoara, Retail & entertainment scheduled
Plaza Romania scheme 40,000 100 for H2 2017
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Belgrade Belgrade, Apartment-hotel 72,000 100 In planning
Plaza Serbia and business (GBA) and permitting
centre with phase
a shopping
gallery
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Construction
Belgrade commenced
Plaza in 2015; completion
(Visnjicka Belgrade, Retail & entertainment scheduled
) Serbia scheme 32,000 100 for H1 2017
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Operational Office Buildings
------------------------------------------------------------------------------------------------------------------
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
David Budapest, Operational
House Hungary Office 2,000 100 office
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Pipeline Projects
------------------------------------------------------------------------------------------------------------------
Plot Size
(sqm)
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Planning and
Kielce Kielce, Retail & entertainment feasibility
Plaza Poland scheme 25,000 100 examination
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
In planning
Lodz, Retail & entertainment and feasibility
Lodz Plaza Poland scheme 61,500 100 phase
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Planning and
Leszno Leszno, Retail & entertainment feasibility
Plaza Poland scheme 18,000 100 examination
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Planning and
Lodz, Residential feasibility
Lodz (Residential) Poland scheme 24,700 100 examination
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Arena Budapest, Office scheme 22,000 100 Planning and
Plaza Hungary (land use feasibility
Extension right) examination
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Miercurea Planning and
Csiki Ciuc, Retail & entertainment feasibility
Plaza Romania scheme 36,500 100 examination
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Planning and
Constanta Constanta, Retail & entertainment feasibility
Plaza Romania scheme 26,500 100 examination
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Planning and
Shumen Shumen, Retail & entertainment feasibility
Plaza Bulgaria scheme 26,000 100 examination
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Planning and
Pireas Athens, feasibility
Plaza Greece Retail/Offices 15,000 100 examination
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Planning and
Bangalore, Residential feasibility
Bangalore India Scheme 218,500 25 examination
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
Planning and
Chennai Chennai, Residential feasibility
(**) India Scheme 302,400 40 examination
-------------------- ------------ ------------------------ ---------------- ----------- ---------------------
(*) all completion dates of the projects are subject to securing
external financing and securing sufficient tenant's demand.
Projects that are classified as "Under planning and feasibility
examination" also have potential to be sold as land.
(**) Following year-end, effective ownership increased to
50%
Details of these activities by country are as follows:
Poland
Plaza owns and operates three completed shopping and
entertainment centres across Poland, with an average occupancy of
93.8%.
Torun Plaza, which was completed and opened in late 2011,
comprises approximately 40,000 sqm of GLA and is Plaza's tenth
completed centre in Poland. Occupancy level increased to 96.08% at
year end. The centre reported a slight decrease in footfall (3.2%),
while the turnover remained stable compared to 2014.
Suwalki Plaza, comprising approximately 20,000 sqm of GLA with
tenants such as H&M, Rossmann, New Yorker, Reserved and Cinema
Lumiere, continues to perform well. Occupancy slightly decreased to
96.5% (2014: 97.7%) and turnover increased by 2.5% during the year.
New stores KIK, Kinderplaneta and Pink opened during 2015 and most
existing tenants have signed lease renewals, with the fifth
anniversary of the opening of the centre having taken place in
May.
In Zgorzelec Plaza, the 13,000 sqm shopping and entertainment
centre has experienced an occupancy decrease, reaching 88.91%
(2014: 95.2%), attributable mainly to the closing of the
supermarket unit (Stokrotka). Despite that, after successful
discussions with tenants, most of them chose to stay in the centre.
Positively, turnover has increased by 2.8% compared to 2014 while
footfall remained stable.
Feasibility and planning studies were also progressed at Lodz
Plaza (comprising approximately 35,000 sqm of GLA) and amendment of
the local master plan is underway.
Plaza also owns a residential plot in Lodz, Poland, which is
being sold in stages: 3,340 sqm were sold in 2015 and another 5,200
sqm have been sold since the end of the period, at the beginning of
2016. The rest of the plot (approximately 24,700 sqm) is expected
to be sold in 2016.
Hungary
Plaza has a transferable land use right to a site adjacent to
the Arena Plaza, on which it plans to develop a 40,000 sqm office
complex extension to the existing shopping centre. In line with
Plaza's cautious approach to development, the Company will hold off
on the commencement of any construction until it is satisfied that
a recovery in the Budapest office market and a general rise in both
occupancy rates and rental levels is underway.
David House, an office building on Andrassy Boulevard, in
Budapest, remains under the Company's ownership.
Czech Republic
Turnover at Liberec Plaza shopping and entertainment centre
(approximately 17,000 sqm GLA), owned and managed by the Company,
improved by 10.6% compared to 2014, while occupancy slightly
decreased to 83.7% (2014: 84%).
In September 2015, one of Plaza's wholly owned subsidiaries won
a tender to buy the bank loan to the wholly owned SPV of Liberec
Plaza. The EUR20.4 million bank facility was provided by two
commercial banks to which the Company agreed to pay and paid an
amount of EUR8.5 million, reflecting a discount of 58%. The Company
recorded a EUR11.9 million profit on the discount in these
consolidated financial statements, included as finance income.
In March 2016, Plaza agreed to sell its subsidiary holding in
Liberec Plaza for EUR9.5 million. In line with the terms of the
agreement, the buyer has deposited 15% of the consideration in
escrow. The due diligence process, final closing and settlement is
expected to conclude by the end of March 2016. Upon completion of
the Liberec Plaza disposal, Plaza will receive EUR8.5 million on
account of the bank loan it previously purchased. Out of the
remaining proceeds, at least 75% will be distributed to the
Company's bondholders by the end of June this year, in line with
the Company's stated restructuring plan.
Romania
Plaza holds a 75% interest in a joint venture with the
Government of Romania to develop Casa Radio (Dambovita), the
largest development plot in central Bucharest. The 467,000 sqm
complex, including a 90,000 sqm GLA shopping mall and leisure
centre, offices, a hotel and a convention and conference hall, is
planned for the site. The Company has obtained the PUD (Detailed
Urban Permit) and the PUZ (Zonal Urban Plan) for the Dambovita
Centre Multifunctional Complex.
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
In light of the financial crisis, and in order to ensure a
construction process that is aligned to current market conditions,
the Company initiated preliminary discussions with the Authorities
(which are shareholders in the SPV and a party to the Public
Private Partnership) regarding the future of the project. The
Company has also officially notified the Authorities that it will
be seeking to redefine some of the terms in the existing PPP
contract, including the timetable, structure and project
milestones. Please see note 8 (d) of the Financial Statements for
further information on the project.
In July 2015, the Company received the building permit to
develop Timisoara Plaza, a circa 40,000 sqm GLA shopping and
entertainment centre in Timisoara, western Romania. A binding
financing offer has also been agreed with a commercial bank for
circa 65% of the project cost. The construction is expected to
commence in 2016, and completion is expected in late 2017.
Latvia
In Riga Plaza, which is 50% owned by Plaza, occupancy decreased
to 97.02% (2014: 99.5%). Turnover has increased by 8.6% compared to
the previous year, and footfall has increased by 7.2%. The Company
is in negotiations for the sale of its share in the project. The
transaction is expected to be executed close to book value of the
asset.
Serbia
In July 2015, the Company received the building permit to
develop Belgrade Plaza (Visnjicka) (previously known by the project
name Sport Star Plaza), a 32,000 sqm of GLA shopping and
entertainment centre. Construction commenced in 2015 and completion
is anticipated in 2017. The demolition, excavation and piling works
has been completed. Reflecting a strong demand for modern retail
space, 45% of the centre's available retail space was pre-let as of
the reporting date. Based on the successful letting progress the
Company has received a financing offer for 55% of the construction
cost.
Plaza owns a building in the central administrative district of
Belgrade, which housed the former Yugoslavian Government's Federal
Ministry of Internal Affairs. Development plans for the building
comprise a shopping gallery, an apartment-hotel and a business
centre, totalling circa 72,000 sqm of gross building area.
Processes to secure the relevant local planning and permitting
approvals are underway.
On 1 March 2013, Serbia was granted candidate status to the
European Union. The Company believes this will significantly
increase the flow of international capital into the country,
enabling its carefully selected Serbian development pipeline,
completing and operating the assets to benefit from an anticipated
growth in investor interest. In March 2016, a joint venture between
two international investors bought the two biggest shopping centres
in Belgrade, demonstrating strong interest in the investment market
there.
India
In May 2015, the Company signed an agreement to sell the SPV
holding Koregaon Park Plaza, the retail, entertainment and office
scheme located in Pune, India, for circa EUR35 million (2,500
million INR). The net cash proceeds received (after repayment of
the related bank loan which was reclassified to short term other
liabilities and transaction costs) from the sale totalled EUR7.4
million (525 million INR). In line with the Company's stated
restructuring plan, all the net cash proceeds from the transaction
were retained within the Company.
In 2008, Plaza formed a 50:50 joint venture with Elbit Imaging
(the "JV") to develop mega mixed-use projects in Bangalore, Chennai
and Kochi. Under the terms of the agreement, Plaza acquired a 47.5%
stake in Elbit India Real Estate Holdings Limited, which had
existing stakes in mixed-use projects in India, in conjunction with
local Indian partners.
The JV projects are as follows:
Bangalore - This residential project, owned in an equal share
between the JV and a prominent local developer, is located on the
eastern side of Bangalore, India's fifth largest city with a
population of more than eight million inhabitants.
In March 2008 the JV entered into an amended and reinstated
share subscription and framework agreement, with a third party, and
a wholly owned Indian subsidiary of the JV which was designated for
this purpose ("SPV"), to acquire, through the SPV, up to 440 acres
of the plot in certain phases as set forth in the Amended Framework
Agreement.
As of 31 December 2015, the SPV holds joint development rights
in approximately 54 acres of the plot for a total aggregate
consideration of approximately INR 2,843 million (EUR40 million).
In addition, the SPV has paid to the Partner advances of
approximately INR 2,536 million (EUR35 million) on account of
future acquisitions by the SPV of a further 51.6 acres.
In December 2015, the JV signed an agreement to sell 100% of its
interest in the SPV to the Partner. The total consideration for the
sale upon completion of the transaction is INR 321 Crores
(approximately EUR45.4 million) which will be paid at transaction
closing.
The transaction is subject to certain conditions precedent, and
closing will take place once these conditions are met and no later
than 30 September 2016. The Investor has provided certain security
in order to guarantee the aforementioned deadline.
Chennai - A residential development, which is 80% owned by the
JV and 20% by a prominent local developer. The Chennai Project was
designated at the end of 2014 as a project for development. During
2015, due to changes in the Group's activities and objectives, the
Company decided not to develop the Chennai project but rather to
dispose it in its current situation. In this respect, on 16
September 2015, the JV obtained a backstop commitment for the
purchase of Chennai, India Scheme.
The JV, which has been in discussions regarding the sale of
Chennai Project, has obtained a commitment that, subject to the
fulfilment of certain conditions precedent, the sale transaction
will be completed by 15 January 2016 (the "Long Stop Date") for the
consideration of approximately EUR21.6 million (INR 1,617
millions), net of all transaction related costs. If completion does
not take place by the Long Stop Date, then JV's stake in the
Chennai Project will be increased to 100%. In line with the Sale
Transaction agreement, since the local Indian partner (the
"Partner") failed to complete the transaction by the Long Stop
Date, the JV had exercised its right to get the Partner's 20%
holdings in the Indian company.
FINANCIAL REVIEW
Results
During 2015, Plaza remained focused on the execution of its
strategy to dispose of the non-core and matured assets in its
portfolio to reallocate capital to its core yielding assets and to
reduce debt levels.
The Company has designated its properties into three types:
-- Completed trading properties projects;
-- Projects scheduled for construction; and
-- Plots in the planning phase.
In respect of its completed trading property projects, the
Company still faces material uncertainties in respect of the time
required to sell the properties. However, the Company has not
changed its business model and it is actively seeking buyers at
appropriate pricing. Therefore, it is clear from the Company's
perspective that these completed properties are trading properties,
rather than investment properties.
In respect of the sites held, which are not intended to be
developed in the near future, the Company is actively looking for
buyers and does not hold the land passively with the intention to
gain from a potential value increase. Sites scheduled for
construction are intended to be developed and sold in the normal
course of business once circumstances allow. For this reason we
also believe that these are appropriately classified as trading
properties. As at 31 December 2015, as in previous years, the
trading properties were classified as non-current assets in the
Statement of Financial Position.
Income comprised rental income from operating shopping centres.
In 2015, Plaza generated EUR18.7 million of income compared to
EUR22.1 million in 2014. This includes rental income and service
charges collected from the tenants. The rental income in 2015 was
EUR13.1 million while in 2014 it was EUR15.4 million. The decrease
is a result of the strategic sale of Kragujevac Plaza in mid-2014
(c. EUR2.3 million of income recorded in 2014) and also by the sale
of other undeveloped projects. A 10% increase in NOI was recorded
across the shopping centre portfolio (from EUR14.9 million to
EUR16.4 million), including company share in NOI from the
commercial centre of Riga, Latvia, but excluding the impact of the
2014 sale of Kragujevac Plaza. Income from the Group's Fantasy Park
operation, which provides gaming and entertainment services in
Plaza's active shopping centres, decreased to EUR0.7 million (from
EUR1.7 million in 2014) following the operational closure of some
units in the Group's shopping centres. Before the reporting date
the last unit was sold as part of the non-core business disposal
process.
The disposal of Kragujevac Plaza also led to a reduction in
operating costs from EUR8.5 million in 2014 to EUR6.5 million in
2015, while the Fantasy Park operating costs decreased from EUR2.2
million in 2014 to EUR1 million in 2015 following the closures.
A write down of trading properties amounted to EUR20 million in
2015 (EUR87 million in 2014), comprising projects in Romania
(EUR9.2 million); India (EUR1.5 million); Poland (EUR6 million);
the Czech Republic (EUR6.2 million); Hungary (EUR1 million) and
others. This was partly offset by an uplift in the value of
Belgrade Plaza of (EUR6 million).
The uplift in relation to joint ventures classified as equity
accounted investments amounted to EUR0.9 million in 2015, related
to Riga Plaza (Latvia), compared to a net EUR1.7 million write down
in 2014 (related to Plaza's Indian project (Chennai) slightly
offset by the EUR0.4 million increase in the value of Riga Plaza
(Latvia).
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
The Company's active efforts to further reduce costs resulted in
administrative costs decreasing by 6% to EUR7 million (2014: EUR7.4
million), comprising a lower scale expense for professional service
providers and a lower head count. With the elimination of circa
EUR0.5 million severance payments for the two resigning CEOs during
the year, the administrative cost amounted to EUR6.5 million. The
planed expenses for 2016 are EUR6 million.
Other net income saw a net increase to EUR5.5 million from Nil
in 2014, chiefly as a result of a one-time gain recognised due to
the Kochi project in India (EUR4.7 million) and settlement with
potential buyer of Koregaon Park (EUR0.7 million) (2014 - EUR2.3
million insurance pay out received in connection with the Koregaon
Park fire incident, offset mainly by expenses resulting from the
impairment of other assets (mainly Palazzo Du Calle office in
Romania EUR0.7 million) and a loss on the disposal of other assets
(EUR1.5 million)).
Restructuring costs were incurred in connection with the
Company's debt restructuring process in 2014.
A net finance loss of EUR31 million was recorded in 2015,
compared to a net finance cost of EUR35.6 million in 2014.
Finance income increased to EUR14.3 million (2014 EUR2 million),
largely attributable to the settlement of bank loan debt at a
discount (EUR13.5 million) related to projects in the Czech
Republic and Romania.
Finance expenses increased from EUR36.8 million to EUR45.2
million, mainly comprising:
-- Interest expense on debentures (EUR13.9 million compared to
EUR4.6 million in 2014 where most debentures were presented at Fair
Value Through Profit or Loss), and non-cash amortisation of the
discount (the difference between fair value and adjusted par value)
of EUR10.6 million (EUR0.8 million in 2014)
-- EUR5.1 million interest expense on bank borrowings compared to EUR9.6 million in 2014
-- Foreign exchange losses on debentures EUR14.8 million (EUR0.5 million in 2014)
A tax expense of EUR1 million recorded in the consolidated
income statement against the tax benefit of EUR1.3 million in 2014
that largely represented the creation of deferred tax assets
attributed to the Polish operations.
As a result of the above, the loss for the year amounted to c.
EUR46 million in 2015, compared to EUR120 million in 2014. Basic
and diluted loss per share for 2015 was EUR0.07 (2014:
EUR0.39).
Balance sheet
The balance sheet as at 31 December 2015 showed total assets of
EUR392 million, compared to total assets of EUR466 million at the
end of 2014. The decrease was mainly driven by the write down of
trading properties and equity accounted investees, as well as the
disposal of assets and cash used for repayment of debt.
The Company's consolidated cash position (including restricted
bank deposits, short term deposits and held for trading financial
assets) decreased to EUR20.4 million (31 December 2014: EUR41.7
million) after the repayment of bond principal and interest, and
buy out of the bank loan. Gearing increased to 79% (31 December
2014: 74%) as a result of impairment losses and finance costs
incurred during the year.
Trading property values decreased from EUR371 million in 2014 to
EUR318 million in 2015 as result of selling of assets (mainly
Koregaon Park India) and the write downs booked in the period. At
the end of the year, trading properties were classified as
non-current assets due to uncertainties around the development and
commencement dates.
Plaza has on its balance sheet a EUR45 million investment in
equity accounted investees which includes joint venture projects.
The only operating asset currently classified under this heading is
Riga Plaza. The remainder are the two development sites in India
(Bangalore and Chennai). The value has increased by EUR2.7 million
since 2014, comprising a EUR1 million uplift value and by EUR1.7
million due to exchange rate movements.
Total bank borrowings (long and short term) amounted to EUR102.5
million (31 December 2014: EUR150.8 million). This decrease is the
result of loans repaid during the year, hair cuts achieved in the
Czech Republic and Romania and the disposal of the Koregaon Park
Plaza shopping centre.
Apart from bank financing, Plaza has a balance sheet liability
of EUR181.6 million (with an adjusted par value of circa EUR203
million) from issuing debentures on the Tel Aviv Stock Exchange and
to Polish institutional investors. These debentures are presented
at amortised cost.
Provisions are booked in connection with the Company's Casa
Radio project in Bucharest Romania.
Other current liabilities have decreased from EUR13.2 million to
EUR7 million in 2015. The decrease is mainly attributable to the
execution of sale of Koregaon Park in India.
The total equity decreased from EUR120 million in 2014 to EUR83
million in 2015 due to a EUR46 million loss suffered mainly from
write downs, NIS strengthening against the EUR, bonds discount
amortisation and from a net EUR9 million increase in the
translation reserve connected to the Indian operations of the
Company, stemming from the strengthening of the Indian Rupee
against the Euro.
Cash flow (including cash flow disclosures as required by
Israeli Securites Regulations)
Cash flow provided from (used in) operational activities in 2015
was negative at EUR2.6 million (2014: positive cash flow of EUR8.3
million) mainly due to repayment of other liabilities associated
with the Koregaon Park shopping centre, and the sale of a shopping
centre in Serbia.
Cash flow provided from investment activities in 2015 remained
low and totalled EUR2.6 million (2014 negative EUR1.4 million)
owing to the disposal of the office building in Romania and net
sale of held for trading marketable debt securities.
Cash flow used in financing activities in 2015 totalled EUR17.9
million (2014: EUR2.4 million) owing to the payment of EUR8.5
million and obtaining the discount of 58% over the bank loan
purchased in the Czech Republic. In addition,2014 activities
included right issuance net proceeds of EUR18.8 million.
Disclosure in accordance with Regulation 10(B)14 of the Israeli
Securities Regulations (periodic and immediate reports),
5730-1970
1. General Background
According to the abovementioned regulation, upon existence of
warning signs as defined in the regulation, the Company is obliged
to attach to its reports projected cash flow for a period of two
years, commencing with the date of approval of the reports
("Projected Cash Flow").
One of the warning signs emphasise is a matter included in the
audit opinion issued by the auditor. The emphasis of matter was
included in view of management plans for asset disposals and also
in respect of the Casa Radio project, as described in Notes 2(c),
16 and 27(c) to the Financial Statements in this press release.
Upon having such warning signs, the Company is required to
provide projected cash flow for the period of 24 months since the
reporting period, and also provide explanations on differences
between previously disclosed estimated projected cash flows with
actual cash flows.
2. Projected cash flow
According to the Restructuring Plan, a three and a half year
period deferral of payment was granted. If until 1 December 2016
the Company manages to repay NIS 434 (circa EUR102 million) of
debentures, then the remaining principal payments shall be deferred
for an additional one year. Since the Plan entered into effect,
until 31 December 2015, the Company has repaid circa NIS 89 million
(EUR19 million) out of the debentures. The remaining NIS 345
million (circa EUR81 million) of the principal bonds (through the
sale of assets), together with the interest of approximately EUR13
million are still to be paid up to 1 December 2016, if the Company
strives to achieve the abovementioned condition in the Plan.
The Company regards this scenario as the most probable, and has
accordingly reclassified EUR79.6 million of its debentures as short
term, although these repayments are not falling due, unless the
below mentioned assets in this scenario are disposed.
The materialisation, occurrence consummation and execution of
the events and transactions and of the Assumptions on which the
projected cash flow is based, including with respect to the
proceeds and timing thereof, although probable, are not certain and
are subject to factors beyond the Company's control as well as to
the consents and approvals of third parties and certain risks
factors. Therefore, delays in the realisation of the Company's
assets and investments or realisation at lower price than expected
by the Company, as well as any other deviation from the Company's
Assumptions, could have an adverse effect on the Company's cash
flow and the Company's ability to service its indebtedness in a
timely manner.
Description Footnote January January
(details 1, 2016 1, 2017
and assumptions) till December till December
31, 2016 31,2017
------------------------------ ------------------ --------------- ---------------
(MEUR) (MEUR)
------------------------------ ------------------ --------------- ---------------
Cash and Cash equivalents
- Opening balance (1) 12.1 36.6
------------------------------ ------------------ --------------- ---------------
Solo resources:
------------------------------ ------------------ --------------- ---------------
Cash inflow from operating
activity:
------------------------------ ------------------ --------------- ---------------
proceeds from selling
trading and investment
properties (2) 152.4 20.0
------------------------------ ------------------ --------------- ---------------
Cash inflow from finance
activity:
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
------------------------------ ------------------ --------------- ---------------
Distributions from
operating subsidiaries
(through loan repayments) (3) 7.6 -
------------------------------ ------------------ --------------- ---------------
Release of restricted
cash due to disposal
of subsidiaries (4) 7.2 -
------------------------------ ------------------ --------------- ---------------
Total sources: 179.3 56.6
------------------------------ ------------------ --------------- ---------------
Expected use
------------------------------ ------------------ --------------- ---------------
Cash outflow from operating
activity:
------------------------------ ------------------ --------------- ---------------
Administrative expenses (4) 5.8 5.0
------------------------------ ------------------ --------------- ---------------
Cash outflow from investment
activity:
------------------------------ ------------------ --------------- ---------------
Investment in equity
in projects (5) 16.9 1.0
------------------------------ ------------------ --------------- ---------------
Cash outflow from finance
activity:
------------------------------ ------------------ --------------- ---------------
Principal repayment
to Noteholders (6) 107.5 14.7
------------------------------ ------------------ --------------- ---------------
Interest repayment
to Noteholders (7) 12.5 5.7
------------------------------ ------------------ --------------- ---------------
Total uses: 142.7 26.4
------------------------------ ------------------ --------------- ---------------
Cash and cash equivalents
-Closing balance: 36.6 30.2
------------------------------ ------------------ --------------- ---------------
Restricted deposit 0.5 3.6
------------------------------ ------------------ --------------- ---------------
Total cash, including
restricted deposit 37.1 33.8
------------------------------ ------------------ --------------- ---------------
1. Consolidated cash position, without restricted cash in
subsidiaries in a total amount of EUR8 million, due to bank
facilities restrictions. The Company is expected to be able to
collect all remaining cash in subsidiaries upon exit.
2. 2016: Comprised from the exercise of four out of the five
shopping centres in CEE the Company owns, and also plots, mainly in
Serbia and India. 2017: Mainly from plot disposals in India and
Poland.
3. Based on expected Net Operating Income ("NOI") from
subsidiaries, less expected payment to bank financing in
subsidiaries. The Company expects to retrieve the funds through
repayment of existing intercompany loans. The vast amount of the
retrieve is from Polish operating shopping malls.
4. Management estimation based on last year's actual cash restriction balances.
5. 2016: Comprised mainly from investment in the schemes of
Visnjicka Belgarde (Serbia) and Timisoara (Romania)
6. Assuming EUR/NIS rate of 4.40 and EUR/PLN rate of 4.20. The
repayment schedule takes into consideration also that in case of
disposal of a subsidiary, 75% of the proceeds are used for the
early prepayment of the Unsecured Debt in accordance with the terms
of the Restructuring Plan.
7. Refer to remark 6 in respect of exchange rates.
3. Projected solo cash flow
In its prospectus dated 27 May 2014, the Company published its
expected cash flow for the following 24 months. Below is a summary
table of comparison between forecasted and actual cash flow, with
explanations on the differences on cash flow published for the 18
months period ending December 31, 2015
Description Footnote July 1, 2014 till
(details December 31, 2015
and assumptions)
---------------------------- ------------------ ---------------------
Forecasted Actual
---------------------------- ------------------ ------------ -------
(MEUR)
---------------------------- ------------------ ------------ -------
Cash and Cash equivalents
- Opening balance (1) 9.6 23.2
---------------------------- ------------------ ------------ -------
Solo resources:
---------------------------- ------------------ ------------ -------
Cash inflow from
operating activity:
---------------------------- ------------------ ------------ -------
proceeds from selling
trading and investment
properties (2) 123.3 39.0
---------------------------- ------------------ ------------ -------
Cash inflow from
finance activity:
---------------------------- ------------------ ------------ -------
Distributions from
operating subsidiaries
(through loan repayments) (3) 26.5 21.6
---------------------------- ------------------ ------------ -------
Right issuance (4) 20.0 15.5
---------------------------- ------------------ ------------ -------
Other financial 2.5 -
income
---------------------------- ------------------ ------------ -------
Total sources: 181.9 99.3
---------------------------- ------------------ ------------ -------
Expected use
---------------------------- ------------------ ------------ -------
Cash outflow from
operating activity:
---------------------------- ------------------ ------------ -------
Administrative expenses 10.5 10.5
---------------------------- ------------------ ------------ -------
Cash outflow from
investment activity:
---------------------------- ------------------ ------------ -------
Investment in equity
in projects (5) 29.3 10.0
---------------------------- ------------------ ------------ -------
Cash outflow from
finance activity:
---------------------------- ------------------ ------------ -------
Principal repayment
to Noteholders (6) 79.5 18.6
---------------------------- ------------------ ------------ -------
Interest repayment
to Noteholders (7) 13.6 26.0
---------------------------- ------------------ ------------ -------
Repayment bank loan
in subsidiaries (8) 22.0 22.1
---------------------------- ------------------ ------------ -------
Total uses: 154.9 87.2
---------------------------- ------------------ ------------ -------
Cash and cash equivalents
-Closing balance
(Solo): 27.0 12.1
---------------------------- ------------------ ------------ -------
Restricted deposit 7.0 8.3
---------------------------- ------------------ ------------ -------
Total cash, including
restricted deposit
(Consolidated) 34.0 20.4
---------------------------- ------------------ ------------ -------
The below explains the main reasons for deviation between
expected cash flow projections and actual cash flows:
1. Opening balance was calculated assuming repayment of interest
on bonds before 30 June 2014, while actual payment was performed in
December 2014 (of EUR12.1 million).
2. Disposal of the CEE shopping centres did not materialized,
and the Company instead has improved the tenant mix and the overall
performance of the shopping malls, in order to benefit from it upon
sale.
3. Lower due to tenant improvements cost incurred in operating shopping centres in the period.
4. Actual right issuance - net of total restructuring plan costs of circa EUR4.5 million.
5. Main investment slowed down as a result of low level of
sales, and mainly in projects in Serbia and Romania.
6. Decreased as a result of low level of sales.
7. Refer to remark 1 above.
8. Actual amount includes repayment of Liberec loan (EUR8.5)
million with a discount of EUR12 million.
Roy Linden
Chief Financial Officer
29 March 2016
Valuation Summary by Cushman and Wakefield as at 31 December
2015 (in EUR)
Market Market Market Market
Value Value Value upon Value upon
of Land of Land Completion Completion
and Project and Project 2014 2015
31 December 31 December
Country Project Name 2014 2015
----------- ------------- ------------- -------------- --------------
Arena Plaza
Hungary Extension 6,650,000 3,400,000 87,353,000 86,718,000
David House 2,625,000 2,625,000 2,625,000 2,625,000
Poland Torun Plaza 96,300,000 97,725,000 96,300,000 97,725,000
-----------
Zgorzelec
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
Plaza 13,450,000 12,050,000 13,450,000 12,050,000
Suwalki Plaza 43,075,000 43,250,000 43,075,000 43,250,000
Lodz Plaza 7,400,000 7,400,000 70,911,000 70,911,000
Kielce Plaza 3,600,000 3,325,000 70,158,000 60,533,000
---------------------------------- ------------- ------------- -------------- --------------
Czech
Republic Liberec Plaza 15,725,000 9,700,000 15,725,000 9,700,000
----------- ---------------------- ------------- ------------- -------------- --------------
Casa Radio
Romania Plaza 87,075,000 81,450,000 555,138,000 578,711,000
Timisoara
Plaza 8,940,000 9,400,000 72,283,000 70,329,000
Miercurea
Ciuc Plaza 2,460,000 2,400,000 14,276,000 14,831,000
Slatina Plaza 1,000,000 1,000,000 30,151,000 30,151,000
Constanta
Plaza 3,300,000 2,150,000 3,300,000 2,150,000
Brasov 1,990,000 1,990,000 147,039,000 147,039,000
---------------------------------- ------------- ------------- -------------- --------------
Latvia Riga Plaza 45,000,000 47,463,000 45,000,000 47,463,000
----------- ---------------------- ------------- ------------- -------------- --------------
Greece Pireas Plaza 4,475,000 4,050,000 73,141,000 60,038,000
----------- ---------------------- ------------- ------------- -------------- --------------
Varthur Park
India Bangalore 14,206,000 15,089,000 109,646,000 116,457,000
-----------
SIPCOT Park Comparable
Chennai 10,031,000 10,742,000 18,710,000 (*)
---------------------------------- ------------- ------------- -------------- --------------
Bulgaria Shumen Plaza 1,025,000 975,000 29,176,000 37,048,000
----------- ---------------------- ------------- ------------- -------------- --------------
Belgrade Plaza
Serbia (MUP) 13,650,000 13,625,000 153,831,000 153,831,000
-----------
Belgrade (Visnjicka)
Plaza 18,850,000 29,625,000 91,299,000 91,299,000
---------------------------------- ------------- ------------- -------------- --------------
TOTAL(**) 400,827,000 399,434,000 1,742,587,000 1,732,859,000
---------------------------------- ------------- ------------- -------------- --------------
(*) Asset were valued with the comparative sales price method;
no value at completion was estimated
(**) Rounded to nearest thousand
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 75% share of Casa Radio Plaza.
-- Plaza Centers has a 25% share of Bangalore.
-- Plaza Centers has a 40% share of Chennai.
-- All the figures reflect Plaza's share.
PLAZA CENTERS N.V.
CONSOLIDATED FINANCIAL STATEMENTS
AUDITED
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2015
PLAZA CENTERS N.V.
CONSOLIDATED FINANCIAL STATEMENTS
AUDITED
CONTENTS
Page
------------------------------------------------- ----
Independent Auditors' report 3
Consolidated Financial Statements
Consolidated statement of financial position 4
Consolidated statement of profit or loss 5
Consolidated statement of comprehensive income 6
Consolidated statement of changes in equity 7
Consolidated statement of cash flows 8
9 -
Notes to the consolidated financial statements 72
- - - - - - - - - - - - - - - - - - - - - -
Independent Auditors' Report
The Board of Directors and Stockholders
Plaza Centers N.V.
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial
statements of Plaza Centers N.V. ("the Company"), which comprise
the consolidated statement of financial position as at December 31,
2015, the consolidated statement of profit or loss and the
consolidated statements of comprehensive income, changes in equity
and cash flows for the year then ended, and notes, comprising a
summary of significant accounting policies and other explanatory
information.
Management's Responsibility for the Consolidated Financial
Statements
Management is responsible for the preparation and fair
presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards as
adopted by the EU and for such internal control as management
determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement,
whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. We conducted
our audit in accordance with International Standards on Auditing.
Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on our judgment,
including the assessment of the risks of material misstatement of
the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, we consider internal
control relevant to the entity's preparation and fair presentation
of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the
entity's internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness
of accounting estimates made by management, as well as evaluating
the overall presentation of the consolidated financial
statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements present
fairly, in all material respects, the consolidated financial
position of the Company as at December 31, 2015 and of its
consolidated financial performance and its consolidated cash flows
for the year then ended in accordance with International Financial
Reporting Standards adopted by the EU.
Emphasis of matter
Without qualifying our opinion, we draw attention to Notes 2(c),
16 and 27(c) in the consolidated financial statements which
disclose, among other matters, important information regarding the
Company's cash flow projections for 18 months from the end of the
reporting period.
Without qualifying our opinion, we draw attention to Note 8(5)
(d) which discloses that the Board and Management have become aware
of potential irregularities concerning the Casaradio Project in
Romania and Note 8(5) (f) which discloses possible outcomes also
related to the Casaradio Project.
Budapest, Hungary
March 29, 2016
KPMG Hungária Kft.
Michael Carlson
Partner
CONSOLIDATED STATEMENT OF FINANCIAL POSITION IN '000 EUR
December December
31, 31,
Note 2015 2014
--------------- ------------ -----------
ASSETS
Cash and cash equivalents 4 15,659 33,363
Restricted bank deposits 5 4,774 6,886
Held for trading financial
assets - 1,434
Trade receivables 6 1,654 2,719
Other accounts receivable 7a 1,350 2,963
Prepayments 7b 196 767
Total current assets 23,633 48,132
------------ -----------
Trading properties 8 317,758 370,761
Equity accounted investees 10 40,608 36,108
Loan to equity accounted
investee 10 4,298 6,121
Property and equipment 9 2,480 4,029
Related parties receivables 29(h) 2,828 -
Deferred taxes 17 406 921
Other non-current assets - 25
Total non-current assets 368,378 417,965
------------ -----------
Total assets 392,011 466,097
============ ===========
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing loans
from banks 12 31,891 37,885
Debentures at amortized
cost 2(c),16 79,564 -
Trade payables 13 2,223 1,893
Related parties liabilities 14 109 1,161
Derivatives 11 436 430
Other liabilities 15 7,045 13,175
Total current liabilities 121,268 54,544
------------ -----------
Interest bearing loans
from banks 12 70,621 112,962
Debentures at amortized
cost 16 102,025 162,862
Provisions 8 14,911 15,597
Derivatives 11 318 559
Total non-current liabilities 187,875 291,980
------------ -----------
Share capital 18 6,856 6,856
Translation reserve 18 (27,418) (36,699)
Capital reserve due to
transaction with Non-controlling
interests (20,706) (20,706)
Other reserves 18 35,376 35,340
Share premium 18 282,596 282,596
Retained losses (194,602) (148,486)
Equity attributable to equity
holders of the Company 82,102 118,901
Non-controlling interests 766 672
Total equity 82,868 119,573
------------ -----------
Total equity and liabilities 392,011 466,097
============ ===========
March 29, 2016
------------------------------------- --------------- -------------------------
Roy Linden David Dekel
Date of approval
of the Chief Financial Director and Chairman
financial statements Officer of the Audit Committee
CONSOLIDATED STATEMENT OF PROFIT OR LOSS IN '000 EUR
Year ended
December 31,
---------------------
Note 2015 2014
------ --------- ----------
Revenue from disposal of
trading property 29(a) 34,684 38,600
Rental income 21(a) 18,676 22,112
Revenues from entertainment
centers 21(b) 728 1,713
--------- ----------
54,088 62,425
Cost of Trading property
disposed 29(a) (34,684) (38,600)
Cost of operations 22(a) (6,481) (8,491)
Cost of operations - entertainment
centers 22(b) (1,019) (2,169)
Loss from disposal of Trading
property SPV 29(a) (8,802) -
Gross profit 3,102 13,165
--------- ----------
Loss from disposal of Trading
Property plots - (573)
Gain from sale of leasehold
rights 29(i) 2,589 -
Write-down of Trading Properties 8 (20,322) (87,489)
Uplift (write-down) of equity-accounted
investees, net 10 939 (1,687)
Loss from disposal of equity
accounted investees (holding
undeveloped Trading Properties) - (4,048)
Share in results of equity-accounted
investees, net of tax 10 1,043 1,641
Administrative expenses,
excluding restructuring costs 23a (6,999) (7,434)
Restructuring costs 23b - (2,388)
Other income 24 7,307 2,484
Other expenses 24 (1,851) (2,507)
--------- ----------
Loss from operating activities (14,192) (88,836)
Gain from restructuring plan 16 - 3,443
Finance income 25 14,292 1,263
Finance costs 25 (45,195) (36,839)
Net finance costs (30,903) (35,576)
--------- ----------
Loss before income tax (45,095) (120,969)
Tax benefit (income tax expense) 26 (1,021) 1,282
Loss for the year (46,116) (119,687)
--------- ----------
Loss attributable to:
Equity holders of the Company (46,116) (119,687)
Earnings per share
Basic and diluted loss per
share (in EURO) 19 (0.07) (0.39)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME IN '000 EUR
Year ended
December 31,
---------------------
2015 2014
--------- ----------
Loss for the year (46,116) (119,687)
Other comprehensive income
Items that are or may be reclassified
to profit or loss:
Foreign currency translation differences
- foreign operations (Trading
properties) - reclassified to
profit or loss 6,516 -
Foreign currency translation differences
- foreign operations (Equity accounted
investees) 1,738 2,740
Foreign currency translation differences
- foreign operations (Trading
properties) 1,121 1,278
Other comprehensive income
(loss) for the year, net of
income tax 9,375 4,018
Total comprehensive loss for
the year (36,741) (115,669)
Total comprehensive income
(loss)attributable to:
Equity holders of the Company: (36,835) (115,735)
Non-controlling interests 94 66
Total comprehensive loss for
the year (36,741) (115,669)
========= ==========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY IN '000 EUR
Attributable to the equity holders of the Company
Capital
reserve
from
acquisition
of
non-controlling
Share interests
based without Retained
Share Share payment Translation a change earnings Non-controlling
capital Premium reserves Reserve in control (losses) Total interests Total
Balance at
December 31,
2013 2,972 261,773 35,133 (40,651) (20,706) (28,799) 209,722 606 210,328
Right issuance
(refer
to note 18) 3,884 20,823 - - - - 24,707 - 24,707
Share based
payment
(refer
to note 20) - - 207 - - - 207 - 207
Comprehensive
income for
the year
Net loss for
the year - - - - - (119,687) (119,687) - (119,687)
Foreign
currency
translation
differences - - - 3,952 - - 3,952 66 4,018
Total
comprehensive
loss
for the year - - - 3,952 - (119,687) (115,735) 66 (115,669)
-------- -------- --------- ------------ ---------------- ---------- ---------- ---------------- ----------
Balance at
December 31,
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
2014 6,856 282,596 35,340 (36,699) (20,706) (148,486) 118,901 672 119,573
Share based
payment
(refer
to note 20) - - 36 - - - 36 - 36
Comprehensive
income for
the year
Net loss for
the year - - - - - (46,116) (46,116) - (46,116)
Foreign
currency
translation
differences - - - 9,281 - - 9,281 94 9,375
Total
comprehensive
loss
for the year - - - 9,281 - (46,116) (36,835) 94 (36,741)
-------- -------- --------- ------------ ---------------- ---------- ---------- ---------------- ----------
Balance at
December 31,
2015 6,856 282,596 35,376 (27,418) (20,706) (194,602) 82,102 766 82,868
-------- -------- --------- ------------ ---------------- ---------- ---------- ---------------- ----------
CONSOLIDATED STATEMENT OF CASH FLOWS IN '000 EUR
Year ended
December 31,
Note 2015 2014
------ --------- ----------
Cash flows from operating
activities
Loss for the year (46,116) (119,687)
Adjustments necessary to reflect
cash flows used in operating activities:
Depreciation and impairment
of property and equipment 9 200 982
Net finance costs 25 30,903 35,576
Equity-settled share-based
payment transaction 36 207
Gain from restructuring plan 16 - (3,443)
Loss on sale of property and
equipment - 232
Share of gain of equity-accounted
investees, net of tax 10 (1,043) (1,641)
Income tax expense (tax benefit) 26 1,021 (1,282)
(14,999) (89,056)
Changes in:
Trade receivables 644 222
Other accounts receivable (2,810) 2,566
Trading properties 8 36,640 106,176
Equity Accounted Investees 105 5,122
Trade payables 346 (64)
Other liabilities, related
parties liabilities and provisions (5,680) 3,964
29,245 117,986
Interest received 290 93
Interest paid (17,053) (20,664)
Taxes paid (118) (18)
Net cash provided by (used
in) operating activities (2,635) 8,341
--------- ----------
Cash from investing activities
Purchase of property and equipment 9 - (12)
Proceeds from sale of property
and equipment 29(d) 1,190 1,375
Sale of held for trading marketable
debt securities 2,227 -
Purchase of held for trading
marketable debt securities (825) -
Net cash provided by investing
activities 2,592 1,363
--------- ----------
Cash from financing activities
Proceeds (payments) from hedging
activities through sale of
options 11 (373) 313
Changes in restricted cash 1,945 (2,019)
Proceeds from right issuance,
net of right issuance costs 18 - 18,836
Repayment of debentures 16 (6,585) (12,057)
Repayment of interest bearing
loans from banks 29(c) (12,921) (7,527)
Net cash used in financing
activities (17,934) (2,454)
--------- ----------
Increase (decrease) in cash
and cash equivalents during
the year (17,977) 7,250
Effect of movement in exchange
rate fluctuations on cash
held 273 (44)
Cash and cash equivalents
as at January 1(st) 33,363 26,157
--------- ----------
Cash and cash equivalents
as at December 31(st) 15,659 33,363
========= ==========
NOTE 1 - PRINCIPAL ACTIVITIES AND OWNERSHIP
Plaza Centers N.V. ("the Group" or "the Company") was
incorporated and is registered in the Netherlands. The Company's
registered office is at Prins Hendrikkade 48-S, 1012 AC, Amsterdam,
the Netherlands. The Company conducts its activities in the field
of establishing, operating and selling of shopping and
entertainment centers, as well as other mixed-use projects (retail,
office, residential) in Central and Eastern Europe (starting 1996)
and India (from 2006).
The consolidated financial statements for each of the periods
presented comprise the Company and its subsidiaries (together
referred to as the "Group") and the Group's interest in associates
and jointly controlled entities.
The Company is listed on the Main Board of the London Stock
Exchange ("LSE"), the Warsaw Stock Exchange ("WSE") and, starting
November 2014, on the Tel Aviv Stock Exchange ("TASE").
The Company's immediate parent company is Elbit Ultrasound
(Luxembourg) B.V. / S.à r.l. ("EUL"), which holds 44.9% of the
Company's shares, as at the end of the reporting period (December
31, 2014 - 44.9%). The Company regards Elbit Imaging Limited ("EI")
as the ultimate parent company (refer to note 30 for more details).
For the list of the Group entities, refer to note 35.
NOTE 2 - BASIS OF PREPARATION
a. 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, 2015 in accordance with
the Netherlands Civil Code.
The consolidated financial statements were authorized for issue
by the Board of Directors on March 23, 2016.
b. Functional and presentation currency
These consolidated financial statements are presented in EURO
("EUR"), which is the Company's functional currency. All financial
information presented in EUR has been rounded to the nearest
thousand, unless otherwise indicated.
c. Financial position of the Company
The consolidated financial statements have been prepared on a
going concern basis, which assumes that the Group will be able to
meet the mandatory repayment terms of the banking facilities and
debentures, as disclosed in notes 12 and 16.
Following the closing of the Company's restructuring plan (as
mentioned in note 29(e), "the Plan" in this note), the Company's
consolidated financial statements include liabilities to
bondholder's in the aggregate principal amount of EUR 203
million.
The following table sets forth the cash flow forecast of the
Company until mid-2017 in order to achieve the abovementioned
repayments, as they fall due.
NOTE 2 - BASIS OF PREPARATION (Cont.)
c. Financial position of the Company (cont.)
According to the Plan, if until December 1, 2016 the Company
manages to repay its principal of debentures in the amount of NIS
434 million (EUR 102 million), then the remaining principal
payments shall be deferred for an additional year ("the Deferral").
Since the Plan entered into effect, until December 31, 2015, the
Company has repaid circa NIS 89 million (EUR 19 million) out of the
debentures. The remaining NIS 345 million (EUR 81 million) of the
bonds principal (through selling of its assets), together with the
interest of approximately EUR 13 million are still to be paid up to
December 1, 2016, if the Company is to achieve the abovementioned
condition in the Plan.
Since parts of series B debentures are held in treasury (refer
to note 29(l)), the total required net principal repayment in 2016
in order to achieve the Deferral, is NIS 338 million (EUR 80
million). As the Company's primary objective is to obtain the
Deferral, it has therefore reclassified this minimum net amount to
current.
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
The scenario below reflects the Company's approved business plan
until June 30, 2017:
Expected cash flow
(in MEUR)
In the year In the six
ending December months ending
31, 2016 June 30, 2017
Opening balance of consolidated
cash (1) 20 37
Sources of cash during the
period
Net proceeds from disposal
of operating shopping centers
(2) 98 -
Proceeds from disposal of
plots held (3) 54 15
Net operating income from
shopping centers (4) 14 1
----------------- ---------------
Total sources expected 186 53
----------------- ---------------
Items added
Principal repayment of debentures,
net (5) (108) (11)
Interest repayment of debentures,
net (13) (3)
Investment in projects under
construction (6) (15) (1)
Repayment of bank facilities
in subsidiaries (principal
+interest) (7) (1)
General and administrative
expenses (6) (3)
----------------- ---------------
Total uses expected (149) (19)
----------------- ---------------
Closing balance of consolidated
cash (7) 37 34
----------------- ---------------
(1) Opening balance - as appeared in this consolidated statement
of financial position, including restricted cash (which will be
released upon the disposal of the operating shopping centers).
(2) 2016 - Expected net payment from the selling of four
shopping centers (Riga, Liberec, Suwalki and Torun).
(3) 2016 - The Company expects extensive disposal of it plots
held in CEE and in India. Main 2016 disposal are expected in India
and Serbia. 2017 - Main disposal is due to India.
(4) As the operating shopping centers are to be disposed of in
2016, in 2017 Net Operating Income is generated from the Belgrade
Plaza (Visnijcka) shopping center to be opened in the first half of
2017.
(5) 2016 - This reflects the gross amount of EUR 110 million to
be paid based on forecast disposal proceeds, net of the expected
repayment on treasury bonds held in the amount of EUR 2
million.
(6) 2016 - Main investment in Belgrade Plaza (Visnijcka project)
and in Timisoara project (Romania).
(7) 2016 - Immaterial restricted cash amounts. 2017 - Including
restricted cash in Visnjicka of EUR 3 million.
NOTE 2 - BASIS OF PREPARATION (Cont.)
c. Financial position of the Company (cont.)
It should be noted, that the projected cash flow is based on the
Company's forward-looking plans, assumptions, estimations,
predictions and evaluations which rely on the information known to
the Company at the time of the approval of these financial
statements (collectively, the "Assumptions").
The materialization, occurrence consummation and execution of
the events and transactions and of the Assumptions on which the
projected cash flow is based, including with respect to the
proceeds and timing thereof, although probable, are not certain and
are subject to factors beyond the Company's control as well as to
the consents and approvals of third parties and certain risks
factors. Therefore, delays in the realization of the Company's
assets and investments or realization at lower price than expected
by the Company's, as well as any other deviation from the Company's
Assumptions, could have an adverse effect on the Company's cash
flow and the Company's ability to service its indebtedness in a
timely manner.
If the Company is unable to repay cumulative NIS 434 million
(EUR 108 million) by December 1, 2016, then the minimum required
principal repayment due December 31, 2016 is NIS 57 million (EUR
13.5 million) (refer to Note 16), plus 75% of the net proceeds from
sales of trading properties, which will be paid through the net
cash generated out of the disposal program summarized above
d. Investment property vs. trading property classification
The Company has designated its properties into three types
(completed trading property projects, plots scheduled for
construction and plots under planning stage). In respect of its
completed trading property projects, and as written above, the
Group has not changed its business model and is actively seeking
buyers. Therefore it is clear from the Company's perspective that
these completed properties are trading properties, rather than
investment properties.
In respect of plots under planning stage held, which are not
intended to be constructed in the near future, the Company is
actively looking for buyers and does not hold the plots passively
with the intention to gain from a potential value increase. Plots
scheduled for construction are intended to be developed and sold as
a completed project in the normal course of business once
circumstances allow. Therefore management also believe that these
are appropriately classified as trading properties.
e. Use of estimates and judgments
The preparation of the consolidated financial statements in
conformity with IFRS as adopted by the EU 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.
Information about other critical judgements in applying accounting
policies that have the most significant effect on the amounts
recognised in the consolidated financial statements is included in
the following notes:
NOTE 2 - BASIS OF PREPARATION (cont.)
-- Note 8 - Suspension of borrowing costs capitalization
-- Note 8 - Classification of trading properties as current vs. non-current
-- Note 2(d) - Trading property vs. Investment property
-- Note 10 - Classification of the joint arrangement
-- Note 16 - Measurement of fair value of new debentures series
e. Use of estimates and judgments (cont.)
Information about assumptions and estimation uncertainties that
have a significant risk of resulting in a material adjustment
within the next financial year are included in the following
notes:
-- Notes 8 - key assumptions used in determining the net
realisable value of trading properties
-- Note 8, 28 - provisions and contingencies
-- Note 20 - measurement of share-based payments
-- Note 26 - recognition of deferred tax assets and availability
of future taxable profits against which carry-forward tax loss can
be used.
Functional currency
The EUR is the functional currency for Group companies (with the
exception of Indian companies - in which the functional currency is
the Indian Rupee - INR) since it is the currency of the economic
environment in which the Group operates. This is because the EUR
(and in India the INR) is the main currency in which management,
determines its pricing with tenants, potential buyers and
suppliers, determine its financing activities and budgets and
assesses its currency exposures.
Operating cycle determination
The Normal Operating Cycle ("NOC") of the Group is driven by its
business model to buy, develop and sell, primarily shopping
centers, and comprises the estimated amount of time required to
complete the process from the acquisition of undeveloped land
through its development, preparation for sale and ultimate
disposal. Based on the Group's experience, mainly from the period
from 1996-2008, this period of time was three to five years (and in
respect of large scale, multi-phase/mixed-use projects, up to eight
years). For example, for completed shopping centres, these steps
include achieving a stabilized tenants list, improving the tenant
mix, increasing occupancy rates, completion of certain tenant
improvements and finding the qualified buyers. For plots, this
includes obtaining permits, finance and construction.
The Company maintains its existing business model; however
following the financial crisis, the level of uncertainty of the
actual amount of time needed to complete all steps in the process
has become much longer than what the Company believes is a normal
level. Over the period 2009 - 2012, the Company has had difficulty
selling completed properties at prices reflecting management's view
of reasonable estimated values, as well as experienced a lack of
available finance for development of plots. The return to what
management considers more normal conditions, primarily in the CEE
markets where it has properties, have been longer than
expected.
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
In view of the above uncertainties and abnormalities, the
Company has taken in 2013 (and reassured this position in both 2014
and 2015) a position of reclassifying its entire trading properties
to long term.
Despite of the above, where a sale and purchase agreement exists
as of the end of the reporting period, the asset and related
liabilities will be reclassified as short term.
NOTE 3 - MEASUREMENT OF FAIR VALUES
A number of the Group's accounting policies and disclosures
require the measurement of fair value, for both financial and
non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the
Group uses market observable data as far as possible. The Company's
finance department reviews significant unobservable inputs and
valuation adjustments. If third party information, such as broker
quotes, is used to measure fair values, then the finance department
assesses the evidence obtained from the third parties to support
the conclusion that such valuations meet the requirements of IFRS,
including the level in the fair value hierarchy in which such
valuations should be classified. Fair values are categorised into
different levels in a fair value hierarchy based on the inputs used
in the valuation techniques as follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices)
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs)
-- Note 11 - Derivatives
-- Note 20 - Employee share option plan
-- Note 27 - Financial instruments
NOTE 4 - CASH AND CASH EQUIVALENTS
Interest rate
Bank deposits as of December December
and cash December 31, 31, 31,
--------- ---------
denominated in 2015 2015 2014
--------------------- -------------- --------- ---------
EUR - bank balances 6,595 26,954
Romanian Lei
(RON) Mainly 0.4% 2,739 2,203
United States
Dollar (USD)
- bank balances 2,069 505
New Israeli Shekel
(NIS) 0% 2,017 554
Polish Zlotys
(PLN) 1,576 2,248
Other currencies 663 899
Cash and cash equivalents in
the statement of financial
position 15,659 33,363
========= =========
The Group's exposure to interest rate risk and a sensitivity
analysis for financial assets and liabilities are disclosed in note
27.
NOTE 5 - RESTRICTED BANK DEPOSITS
Interest
rate as of
December December December
31, 31, 31,
--------- ---------
2015 2015 2014
--------------- --------- ---------
Short term restricted bank deposits
In EUR See (1) below 3,972 5,232
In USD 298 1,037
In other currencies
(2015 - PLN) See (1) below 504 617
Total short term 4,774 6,886
========= =========
(1) As of December 31, 2015, EUR 4.5 million is restricted
mainly in respect of bank facilities agreements signed to finance
Projects in Poland. These amounts carry an annual interest rate of
mainly Overnight rates.
The Group's exposure to interest rate risk and a sensitivity
analysis for financial assets and liabilities are disclosed in note
27.
NOTE 6 - TRADE RECEIVABLES
December December
31, 31,
--------- ---------
2015 2014
--------- ---------
Trade receivables 3,064 4,255
Less - Allowance for doubtful debts (1,410) (1,536)
--------- ---------
1,654 2,719
========= =========
NOTE 7 - OTHER ACCOUNTS RECEIVABLE, PREPAYMENTS AND ADVANCES
a. Other receivables
December December
31, 31,
--------- ---------
2015 2014
--------- ---------
VAT and tax receivables 1,061 2,502
Others 289 461
--------- ---------
1,350 2,963
========= =========
b. Prepayments and advances
December December
31, 31,
--------- ---------
2015 2014
--------- ---------
Advance payments to suppliers 137 275
Prepaid expenses 59 492
196 767
========= =========
NOTE 8 - TRADING PROPERTIES
December December
31, 31,
--------- ---------
2015 2014
--------- ---------
Balance as at 1 January 370,761 495,174
Acquisition and construction
costs (1) 6,649 7,520
Write-down of trading properties,
net (3) (20,322) (87,489)
Effect of movements in exchange
rates 4,756 3,713
Trading properties disposed
(refer to note 29(a) and
29(b)) (44,086) (48,157)
--------- ---------
Balance as at 31 December 317,758 370,761
========= =========
Completed trading properties (operating
shopping centers) 129,483 170,189
Plots scheduled for construction
(4) ,(5) 161,183 164,930
Plots under planning stage 27,092 35,642
Total 317,758 370,761
======== ========
(1) 2015 - Including EUR 6 million due to construction
activities in Serbia and Romania.
(2) Regarding accounting policy of capitalizing borrowing costs
refer to note 34 (e). The Company temporarily suspended
capitalization of borrowing costs starting July 1, 2013, following
temporary suspension of active development of the majority of its
trading properties due to the Group's liquidity position.
NOTE 8 - TRADING PROPERTIES (Cont.)
(3) Breakdown of write -down (uplift) of trading properties:
The year ended December
31,
--------------------------
Project name (location) 2015 2014
------------- -----------
Koregaon Park (Pune, India) 1,540 10,059
Helios Plaza (Athens, Greece) 450 10,901
Liberec (Liberec, Czech Republic) 6,225 2,080
Belgrade Plaza Visnjicka (Belgrade,
Serbia) (5,601) 175
Lodz Plaza (Lodz, Poland) 2,225 829
Lodz residential (Lodz, Poland) 2,133 664
Casa radio (Bucharest, Romania) 8,500 33,583
Zgorzelec (Zgorzelec, Poland) 1,466 3,868
Constanta (Constanta, Romania) 400 3,813
Arena Plaza extension (Budapest, 1,111 -
Hungary)
Krusevac (Krusevac, Serbia) 800 -
Ciuc (Ciuc, Romania) - 3,653
Kragujevac (Kragujevac, Serbia) - 3,395
Timisoara (Timisoara, Romania) 261 2,027
Iasi (Iasi, Romania) - 4,280
Belgrade Plaza (Belgrade,
Serbia) - 2,500
Kielce (Kielce, Poland) 170 (323)
Other, aggregated 642 5,985
20,322 87,489
============= ===========
The 2015 write downs were caused mainly by the following
factors:
There were significant decreases in Net Realizable Values of
certain projects below the carrying amount due to deteriorating
market condition in certain countries in which the Group
operates.
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
Moreover, affecting the valuations (in respect of plots under
planning stage) are delays in the execution and commencement of
construction of projects by the Company, increase in the risks
inherent in the Company's developments projects which cause an
increase in the discounts rate and the exit yields of the
undeveloped projects. In certain cases, changes were performed
according to schemes of projects (e.g Casa radio, below mentioned)
which triggered additional significant impairments.
Koregaon Park write-down (refer to note 29(a)) was performed due
to delays in executing a sale transaction of the shopping
center.
In case of Liberec Plaza in Czech Republic, write-down was
recorded as a result of a decrease in the NOI of the shopping
center (mainly due to an increase of the non-recoverable expenses)
and an increase of 0.5% in the exit yield compared to last
year.
In the case of Belgrade Plaza (Visnjicka) project an
appreciation was performed as the development of the project has
already started, and the project is expected to start generating
income within 15 months following year-end.
In the case of Casa radio project in Romania write-down was
performed due to a significant change in the estimated date of
construction commencement of the project (now scheduled to
mid-2018), triggered mainly by permitting issues as described in
the note below.
(4) Including carrying amount of Casa radio and Timisoara
projects in Romania, and also the Belgrade Plaza (Visnjicka) and
Belgrade Plaza (both in Serbia).
NOTE 8 - TRADING PROPERTIES (Cont.)
(5) Casa radio note
a. General
In 2006 the Company entered into an agreement according to which
it acquired 75% interest in a company ("Project SPV") which under a
Public-Private Partnership agreement ("PPP") with the Government of
Romania is to develop the Casa radio site in central Bucharest
("Project"). After signing the PPP agreement, the Company holds
indirectly 75% of the shares in the Project SPV, the remaining 25%
are held by the Romanian authorities (15%) and another third party
(10%).
As part of the PPP, the Project SPV was granted with development
and exploitation rights in relation to the site for a period of 49
years, starting December 2006. As part of its obligations under the
PPP, the Project SPV has committed to construct a Public Authority
Building ("PAB") measuring approximately 11.000 square meters for
the Romanian Government at its own cost.
Large scale demolition, design and foundation works were
performed on the construction site which amounted to circa EUR 85
million until 2010, when current construction and development were
put on hold due to lack of progress in the renegotiation of the PPP
Contract with the Authorities (refer to point c below) and the
Global financial crisis. These circumstances (and mainly the
avoidance of the Romanian Authorities to deal with the issues
specified below) caused the Project SPV to not meet the development
timeline of the Project, as specified in the PPP. However, the
Company is in the opinion that it has sufficient justifications for
the delays in this timeline, as generally described below.
b. Obtaining of the Detailed Urban Plan ("PUD") permit
The Project SPV obtained the PUD related to this project in
September 2012. Furthermore, on 13 December 2012, the Court took
note of the waiver of the claim submitted by certain plaintiffs and
rejected the litigation aiming to cancel the approval of the Zonal
Urban Plan ("PUZ") related to the Project. The court decision is
irrevocable.
As the PUD is based on the PUZ, the risk that the PUD would be
cancelled as a result of the cancellation of the PUZ was removed
following the date when the PUZ was cleared in court on December
13, 2012.
c. Discussions with Authorities on construction time table deferral
As a result of point b above, following the Court decision, the
Project SPV was required to submit a request for building permits
within 60 days from the approval date of the PUZ/PUD and commence
development of its project within 60 days after obtaining the
building permit.
However, due to substantial differences between the approved PUD
and stipulations in the PPP Contract as well as changes in the EU
directives concerning buildings used by Public Authorities, and in
order to ensure a construction process that will be adjusted to
current market conditions, the Project SPV started preliminary
discussions with the Romanian Authorities (which are both
shareholders of the Project SPV and a party to the PPP) regarding
the future development of the project.
The Project SPV also officially notified the Romanian
Authorities its wish to renegotiate the existing PPP contract on
items such as time table, structure and milestones (e.g., the
construction of the Public Authority Building ("PAB"), whose'
estimated costs are provisioned for in these financial statement -
refer to paragraph e below). The Company estimates that although
there is no formal obligation from the Romanian Authorities to
renegotiate the PPP agreement, such obligation is expressly
provided for the situation when extraordinary economic
circumstances arise.
NOTE 8 - TRADING PROPERTIES (Cont.)
d. Co-operation with the Romanian Authorities re potential irregularities
The Board and Management have become aware of certain issues
with respect to certain agreements that were executed in the past
in connection with the Project. In order to address this matter,
the Board has appointed the chairman of the Audit Committee to
investigate the matters internally and have also appointed
independent law firms to perform an independent review of the
matters raised.
The Company has approached and is co-operating fully with the
relevant Romanian Authorities regarding the matters that have come
to its attention and it has submitted its findings to the Romanian
Authorities. As this process is still on-going, the Company in
unable to comment on any details related to this matter. At the
current stage the Company, based on a legal advice received, cannot
determined the consequences of such matter. As for the fair value
of the Project as of December 31, 2015 refer to the summary table
below.
e. Provision in respect of PAB
As mentioned in point a above, when the Company entered into an
agreement to acquire 75% interest in the Project SPV it assumed a
commitment to construct the PAB at its own costs for the benefit of
the Romanian Government. Consequently, the Company had recorded a
provision in the amount of EUR 17.1 million in respect of the
construction of the PAB.
The Company utilized the amount of EUR 1.5 million out of this
provision, and in 2015 a reduction in the provision in the amount
of EUR 0.6 million (recorded as other income) was performed in
order to reflect updated budget changes in respect of the PAB.
Management believes that the current level of provision is an
appropriate estimation in the current circumstances. Upon reaching
concrete agreements with Authorities, the Company will be able to
further update the provision.
f. The circumstances described in subsection a through e above
might lead to future claims, penalties, sanctions and/or, in
extreme circumstances, termination of the PPP and annulment of the
Company's rights in the Project by the Authorities.
(6) Security over trading properties
As of December 31, 2015, a total carrying amount of EUR 123
million (December 31, 2014 - EUR 170 million) which represents
mainly operating shopping centres is pledged against secured bank
loans of approximately EUR 103 million.
(7) Write-down of trading properties
Trading properties are measured at the lower of cost and net
realizable value. Determining net realizable value is inherently
subjective as it requires estimates of future events and takes into
account special assumptions in the valuations, many of which are
difficult to predict.
Actual results could be significantly different than the
Company's estimates and could have a material effect on the
Company's financial results. Trading Properties accumulated
write-downs from cost as of December 31, 2015, amounted to EUR 230
million or 42% percent of outstanding trading properties original
cost (December 31, 2014 - EUR 274 million or 42% of gross trading
property balance). These valuations become increasingly difficult
as they relate to estimates and assumptions for projects in the
preliminary stage of development.
Management is responsible for determining the net realizable
value of the Group's Trading Properties. In determining net
realizable value of the vast majority of Trading Properties,
management utilizes the services of an independent third party
recognized as a specialist in valuation of properties (As at
December 31, 2015, 98% of the value of trading properties was based
on valuations done by the independent third party valuation service
(2014 - 98%).
NOTE 8 - TRADING PROPERTIES (Cont.)
The remaining properties were valued internally. On an annual
basis (and in certain cases during the year), the Company reviews
the valuation methodologies utilized by the independent third party
valuator service for each property.
The main features included in each valuation are:
a. Completed trading properties (operating shopping centers)
The Net Realizable Value of operating shopping centers reflects
rental income from current leases and assumptions about rental
income from future leases in the light of current market
conditions.
The Net Realizable Value also reflects, on a similar basis, any
cash outflows that could be expected in respect of the property.
The Group uses professional appraisers for determining the Net
Realizable Value of the operating shopping centers.
Independent valuation reports are prepared by Cushman &
Wakefield by using discounted cash flow valuation techniques. The
Group uses assumptions that are mainly based on market conditions
existing at the reporting date.
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
The principal assumptions underlying management's estimation of
Net Realizable Values are those related to the receipt of
contractual rentals, expected future market rentals, void periods,
maintenance requirements and appropriate discount rates. These
valuations are regularly compared to actual market yield data and
actual transactions made by the Group and those reported by the
market, if available. Expected future rentals are determined on the
basis of current market rentals for similar properties in the same
location and condition.
b. Incomplete trading properties (undeveloped plots of lands)
The net realizable value in case of an undeveloped project is
determined by either:
-- comparison with the sale price of land for comparable development ; or
-- assessment of the value of the project as completed and
deduction of the costs of development (including developer's profit
and financing costs), and applying an estimated discount rate, to
arrive at the underlying land value. This is known as the residual
method.
b1 - Comparable method
Valuation by comparison is essentially objective in that it is
based on an analysis of the price achieved for sites with broadly
similar development characteristics. Valuation by comparison is
generally used if evidence of actual sales can be found and
analysed on a common unit basis, such as site area, developable
area or habitable room.
Where comparable development cannot be identified in the
immediate area of the subject site or when sales information is not
clearly available through common channels of information (internet,
newspapers, trade journals, periodic market research) it is
necessary to look further out for suitable comparable and to make
necessary adjustments to the price in order to account for
dissimilarities between the comparable development and the subject
site. Such adjustments include, but not limited to:
-- Adjustment due to the time of the transaction. Market
conditions at the time of the sales transaction of a comparable
property may differ from those on the valuation date of the
property being valued. Factors that impact market conditions
include rapidly appreciating or depreciating property values,
changes in tax laws, building restrictions or moratoriums,
fluctuations in supply and demand, or any combination or forces
working in concert to alter market conditions from one date to
another.
-- Adjustment due to asking price and condition of payment. The
special motivations of the parties to the transaction in many
situations can affect the prices paid and even render some
transactions as non-market. Examples of special conditions of sale
include a higher price paid
NOTE 8 - TRADING PROPERTIES (Cont.)
by a buyer because the parcel has synergistic, or marriage
value; a lower price paid because a seller was in a hurry to
conclude the sale; a financial, business, or family relationship
betweenthe parties involved in the transaction, unusual tax
considerations; lack of exposure of the property in the (open)
market; or the prospect of lengthy litigation proceedings.
-- Adjustment because of size, shape and surface area. Where the
physical characteristics of a comparable property vary from those
of the subject property, each of the differences is considered, and
the adjustment is made for the impact of each of these differences
on value.
-- Adjustment because of location. The locations of the
comparable sale properties and the subject property are compared to
ascertain whether location and the immediate environment are
influencing the prices paid. The better location a property is
located in the more it is worth per square meter; and conversely
the worse location a property is in the less it is worth per square
meter. An adjustment is made to reflect such differences based on
the valuers' professional experience. Extreme location differences
may indicate that a transaction is not truly comparable and are
disqualified.
b2 - Residual method
The residual method, in contrast, relies on an approach that is
a combination of comparison and cost and it requires making a
number of assumptions - any of which can affect the outcome in
varying degrees. Having established the development potential a
residual valuation can be expressed as a simple equation: (value of
completed development) - (development costs + developers profit +
financing costs) = land value. Each element of this equation is
discussed in the following paragraphs.
(8) Value of completed development
The value of the completed development is the market value of
the proposed development assessed on the special assumption that
the development is complete as at the date of valuation in the
market conditions prevailing at that date.
(9) Development costs
The development costs include planning and design costs,
construction costs, site related costs, holding costs, finance
costs and contingencies.
Some larger schemes such as Casa radio in Romania and Bangalore
in India are phased over time. Is such case the phasing is
reflected in the cash flows as deferral of some of costs to a date
when it might be reasonable to expect them to be incurred.
Similarly, not all proceeds occur simultaneously.
(10) Developer's profit
The nature of the development determines the selection of the
profit margin, or rate of return and the percentage to be adopted
varies for each case. The developers profit is expressed as a
percentage of the cost of the completed development.
All of the trading properties were valued using the Residual
technique (or the Discounted Cash Flows technique for operating
shopping centres) except the one project in a value of EUR 10.7
million. In 2014: the same with the exception of one project with a
total amount of EUR 0.8 million using the comparative method.
All the trading properties carrying amounts equals their net
realizable values with the exception of Torun and Suwalki in Poland
(2014: Torun and Suwalki in Poland and Arena extension in Hungary),
where the carrying amount reflects the cost.
NOTE 8 - TRADING PROPERTIES (Cont.)
(11) Significant estimates
The following table shows the valuation techniques used in
measuring the net realizable values of trading properties,
including those held by joint ventures which are recorded as equity
accounted investees:
Group of Valuation Significant unobservable Inter-relationship between
assets technique inputs key unobservable inputs
and fair value measurement
----------- -------------- ------------------------------------------------------------ -------------------------------------------------------------
Operating Discounted The estimated fair value
shopping cash * Estimated rental prices per SQM (EUR 3-47.0, weighted would increase (decrease)
centers - flows: The average EUR 10.5). if:
Poland valuation * the estimated rental prices per sqm were higher
model (lower);
considers * Estimated exit yield is between 7.15% and 9.4%.
the present
value * the Estimated yield rates were lower (higher);
of the net * Discount rate is between 8.85% to11.1%
cash
flows * the Estimated discount rates were lower (higher);
expected to * Based on 100% occupancy rate to be achieved within 2
be generated years
by * The occupancy of the mall was higher (lower).
the shopping
centers.
The cash flow
projections
include
specific
estimates for
10
years. The
expected
net cash
flows are
discounted
using
a
risk-adjusted
discount
rate.
Plots in Residual The estimated fair value
CEE method: * Estimated weighted average rental prices per SQM is would increase (decrease)
(except The valuation between EUR 6.00 to EUR 30.00; if:
Casaradio) model * the estimated rental prices per sqm were higher
considers the (lower);
net * The Estimated Exit Yield for the projects are between
present value 7.75% and 11%
(based * the Estimated yield rates were lower (higher);
on an NPV
factor) * The construction cost of the projects are between 275
based on the EUR/sqm to 1,200 EUR /sqm for the malls; * the Estimated discount rates were lower (higher);
estimated
value of the
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
project * The development finance rate is between 5.00% to 10% * The construction cost of the project were lower
upon (higher);
completion
less the * The occupancy rate of the projects at opening are
estimated estimated at 95%. * The developer's profit provision for the project were
development lower (higher);
cost
including a * Developers profit - 17%-25%.
provision * The development finance provision for the project
for the were lower (higher);
profit for --
the potential
development; * The estimated completion of the project were shorter
(longer);
* The occupancy of the mall were higher (lower);
* The land prices for comparable transactions on the
market would be higher (lower)
The characteristics of the
project would be changed;
NOTE 8 - TRADING PROPERTIES (Cont.)
11. Significant estimates (cont.)
Group of Valuation Significant unobservable Inter-relationship between key
assets technique inputs unobservable inputs and fair
value measurement
----------------- ------------ ------------------------------------------------------------ ------------------------------------------------------------
Casaradio Residual The estimated fair value would
method: increase (decrease) if:
The * the estimated rental prices per sqm were higher
valuation (lower);
model
considers * Estimated weighted average rental prices per SQM is
the net EUR 27.00 for the mall and EUR 16.50 for offices; * the estimated yield rates were lower (higher);
present
value
(based on * The Estimated Exit Yield is 7.50% for the mall and * The construction cost of the project were lower
an NPV 8.00% for the office component (higher);
factor)
based on
the * The construction cost of the project is 850 EUR/sqm * The developer's profit provision for the project were
estimated for the mall; 1000 EUR/sqm for the offices; 500 lower (higher);
value of EUR/sqm for the parking
the project
upon * The development finance provision for the project
completion * The development finance rate is 7.50% were lower (higher);
less the
estimated
development * The occupancy rate of the project at opening is * The estimated completion of the project were shorter
cost estimated at 95% (longer);
including a
provision
for the * The scheme would compose the following components: * The occupancy of the mall were higher (lower);
profit (i) retail; (ii) offices;
for the
potential * The characteristics of the project would be changed
development * Developers profit - 20%.
Bangalore Bangalore- The estimated fair value would
and Chennai Residual increase (decrease) if:
(Joint Ventures) method was * the estimated sales prices per sqm were higher
used (lower);
as well as
follows:
The * the estimated construction cost were lower (higher);
valuation
model
considers * The development finance provision for the project
the net were lower (higher);
present
value
(based on * The estimated completion of the project were shorter
an NPV (longer);
factor)
based on
the * The characteristics of the project would be changed;
estimated
value of
the project * The developer's profit provision for the project were
upon For residual approach: lower (higher)
completion * The sales price per sqm for the development is
less the between INR 100,000 and INR 138,000 subject to the
estimated size, location and the quality of the asset class
development
cost
including a * The construction cost per sqm for the development is
provision INR 34,000 to INR 41,000 subject to location and the
for the quality of the asset class.
profit
for the
potential * Developers profit - 20%.
development
Chennai-
Comperable --
NOTE 8 - TRADING PROPERTIES (Cont.)
11. Significant estimates (cont.)
The following table provides sensitivity analysis on value of
certain projects (in thousands of EUR), assuming the following
changes in key inputs used in valuations:
Operating
Property Exit Yield
-50bps -25bps 0 +25bps +50bps
------------ -------- -------- -------- -------- --------
Polish
operating
shopping
centers 164,050 158,350 153,025 148,100 143,425
------------ -------- -------- -------- -------- --------
Delay in construction commencement
Increase in exit yields (base points) day (months)
----------------------------------------------------------- ----------------------------------------------
0 +15bps +25bps +40bps +50bps 0 +6 +12 +18 +24
------------ -------- -------- ------- ------- ------- -------- -------- -------- ------- -------
Belgrade
Plaza
Visnjicka 29,630 28,480 27,730 26,650 25,490 29,630 28,450 27,310 26,220 25,170
------------ -------- -------- ------- ------- ------- -------- -------- -------- ------- -------
Belgrade
Plaza 13,630 12,090 11,100 9,660 8,740 13,630 12,880 12,160 11,480 10,830
------------ -------- -------- ------- ------- ------- -------- -------- -------- ------- -------
Timisoara
Plaza 9,410 8,710 8,250 7,580 7,150 9,410 9,050 8,690 8,360 8,030
------------ -------- -------- ------- ------- ------- -------- -------- -------- ------- -------
Casa
Radio 108,590 101,410 96,780 90,040 85,680 108,590 104,730 101,010 97,430 93,970
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
------------ -------- -------- ------- ------- ------- -------- -------- -------- ------- -------
Construction costs for all phases Rental income for all the phases
------------------------------------------------------ -----------------------------------------
-10% -5% 0 +5% +10% -10% -5% 0 +5% +10%
----------- ------- ------- ------- ------ ------ ------ ------ ------- ------- -------
Belgrade
Plaza
Visnjicka 32,680 31,160 29,630 28,100 26,580 23,530 26,580 29,630 32,680 35,730
----------- ------- ------- ------- ------ ------ ------ ------ ------- ------- -------
Belgrade
Plaza 20,020 16,820 13,630 10,430 7,230 5,870 9,750 13,630 17,510 21,390
----------- ------- ------- ------- ------ ------ ------ ------ ------- ------- -------
Timisoara
Plaza 13,060 11,240 9,410 7,590 5,760 4,720 7,060 9,410 11,760 14,110
----------- ------- ------- ------- ------ ------ ------ ------ ------- ------- -------
Casa Radio 135,010 121,800 108,590 95,380 82,170 71,310 89,950 108,590 127,230 145,870
----------- ------- ------- ------- ------ ------ ------ ------ ------- ------- -------
12. Below is a summary table for main projects status:
NOTE 8 - TRADING PROPERTIES (Cont.)
Carrying Carrying
Planned amount amount
Holding Gross December December
Purchase Rate Nature of Lettable 31, 2015 31, 2014
Project Location year (%) rights Permit status Area (sqm) (MEUR) (MEUR)
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Operating
shopping
Suwalki center (starting
Plaza Poland 2006 100 Ownership Q2 2010) 20,000 39.7 39.2
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Operating
shopping
Zgorzelec center (starting
Plaza Poland 2006 100 Ownership Q1 2010) 13,000 12.1 13.5
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Operating
shopping
center (starting
Torun Plaza Poland 2007 100 Ownership Q4 2011) 40,000 68.1 68.0
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Ownership/
Lodz Perpetual Planning permit
residential Poland 2001 100 usufruct valid 24,700(*) 2.1 4.8
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Perpetual Planning permit
Lodz plaza Poland 2009 100 usufruct pending 35,000 5.5 7.4
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Perpetual Planning permit
Kielce Plaza Poland 2008 100 usufruct valid 33,000 3.3 3.5
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Perpetual Planning permit
Leszno Plaza Poland 2008 100 usufruct valid 16,000 0.8 0.8
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Operating
shopping
Liberec Czech center (starting
Plaza Republic 2006 100 Ownership Q1 2009) 17,000 9.6 15.7
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Operating
shopping
Koregaon center (starting
Park India 2006 100 Ownership Q1 2012) 41,000 Sold 33.8
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Detailed Zoning
Leased for Plan ("PUD")
Casaradio Romania 2007 75 49 years valid 467,000(**) 108.6 116.1
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Zoning Plan
Iasi Plaza Romania 2007 100 Ownership ("PUZ") valid 58,000 Sold 7.3
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Detailed Zoning
Slatina Plan ("PUD")
Plaza Romania 2007 100 Ownership valid 17,000 0.6 1.1
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Timisoara Zoning Plan
Plaza Romania 2007 100 Ownership ("PUZ") valid 40,000 9.4 8.9
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Constanta Existing
Plaza Romania 2009 100 Ownership building 18,000 2.2 2.5
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
No valid permit
Miercurea (Building Permit
Ciuc Plaza Romania 2007 100 Ownership expired) 14,000 2.0 2.0
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Belgrade
Plaza Building Permit
visnjicka Serbia 2007 100 Ownership obtained 32,000 29.6 18.9
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Belgrade Approval of
Plaza Serbia 2007 100 Ownership DRP pending 63,000(**) 13.5 13.7
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Planning permit
Shumen Plaza Bulgaria 2007 100 Ownership valid 20,000 0.8 1.0
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Arena Plaza Land use
Extension Hungary 2005 100 rights - 40,000 2.5 3.4
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Piraeus
Plaza Greece 2002 100 Ownership - 38,270 4.0 4.4
------------- ----------- ---------- -------- ----------- ----------------- ------------ ---------- ----------
Other small
plots, grouped 3.4 4.8
-------------------------------------- -------- ----------- ----------------- ------------ ---------- ----------
Total 317.8 370.8
---------- ----------
(*) Gross area of the plot
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
(**)GBA (sqm)
NOTE 9 - PROPERTY AND EQUIPMENT
Land Fixtures
and buildings Equipment and fittings Airplane Total
--------------- ---------- -------------- --------- --------
Cost
Balance at January
1, 2014 7,181 3,542 1,397 4,737 16,857
Additions - 12 - - 12
Disposals - (208) - (4,737) (4,945)
Exchange rate effect - 54 - - 54
--------------- ---------- -------------- --------- --------
Balance at December
31, 2014 7,181 3,400 1,397 - 11,978
--------------- ---------- -------------- --------- --------
Additions - 31 - - 31
Reclassification - 202 (202) - -
Disposals (*) (3,079) (306) - - (3,385)
Balance at December
31, 2015 4,102 3,327 1,195 - 8,624
--------------- ---------- -------------- --------- --------
Accumulated depreciation
and impairment
Balance at January
1, 2014 2,776 3,220 1,071 3,270 10,337
Depreciation 85 197 - - 282
Impairment (**) 700 - - - 700
Disposals - (66) - (3,270) (3,336)
Exchange rate
effect - (34) - - (34)
-------- ------ ------ -------- --------
Balance at December
31, 2014 3,561 3,317 1,071 - 7,949
-------- ------ ------ -------- --------
Depreciation 170 30 - - 200
Disposals (*) (1,881) (124) - - (2,005)
Balance at December
31, 2015 1,850 3,223 1,071 - 6,144
-------- ------ ------ -------- --------
Net carrying amounts
At December 31,
2015 2,252 104 124 - 2,480
At December 31,
2014 3,620 83 326 - 4,029
At January 1,
2014 4,405 322 326 1,467 6,520
(*) Disposal of Palazzo duCale building in Romania - refer to
note 29 (d).
(**) 2014 depreciation - includes impairment of EUR 0.7 million
due to office building in Romania.
NOTE 10 - EQUITY ACCOUNTED INVESTEES
The Group has the following interest (directly and indirectly)
in the below joint ventures (the Group has no investment in
associates), as at December 31, 2015 and 2014:
Company name Country Activity Interest of holding
(percentage) as
at December 31,
----------------------- --------- -------------------- ----------------------
2015 2014
----------------------- --------- -------------------- ---------- ----------
Elbit Plaza USA
II LP USA Inactive 50% 50%
----------------------- --------- -------------------- ---------- ----------
Elbit Plaza India
Real Estate Holdings Mixed-use large
Ltd. ("EPI") (*) Cyprus scale projects 47.5% 47.5%
----------------------- --------- -------------------- ---------- ----------
Elbit Kochin Ltd. Cyprus Inactive 40% 40%
----------------------- --------- -------------------- ---------- ----------
Operating shopping
SIA Diksna ("Diksna") Latvia center 50% 50%
----------------------- --------- -------------------- ---------- ----------
None of the joint ventures are publicly listed.
(*) Though EPI is 47.5% held by the Company, the Company is
accounted for 50% of the results, as the third party holding 5% in
EPI is deemed not to participate in accumulated losses, hence EI
and the Company, the holders of the remaining 95% each account for
50% of the results of EPI.
NOTE 10 - EQUITY ACCOUNTED INVESTEES (cont.)
The movement in equity accounted investees (in aggregation) was
as follows:
2015 2014
-------- --------
Balance as at 1 January 42,229 40,141
Investments in (repayment from)
equity-accounted investees, net (1,043) 463
Share in results of equity-accounted
investees, net of tax 1,043 1,641
Uplift (write-down) of Equity-accounted
investees (1) 939 (1,687)
Effect of movements in exchange
rates 1,738 2,740
Equity-accounted investees disposed - (1,069)
-------- --------
Balance as at 31 December (2) 44,906 42,229
======== ========
(1) Breakdown of the Group's share of write-downs (reversals of
write-downs) of trading properties projects held by equity
accounted investees is as follows:
The year ended December
31,
--------------------------
Project name (holding company 2015 2014
name)
---------- --------------
Bangalore (held by EPI) - 557
Chennai (held by EPI) - (2,463)
Riga Plaza (held by Diksna) 939 420
Elbit Kochin Ltd. - (201)
939 (1,687)
========== ==============
(2) As of December 31, 2015, the loan to equity accounted
investee Diksna totalled circa EUR 4.3 million bearing interest of
3 months EURIBOR +2.5% per annum (December 31, 2014 - EUR 6.1
million). Other investment in equity accounted investees is through
certain equity instruments to cover negative equity position
considered part of the Group's net investment in the investees.
Material joint ventures
Within the joint ventures, two joint ventures were deemed as
material, and these are EPI (due to holding of major schemes in
Bangalore and Chennai) and Diksna (being the only active shopping
center held through a joint venture). The summarized financial
information of the material joint ventures is as follows:
December 31,
--------------------------------------
2015 2014
------------------ ------------------
EPI Diksna EPI Diksna
Current assets
(*) 338 2,408 3,168 2,696
Trading properties-non
current 51,661 93,400 48,475 90,000
Other current liabilities (187) (1,930) (709) (2,414)
Interest bearing loans from
banks - (55,990) - (56,884)
Group loan to Diksna - (8,596) - (12,242)
Net assets (100%) 51,812 29,292 50,934 21,156
Group share of net asset (50%)
(**) 25,906 14,646 25,467 10,578
Carrying amount of interest
in joint venture 25,906 14,646 25,467 10,578
======= ========= ======= =========
(*) Including cash and cash equivalents in Diksna the amount of
EUR 0.4 million (2014 - EUR 0.8 million).
(**) Refer to remark on EPI holding rate.
NOTE 10 - EQUITY ACCOUNTED INVESTEES (cont.)
Material joint ventures (cont.)
The year ended December
31,
--------------------------------------
2015 2014
------------------ ------------------
EPI Diksna EPI Diksna
Revenue - 11,762 - 11,244
Cost of operations - (4,412) - (4,291)
Interest expenses - (1,908) - (2,018)
Uplift (write-downs) - 1,878 (3,812) 840
Total net profit (loss) and
comprehensive income (100%) (3,510) 7,320 (4,730) 5,092
Group share of Profit (loss)
and comprehensive income (50%) (1,755) 3,660 (2,365) 2,546
Interest income on Diksna
loan - 77 - 82
Total results from investee (1,755) 3,737 (2,365) 2,628
======== ======== ======== ========
Immaterial joint ventures information
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
With the exception of EPI and Diksna, all other December 31,
2015 and 2014 outstanding joint ventures were considered
immaterial. The aggregation of the information in respect of these
immaterial joint ventures was as follows (the Group's part):
December 31,
---------------
2015 2014
------- ------
Current assets 56 63
Carrying amount of interest
in joint venture 56 63
======= ======
The year ended December
31,
---------------------------
2015 2014
------------ -------------
Revenues - 23
Write-downs (refer to impairment
table above) - (201)
----------- -------------
Loss and comprehensive income - (309)
=========== =============
NOTE 11 -DERIVATIVES
The table below summarizes the results of the 2015 and 2014
derivatives activity (none of the abovementioned activities
qualified for hedge accounting), as well as the outstanding
derivatives as of December 31, 2015 and 2014:
Derivative Nominal Fair Loss Fair value Gain Maturity
type amount as value in of derivatives (loss)in date of
of December of derivatives 2015 at December 2014 derivative
31, 2015 at December 31, 2014
31, 2015
-------------- ------------- --------------------- ----------- ---------------- ---------- ------------
Currency
options (1) N/A N/A (586) (95) 217 N/A
-------------- ------------- --------------------- ----------- ---------------- ---------- ------------
Interest N/A N/A N/A N/A 220 N/A
Rate Swap
("IRS") 1
(2)
-------------- ------------- --------------------- ----------- ---------------- ---------- ------------
IRS 2 (3) N/A N/A N/A N/A 20 N/A
-------------- ------------- --------------------- ----------- ---------------- ---------- ------------
EUR 35.5 December
IRS 3 (4) million (754) - (894) (689) 2017
-------------- ------------- --------------------- ----------- ---------------- ---------- ------------
Total (754) (586) (989) (232)
-------------- ------------- --------------------- ----------- ---------------- ---------- ------------
(1) Selling options strategy (by writing call and put currency
option) in order to manage its foreign currency risk (EUR-NIS)
inherent in its long term debentures series A and series B issued
in NIS. The Company ceased using this strategy effective October
2015.
(2) In respect of Suwalki project loan. The project company paid
EUR fixed interest rate of 2.13% and receives three months Euribor
on a quarterly basis, until June 30, 2014.
(3) In respect of Kragujevac project loan. The project company
paid EUR fixed interest rate of 1.85% and receives three months
EURIBOR on a quarterly basis, until December 31, 2014.
(4) In respect of Torun project loan. The project company pays
fixed interest rate of 1% and receives three months Euribor on a
quarterly basis, until December 31, 2017. Regarding pledges in
respect of derivative activity refer to note 28(d)(2).
NOTE 11 - DERIVATIVES (cont.)
Fair value measurement
Fair values of the SWAP may be determined in whole or in part
using valuation techniques based on assumptions that are not
supported by prices from current market transactions or observable
market data, where current prices or observable market data are not
available.
Factors such as bid-offer spread, credit profile, collateral
requirements and model uncertainty are taken into account, as
appropriate, when fair values are calculated using valuation
techniques. Valuation techniques incorporate assumptions that other
market participants would use in their valuations, including
assumptions about interest rate yield curves, and middle exchange
rates, as determined by relevant central banks at each cut-off
dates.
NOTE 12 - 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. For more information about the Group's
exposure to interest rate, foreign currency and liquidity risk,
refer to note 27. All interest bearing loans from banks are
secured. Breakdown, terms and conditions of outstanding loans were
as follows:
December 31,
--------------------------- ------------------ ---------- ----------- ------------------
2015 2014
--------------------------- ------------------ ---------- ----------- -------- --------
Nominal Year
interest of
rate Currency maturity Carrying amount
--------------------------- ------------------ ---------- ----------- ------------------
Torun project secured
bank loan (1),(6) 3M Euribor+3% EUR 2017 45,516 46,735
--------------------------- ------------------ ---------- ----------- -------- --------
Liberec project secured
bank loan (2) EUR 2018 - 20,468
----------------------------------------------- ---------- ---------- -------- --------
Suwalki project secured
bank loan (6) 3M Euribor+1.65% EUR 2020 27,571 29,886
--------------------------- ------------------ ---------- ----------- -------- --------
Zgorzelec project secured
bank loan (3) 3M Euribor+2.75% EUR 2014 21,225 21,993
--------------------------- ------------------ ---------- ----------- -------- --------
Koregaon Park project
secured bank loan (4) INR 2021 - 22,065
----------------------------------------------- ---------- ---------- -------- --------
Valley view (bas) project
secured bank loan (5) 3M EURIBOR+5.5% EUR 2014 8,200 9,700
--------------------------- ------------------ ---------- ----------- -------- --------
Total interest bearing
liabilities 102,512 150,847
------------------------------------------------------------------------ ======== ========
(1) IRS on bank loans - refer to note 11.
(2) Refer to note 29(c) for the purchase of the loan.
(3) Zgorzelec loan - mostly non-recourse loan (except a
component of a EUR 1.2 million which is recourse). The loan has
expired during 2014 - the Company is negotiating with the financing
bank on signing new facility. The Company has also pledged its plot
in Leszno, Poland (valued at EUR 0.8 million, refer also to note
10) in favour of the financing bank. In March 2016 the Company
received a debt repayment call for the outstanding loan balance and
the accrued interest due to it (refer also to note 15) in a total
amount of EUR 22.9 million and currently reclassifies the loan as
short term. If the bank would exercise its rights and take over the
asset (valued at EUR 12 million, refer also to note 10), the
management expects the procedure to result in an accounting gain of
circa EUR 9 million. Management believes that the company still
controls the Polish SPV and therefore continues to consolidate
it.
(4) Koregaon Park loan - refer to note 29(a) regarding the sold
project.
(5) The outstanding loan as of December 31, 2015 has expired,
and the Company is currently negotiates with the financing bank new
terms and conditions for the loan. The loan is with recourse on
interest payments (not principal) and was reclassified as short
term.
(6) 2015 - Including EUR 2.7 of current maturities of long term
loans.
NOTE 12 - INTEREST BEARING LOANS FROM BANKS (cont.)
Covenants on loan
The below table summarise the main covenants (Loan to Value
("LTV") and Debt Service Coverage Ratio ("DSCR")) on group
loans:
Actual Contractual Actual Contractual
Bank facility LTV LTV DSCR DSCR
------------------------- ------- ------------ ------- ------------
Torun project secured
bank loan 47% 70% 1.93 1.25
------------------------- ------- ------------ ------- ------------
Suwalki project secured
bank loan 64% 70% 1.76 1.20
------------------------- ------- ------------ ------- ------------
Zgorzelec project
secured bank loan
(1) N/A N/A N/A N/A
------------------------- ------- ------------ ------- ------------
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
(1) - The Zgorzelec loan has expired, without new covenants
established; therefore no DSCR and LTV comparative figures are
available.
NOTE 13 - TRADE PAYABLES
December December
31, 31,
Currency 2015 2014
---------------- --------- ---------
Construction related
payables 776 -
Mainly in PLN,
Other trade payables EUR 1,447 1,893
2,223 1,893
========= =========
NOTE 14 - RELATED PARTIES PAYABLES
December December
31, 31,
Currency 2015 2014
---------- --------- ---------
EI Group- ultimate parent
company - expenses recharged EUR, USD 76 457
Other related parties
in EI group EUR 33 704
109 1,161
========= =========
For payments (including share based payments) to related parties
refer to note 30. In respect of the related party receivables refer
to note 29(h).
NOTE 15 - OTHER LIABILITIES
December December
31, 31,
Short term Currency 2015 2014
------------ --------- ---------
Advanced payment in respect
of selling of trading
property INR, RON - 5,868
Obligations to tenants EUR 1,385 2,401
Accrued bank interest
(1) Mainly EUR 2,807 2,265
Obligation in respect
of plot purchase Mainly EUR 1,380 1,380
Government institutions
and fees 974 529
Loan from non-controlling
interest EUR - 215
Salaries and related
expenses 264 180
Accrued expenses and
commissions 44 50
Other 191 287
--------- ---------
Total 7,045 13,175
========= =========
(1) Mainly due to bank facilities in Zgorzelec (EUR 1.5 million)
and valley view BAS (EUR 1.2 million) which are currently in
default (refer also to note 12).
NOTE 16 - DEBENTURES AT AMORTISED COST
New debentures following the conclusion of the restructuring
plan in 2014
In 2014, in view of the significant change in the terms of the
Debentures, the Company de-recognized all of its outstanding
debentures, and recognized new debentures at fair value (with
subsequent measurement at amortized cost) determined based on the
market quote at the end of the trade date of December 10, 2014.
Table 1
Following the above, a value of EUR 170.2 million was deemed to
be the fair value of the principal of new debentures upon
restructuring date (December 10, 2014).
Principal Effective interest Quote deemed
fair value as fair
determined rate Value of Debenture
(in NIS or
PLN cents)
------------ ------------------- -------------------
Series A Debentures(*) 54,119 11.6% 112
Series B Debentures(*) 101,476 13.8% 105.34
Polish Debentures
(**) 14,562 10.8% 96.5
------------
Total 170,157
============
(*) In respect of Israeli bonds, market quote of December 10,
2014 was inclusive of accrued interest due to the year 2014,
therefore, and in order to reach a clean quote of the principal,
accrued interest in the amount of EUR 3.5 million and EUR 7.9
million had to be deducted from the fair value derived from the
quote of debentures A, and B, respectively.
(**) See below in respect of general information on Polish
bonds. Fair value of Polish debentures (untraded) was determined
using the known effective interest rates determined for Israeli
debentures, and the value of the Polish debentures was derived from
it.
Gain from de-recognition and re-recognition (restructuring plan
gain)
Table 2
As a result of the above, the Company recorded a gain of EUR 3.4
million from eliminating the old debentures and recording of the
new debentures. The gain is calculated as follows:
Carrying amount
recognized
(de-recognized)
Items de-recognized
Total Israeli debentures at fair value
through profit or loss (116,671)
Total Israeli debentures at amortized
costs (55,175)
Total Polish debentures (14,425)
Old accrued interest due debentures
at amortized cost as of December 10,
2014 (6,097)
-----------------
Total amounts de-recognized (192,368)
-----------------
Items added
Fair value of new bonds (refer to table
1 above) 170,157
New accrued interest due debentures
at amortized cost as of December 10,
2014 12,614
Value of new shares issued to bondholders
(share premium- refer to note 18) 6,154
-----------------
Total amounts recognized 188,925
-----------------
Gain recorded at December 10, 2014 3,443
-----------------
NOTE 16 - DEBENTURES AT AMORTISED COST (cont.)
New debentures following the conclusion of the restructuring
plan (cont.)
As part of the restructuring plan (refer to note 29(e)), and as
interest due up and until December 31, 2013 was added to the
principal of the debentures, an additional NIS 5.5 million par
value debentures series A and net NIS 13.3 million par value
debentures series B were issued. Also additional PLN 2.8 million
were added to the original principal.
Table 3
Following the additional issuance, the total par value and
adjusted par value (in EUR thousands) outstanding were as
follows:
Adjusted
Par par Fair value Discount
Value value determined Created (*)
-------- --------- ----------- ------------
Series A Debentures 51,447 62,108 54,119 7,989
Series B Debentures (Net
of treasury bonds) 103,813 121,535 101,476 20,059
Polish Bonds 15,090 15,090 14,562 528
--------- ----------- ------------
Total 198,733 170,157 28,576
========= =========== ============
(*) The discount created is recognized as finance cost across
the remaining maturity of the debentures, using the effective
interest rate method, subject to asset disposals.
Following the disposal of several assets by the Company in 2015
(refer to notes 29(b) and 29(d)), the Company made principal
repayment to Bondholders a total amount of EUR 6.6 million (2014 -
EUR 12.1 million due to 2014 disposals), representing 75% of the
total proceeds obtained from asset disposal (except the Koregaon
park disposal (refer to note (29(a)).
The table below describes the movement in the carrying amount of
the debentures between December 10, 2014 and December 31, 2015:
Fair Amortization Repayment Forex Carrying Amortization Repayment Forex Carrying
value and Amount and Amount
As as as
at at at
December Of discount Of inflation December Of discount Of Inflation December
10, in 2014 principal 2014 31, in 2015 principal 2015 31,
2014 2014 2014 2015 2015
(*) (1),(2)
--------- ------------- ---------- ---------- --------- ------------- ---------- ---------- ---------
Series
A
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
Debentures 54,119 216 (2,615) 1,537 53,257 1,923 (1,428) 5,320 59,072
Series
B
Debentures
(net
of
treasury
bonds
held) 101,476 488 (8,406) 2,820 96,378 8,399 (4,588) 9,371 109,560
Polish
Debentures 14,562 55 (1,036) (354) 13,227 294 (569) 5 12,957
--------- ------------- ---------- ---------- --------- ------------- ---------- ---------- ---------
Total 170,157 759 (12,057) 4,003 162,862 10,616 (6,585) 14,696 181,589
========= ============= ========== ========== ========= ============= ========== ========== =========
(1) Carrying amount (net of treasury bonds) as at December 31,
2015 is composed of EUR 203,047 thousand net debentures obligation
and EUR 21,458 thousand of discount outstanding (2014 - Carrying
amount as at December 31, 2014 is composed of EUR 191,545 thousand
net debentures obligation and EUR 28,683 thousand of discount
outstanding).
(2) In view of the probable planned selling of the four shopping
centers (refer to note 2(c), and see also below), the Company is
planning to generate sufficient cash flow which will enable it to
repay by December 1, 2016 an cumulative amount of NIS 434 million
(EUR 102 million) of the Unsecured Debt, and by that the remaining
principal payments shall be deferred for an additional year. The
Company has repaid circa NIS 88 million (EUR 19 million) during
2015 and therefore has reclassified accordingly EUR 79.6 million
(EUR 81.3 million, less treasury bonds expected repayment of EUR
1.6 million) of its unsecured debt as short term. Refer to note
2(c) for further information.
NOTE 16 - DEBENTURES AT AMORTISED COST (cont.)
Debentures covenants are included in note 28 (b).
New debentures following the conclusion of the restructuring
plan (cont.)
As a result of the restructuring plan, new interest rates and
maturities were applied to the debentures as follows:
Interest rate Principal final maturity
Before After Before After
(*)
---------- ------------- -------------- -----------
Series A Debentures 4.5%+ CPI 6%+ CPI 2017 2019
Series B Debentures 5.4%+ CPI 6.9%+ CPI 2015 2018
4.5%+ 6M
Polish Debentures WIBOR 6%+ 6M WIBOR 2013 2017
(*) Principal repayments are subject to 75% mandatory prepayment
(refer to notes 2(c) and 29(e)). Also, if until December 1, 2016
the Company succeeds to repay NIS 434 million (EUR 102 million) of
the Unsecured Debt, then the remaining principal payments shall be
deferred for an additional year.
The below is a summary table of contractually required net
principal repayments of all debentures, assuming the deferral of
payment is obtained, and in comparison when such deferral is not
obtained. This table does not consider the impact of timing of
disposals.
Year Principal Principal
falling repayment repayment
Without
due With Deferral Deferral
---------- -------------- -----------
TEUR TUER
2016 79,564 13,220
2017 - 101,475
2018 26,976 75,132
2019 82,409 13,220
2020 14,098 -
-------------- -----------
Total 203,047 203,047
============== ===========
Both NIS series of debentures have credit rating of "ilBBB-" on
a local Israeli scale with negative outlook as of the date of
approval of these financial statements by S&P Maalot.
Bonds issued in Poland
In November 2010, the Company completed a bond offering to
Polish institutional investors. The Company raised a total of PLN
60 million (approximately EUR 15.2 million). Following the
completion of the restructuring plan (refer also to note 29(e)),
the terms and conditions of the bonds were changed, as described
above.
NOTE 17- RECOGNIZED DEFERRED TAX ASSETS (LIABILITIES)
Deferred taxes recognized are attributable to the following
items:
Recognized
December in Profit December
Assets/(liabilities) 2015 31, or loss 31,
2014 2015 2015
--------- ----------- ---------
Property, equipment and other
assets 921 (515) 406
Debentures (7,334) 3,540 (3,794)
Tax value of loss carry-forwards
recognized (*) 7,334 (3,540) 3,794
Deferred tax asset, net 921 (515) 406
========= =========== =========
Recognized
December in Profit December
Assets/(liabilities) 2014 31, or loss 31,
2013 2014 2014
--------- ----------- ---------
Property, equipment and other
assets (379) 1,300 921
Debentures (9,248) 1,914 (7,334)
Tax value of loss carry-forwards
recognized (*) 9,248 (1,914) 7,334
Deferred tax asset (liability),
net (379) 1,300 921
========= =========== =========
(*) Due to tax losses created at the Company level.
Unrecognized deferred tax assets
Deferred tax assets have not been recognized in respect of tax
losses in a total amount of EUR 151,845 thousand (2014: EUR 135,580
thousand).
Deferred tax assets have not been recognized in respect of these
items because it is not probable that future taxable profit will be
available against which the Group can utilize the benefits there
from. As of December 31, 2015 the expiry date status of tax losses
to be carried forward is as follows:
Total tax losses After
carried forward 2016 2017 2018 2019 2020 2020
----------------- ------ ------ ------- ------- ------- --------
167,021 6,541 7,521 10,308 18,352 10,951 113,384
Tax losses are mainly generated from operations in the
Netherlands. Tax settlements may be subjected to inspections by tax
authorities. Accordingly, the amounts shown in the financial
statements may change at a later date as a result of the final
decision of the tax authorities.
NOTE 18 - EQUITY
December 31,
2015 2014
------------- ---------------
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 685,560,275 297,186,138
Issuance of shares in respect See (1)
of right issuance below - 282,326,830
See (2)
Issuance of shares to bondholders below - 106,047,307
---------------
At the end of the year 685,560,275 685,560,275
============= ===============
(1) Right issuance - as part of the implementation of the
restructuring plan, certain shareholders participated in a right
issuance process, following of which EUR 20 million were injected
to the Company, and the Company has issued a total of 282,326,830
shares to these shareholders for a share price 0.0675 EUR per
share. The premium resulted from the share issuance in a total
amount of EUR 16.2 million was attributed to share premium. Legal,
prospectus related, and other expenses associated with the issuance
of shares in a total amount of EUR 1.6 million was also attributed
to share premium. For more details on the right issuance process
refer to note 29(e).
(2) Issuance of shares to bondholders - as part of the
implementation of the restructuring plan, a total of 106,047,307
shares were issued to the debentures holders, for which the
bondholders have paid the par value of the shares. As a result of
the above, a total deemed premium of EUR 6.2 million was
contributed to the share premium of the entity, based on the market
value of the shares granted at the closing of the day of trading
December 10, 2014.
As a result of the abovementioned two processes, the holding
rate of EI in the Company was reduced from 62.25% to 44.9%.
Share based payment reserve
Other capital reserve is in respect of Employee Share Option
Plans ("ESOP") in the total amount of EUR 35,556 thousand as of
December 31, 2015 (2014 - EUR 35,520 thousand).
Translation reserve
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
The translation reserve comprises, as of December 31, 2015, all
foreign currency differences arising from the translation of the
financial statements of foreign operations in India. Refer to note
29(A) in respect of realization of foreign exchange differences due
to transaction in India.
Restriction of dividend
The Company shall not make any dividend distributions, unless
(i) at least 75% of the Unpaid Principal Balance of the Debentures
(EUR 199 million) has been repaid and the Coverage Ratio on the
last Examination Date prior to such Distribution is not less than
150% following such Distribution, or (ii) a Majority of the Plan
Creditors consents to the proposed Distribution.
Notwithstanding the aforesaid, in the event an additional
capital injection of at least EUR 20 million occurs, then after one
year following the date of the additional capital injection, no
restrictions other than those under the applicable law shall apply
to dividend distributions in an aggregate amount of up to 50% of
such additional capital injection.
NOTE 19 - EARNINGS PER SHARE
The calculation of basic earnings per share ("EPS") at December
31, 2015 was based on the loss attributable to ordinary
shareholders of EUR 46,116 thousand (2014: loss of EUR 119,687
thousand) and a weighted average number of ordinary shares
outstanding of 685,560 thousand (2014: 309,955 thousand).
Weighted average number of ordinary shares (for
both EPS and EPS from continuing operations)
In thousands of shares with
a EUR 0.01 par value December 31,
2015 2014
-------- --------
Issued ordinary shares at
1 January 685,560 297,186
Issuance of shares due to
restructuring plan - 12,769
-------- --------
Weighted average number of
ordinary shares at 31 December 685,560 309,955
======== ========
The calculation of diluted earnings per share from continuing
operations 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,
2015 2014
-------- --------
Weighted average number of ordinary
shares (basic) 685,560 309,955
Effect of share options on issue - -
-------- --------
Weighted average number of ordinary
shares (diluted) at 31 December 685,560 309,955
======== ========
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 20 - EMPLOYEE SHARE OPTION PLAN
On October 26, 2006 the Company's Board of Directors approved
the grant of up to 33,834,586 non-negotiable options for the
Company's ordinary shares to the Company's board members, employees
in the company and other persons who provide services to the
Company including employees of the Group ("Offerees").
The options were granted to the Offerees for no consideration.
Furthermore, 2nd ESOP plan was adopted on November 22, 2011 which
is based on the terms of the 1st ESOP as amended in accordance with
the terms as referred to above, with a couple of amendments, the
most important of which is the total number of options to be
granted under the 2nd ESOP is fourteen million (14) and a cap of
GBP 2. Exercise of the options is subject to the following
mechanism:
Contractual
Grant date / employees entitled Number of options life of options(1)
--------------------------------- ------------------ --------------------
ESOP No.1(3)
Option grant to key management
at October 27, 2006 13,218,073 15 years
--------------------------------- ------------------ --------------------
Option grant to employees 15 years
at October 27, 2006 1,858,589
--------------------------------- ------------------ --------------------
Total granted in 2006 15,076,662 15 years
--------------------------------- ------------------ --------------------
Total granted in 2007 (2) 1,016,156 15 years
--------------------------------- ------------------ --------------------
Total granted in 2008 (2) 763,887 15 years
--------------------------------- ------------------ --------------------
Total granted in 2009 (2) 391,668 15 years
--------------------------------- ------------------ --------------------
Total granted in 2011(2) 120,000 15 years
--------------------------------- ------------------ --------------------
ESOP No.2(3)
--------------------------------- ------------------ --------------------
Total granted in 2011 (2) 4,584,000 10 years
--------------------------------- ------------------ --------------------
Total granted in 2012 (2) 860,000 10 years
--------------------------------- ------------------ --------------------
Total granted in 2013 (2) 985,000 10 years
--------------------------------- ------------------ --------------------
Total share options Granted 23,797,373
--------------------------------- ------------------ --------------------
NOTE 20 - EMPLOYEE SHARE OPTION PLAN (cont.)
(1) Following the 4th amendment of ESOP1, the contractual life
for stock options granted changed from 10 years to 15 years
(2) Share options granted to key management: 2007 - 100,000
share options; 2008 - 260,000 share options; 2009 - 73,334 share
options; 2011- 3,225,000 share options (ESOP No. 2); 2012 - 450,000
share options; 2013 - 150,000 share options.
(3) Vesting conditions - three years of service.
On the exercise date the Company shall allot, in respect of each
option so exercised, shares equal to the difference between (A) the
opening price of the Company's shares on the LSE (or WSE under
certain conditions) on the exercise date, provided that if the
opening price exceeds GBP 3.24, the opening price shall be set at
GBP 3.24 (Except 2nd ESOP as stated above); less (B) the Exercise
Price of the Options; and such difference (A minus B) will be
divided by the opening price of the Company's Shares on the LSE (or
WSE under certain conditions) on the exercise date:
Weighted
average Weighted
exercise Number average Number
price of exercise of
(*) options price options
2015 2015 2014 2014
---------- ----------- ---------- -----------
GBP GBP
---------- ----------- ---------- -----------
Outstanding at the
beginning of the year 0.43 24,442,373 0.43 25,061,138
Forfeited during the
period - back to pool
(**) 0.36 (645,000) 0.42 (618,765)
Outstanding at the
end of the year 0.43 23,797,373 0.43 24,442,373
----------- -----------
Exercisable at the
end of the year 23,469,040 23,115,706
=========== ===========
(*)-The options outstanding at 31 December 2015 have an exercise
price in the range of GBP 0.28 to GBP 0.54 (app. EUR 0.38 - EUR
0.74), and have weighted average remaining contractual life of five
years.
(**)- The total accumulated share based payment costs due to
options exercise and forfeiture were 13,284 thousand as of December
31, 2015 (December 31, 2014 - EUR 13,216 thousand, December 31,
2013 - 13,073 thousand).
The maximum number of shares issuable upon exercise of all
outstanding options as of the end of the reporting period is
35,460,414. The estimated fair value of the services received is
measured based on a binomial lattice model.
During 2015 the total employee costs for the share options
granted was EUR 36 thousand (2014 - EUR 207 thousand).
NOTE 21 - RENTAL INCOME
a. Shopping malls and plots
Year ended
December 31,
2015 2014
------- -------
Rental income from operating
shopping centers (1) 18,085 21,343
Other rental income (2) 591 769
Total 18,676 22,112
======= =======
(1) 2015 - four operating shopping centers presented as part of
trading properties, 2014 - five, following the sale Koregaon
shopping center in May 2015 (refer to note 29(a)).
(2) 2015 and 2014 - Small scale rental fees charged on plots held by the Group.
b. Entertainment centers
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
Revenue from operation of entertainment centers is attributed to
a subsidiary of the Company known as "Fantasy Park" which provided
gaming and entertainment services in operating shopping centers. As
of December 31, 2015, this subsidiary operate in one shopping
centre held by the group (December 31, 2014 - in one shopping
center).
NOTE 22 - COST OF OPERATIONS
a. Shopping malls and plots
Year ended
December 31,
2015 2014
Operating shopping centers (1) 5,353 7,669
Other cost of operations (2) 1,128 822
Total 6,481 8,491
======= ======
(1) Refer to note 21 above.
(2) 2015 and 2014 - Attributed to small scale costs on plots held by the Group.
b. Entertainment centers
Refer also to note 21 (b) above. The costs are inclusive of
management of the operation of the entertainment center, as well as
utility, rent and spent material associated with the operation of
the entertainment center.
NOTE 23 - ADMINISTRATIVE EXPENSES AND RESTRUCTURING COSTS
a. Administrative expenses, excluding restructuring costs
Year ended
December 31,
2015 2014
Salaries and related expenses
(*) 3,842 3,594
Professional services 2,433 2,961
Offices and office rent 260 281
Travelling and accommodation 260 266
Depreciation and amortization 102 133
Others 102 199
Total 6,999 7,434
======= ======
(*) - 2015 - including retirement payments to two former CEO's
in a total amount of EUR 0.5 million (refer to note 29(m).
b. Restructuring costs
The Company incurred restructuring cost in 2014 as a result of
the restructuring process completion during 2014 (refer to note
29(e)).
NOTE 24 - OTHER INCOME AND OTHER EXPENSES
Year ended
December 31,
2015 2014
-------- --------
Insurance indemnity payment
- Koregaon Park Plaza - 2,287
Gain from equity accounted investee
EPI - credit balances waiver 1,174 -
Waiver of advanced payments
obtained from potential buyer
in India 725 -
Changes in provision PAB (refer
to note 8) 686 -
Kochi advanced payment (refer
to note 29(h)) 4,653 -
Other income 69 197
-------- --------
Total other income 7,307 2,484
-------- --------
Impairments of other receivables
and assets (1) (892) (1,014)
Loss from selling turbines,
airplane and other (2) (631) (852)
Other expenses (328) (641)
-------- --------
Total other expenses (1,851) (2,507)
-------- --------
Other income (expense), net 5,456 (23)
======== ========
(1) 2015- Includes impairment of receivables associated with
abandoned projects in a total amount of EUR 0.9 million. 2014 -
Including impairment of Palazzo Du Calle office building in Romania
in the amount of EUR 0.7 million.
(2) 2015 - Including loss from selling Palazzo Du Calle office
building (refer to note 29(d) - EUR 0.2 million.
NOTE 25 - NET FINANCE COSTS
Year ended
December 31,
Recognized in profit or loss 2015 2014
--------- ---------
Gain from settlement of bank debt
(refer to note 29 (b) and (c)) 13,481 622
Finance income from hedging activities
through sale of options - 217
Foreign currency gain on bank deposits
and bank loans 366 202
Interest income on bank deposits 26 69
Finance income from held for trading
financial assets 104 80
Interest from loans to related
parties 315 73
Finance income 14,292 1,263
Interest expense on debentures (13,910) (4,566)
Amortization of discount(*) (9,720) (759)
Loss from early repayment of bonds (896) -
Interest expense on bank loans (5,102) (9,557)
Changes of fair value in debentures
measured at fair value through
profit or loss (**) - (21,290)
Finance costs from hedging activities
through currency options sale (586) -
Foreign currency losses on debentures (14,696) (469)
Other finance expenses (285) (198)
--------- ---------
Finance costs (45,195) (36,839)
Net finance costs (30,903) (35,576)
========= =========
(*) As the Company's primary objective is to obtain the
Deferral, the amortization of the discount is taking into account
the repayment in 2016 of the minimum net amount, as mentioned in
note 2(c).
(**) Credit risk of the entity could not be reliably measure in
2014, as the Company started the year at a state of default in its
payments, and no reliable cash flow projection could have been
measured.
NOTE 26 - INCOME TAXE
Amounts recognized in profit or loss
Year ended
December 31,
2015 2014
-------- ------
Current year tax expenses (506) (18)
Tax benefit (deferred tax
expense) (refer to note 17) (515) 1,300
Total (1,021) 1,282
======== ======
Deferred tax (expense) benefit
For the year ended
December 31,
2015 2014
---------- ---------
Origination and reversal of
temporary differences (515) 1,300
NOTE 26 - TAXES (Cont.)
Reconciliation of effective tax rate:
Year ended December
31,
% 2015 2014
---- --------- ----------
Dutch statutory income tax
rate 25% 25%
Loss from continuing operations
before income taxes (45,095) (120,969)
Tax benefit at the Dutch statutory
income tax rate 25% (11,274) (30,242)
Recognition of previously
unrecognized tax losses (1,021) (981)
Effect of tax rates in foreign
jurisdictions (995) 6,356
Current year tax loss for
which no deferred tax asset
is provided (1) 12,775 18,695
Non-deductible expenses (exempt
income) 1,536 4,890
Tax Expense (Tax benefit) 1,021 (1,282)
==== ========= ==========
(1) 2015 and 2014 - Mainly due to write-down of Trading property
not recognized for tax purposes.
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%. 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.
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:
I. Motive Test, the investee company is not held as passive investment;
II. Tax Test, the investee company is taxed locally at an
effective rate of at least 10% (calculated based on Dutch tax
accounting standards);
III. Asset Test, the investee company owns (directly and
indirectly) less than 50% low taxed passive assets.
Poland
Companies resident in Poland are subject to corporate income tax
at the general rate of 19%. (capital gains bears the same tax
rate). Tax losses may be carried forward for five years, with only
50% of the loss is deductible in each tax year. Withholding tax on
Dividend is at a rate of 19%, subject to European Union regulations
or Double Tax Treaties outstanding.
Czech Republic
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
Companies resident in the Czech Republic are subject to
corporate income tax at the general rate of 19% (possible exemption
in certain cases). Tax losses may be carried forward for five
years, subject to certain limitations. Dividends and interest paid
to non-resident are subject to 15% withholding tax unless the rate
is reduced under an applicable treaty. Dividend paid to EU member
state is exempt upon fulfilling certain criteria. 4% transfer tax
is levied on real estate transfers.
Latvia
Companies resident in Latvia are subject to corporate income tax
at the general rate of 15%. (capital gains bears the same tax
rate). Tax losses may be carried forward indefinitely (with
exception for losses prior to 2008). There is no withholding tax on
Dividend.
NOTE 27 - FINANCIAL INSTRUMENTS
FINANCIAL RISK MANAGEMENT
Overview
The Group has exposure to the following risks from its use of
financial instruments:
-- Credit risk
-- Liquidity risk
-- Market risk
This note presents information about the Group's exposure to
each of the above risks, the Group's objectives, policies and
processes for measuring and managing risk, and the Group's
management of capital.
The Board of Directors has established a continuous process for
identifying and managing the risks faced by the Group (on a
consolidated basis), and confirms that it is responsible to take
appropriate actions to address any weaknesses identified.
The Group's risk management policies are established to identify
and analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits.
Risk management policies and systems are reviewed regularly to
reflect changes in market conditions and the Group's
activities.
The Company's Audit Committee oversees how management monitors
compliance with the Group's risk management policies and procedures
and reviews the adequacy of the risk management framework in
relation to the risks faced by the Group.
a. Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the
Group's financial instruments held in banks and from other
receivables.
Management has a credit policy in place and the exposure to
credit risk is monitored on an ongoing basis. Credit evaluations
are performed on all customers requiring credit over a certain
amount. The Group requires collateral in the form of mainly deposit
equal to three months of rent from tenants of shopping centers
(collected deposits from tenants totalled EUR 1.4 million and EUR
2.4 million as at December 31, 2015 and 2014, respectively).
Cash and deposits and other financial assets.
The Group limits its exposure to credit risk in respect to cash
and deposits, including held for sale financial assets (debt
instruments) by investing mostly in deposits and other financial
instruments with counterparties that have a credit rating of at
least investment grade from international rating agencies. Given
these credit ratings, management does not expect any counterparty
to fail to meet its obligations.
b. Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. For detailed
information refer to note 2(c).
NOTE 27 - FINANCIAL INSTRUMENTS (cont.)
c. Market risk
Currency risk
Currency risk is the risk that the Group will incur significant
fluctuations in its profit or loss as a result of utilizing
currencies other than the functional currency of the respective
Group company.
The Group is exposed to currency risk mainly on borrowings
(debentures issued in Israel and in Poland) that are denominated in
a currency other than the functional currency of the respective
Group companies. The currencies in which these transactions
primarily are denominated are the NIS or PLN.
The Company ceased the using of currency options and forwards
effective October 2015 in order to maintain liquidity. Regarding
currency and risk hedging of the debentures refer also to note
11.
Interest Rate Risk (including inflation)
The group's interest rate risk arises mainly from short and long
term borrowing (as well as debentures). Borrowings issued at
variable interest rate expose the Group to variability in cash
flows. Borrowings issued at fixed interest rate (but are presented
at their fair value) expose the Group to changes in fair value, if
the interest is changing. In certain case, the Group uses IRS to
minimize the exposure to interest risk by fixing the interest rate.
Regarding interest rate risk hedging of the debentures and bank
facilities, refer to note 11. As the Israeli inflation risk is
diminishing to a level that management believes is acceptable
(Israeli CPI 2015 -1%; 2014 -0.2%), the Company has stopped using
hedging of CPI risk in 2012.
Shareholders' equity management
Refer to note 18 in respect of shareholders equity components in
the restructuring plan. The Company's Board of Directors is updated
on any possible equity issuance, in order to assure (among other
things) that any changes in the shareholders equity (due to
issuance of shares, options or any other equity instrument) is to
the benefit of both the Company's bondholders and shareholders.
Refer also to note 18 on dividend policy.
Credit risk
The carrying amount of financial assets represents the maximum
credit exposure. The vast majority of financial assets are not
passed due, and the management believes that the unimpaired amounts
that are past due by more than 60 days are still collectible in
full, based on historic payment behavior and extensive analysis of
customer credit risk. The maximum exposure to credit risk at the
reporting date was:
Carrying amount as
at December 31,
Note Credit
quality 2015 2014
Mainly
Cash and cash equivalents 4 Baa3 15,659 33,363
Restricted bank deposits- Mainly
short term 5 BBB+ 4,774 6,886
Held for trading financial Mostly
assets BB+ - 1,434
Trade receivables,
net 6 N/A 1,654 2,719
Other accounts receivable 7 N/A 1,350 2,963
Loan to Diksna 10 N/A 4,298 6,121
Restricted bank deposits
- long term - 25
Total 27,735 53,511
========== =========
NOTE 27 - FINANCIAL INSTRUMENTS (cont.)
Credit risk (cont.)
As of December 31, 2015 and 2014, all debtors without credit
quality have a relationship of less than five years with the Group.
At 31 December 2015, the aging of trade and other receivables that
were not impaired was as follows:
Carrying amount
December 31,
2015 2014
-------- --------
Neither past due nor impaired 1,151 1,160
Past due 1-90 days 578 1,130
Past due 91-120 days 1,275 3,392
Total 3,004 5,682
======== ========
The maximum exposure to credit risk for the abovementioned table
at the reporting date by type of debtor was as follows:
Carrying amount
December 31,
2015 2014
-------- --------
Banks and financial institutions 20,433 41,683
Tenants 1,654 2,719
Governmental institutions 1,061 2,502
Loan to Diksna 4,298 6,121
Related parties and other 289 486
Total 27,735 53,511
======== ========
Liquidity risk (*) (***)
The following are the contractual maturities of financial
liabilities, including estimated interest payments and excluding
the impact of netting agreements:
December 31, 2015
More
Carrying Contractual 6 months 6-12 1-2 2-5 than
amount cash or less Months(**) years years 5 years
flows (**)
Derivative
financial
liabilities
IRS Derivatives 754 (790) (230) (227) (333) - -
Non-derivative
financial
liabilities
Secured bank
loans 102,512 (107,644) (32,432) (2,822) (48,267) (24,123) -
Debentures
issued 181,589 (238,347) (33,034) (60,472) (18,115) (116,667) (10,059)
Trade and
other payables 9,268 (9,268) (9,268) - - - -
Related parties 109 (109) (109) - - - -
--------- ------------ --------- -----------
293,478 (355,368) (74,843) (63,294) (66,382) (140,790) (10,059)
===========
(*)Refer also to note 2(c) for more information. This note
assumes the minimum contractual payments on the debentures to
achieve the Deferral.
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
(**)Refer also to note 2(c) for more information on debentures
issued. Out of the total remaining amount of EUR 44.6 million
expected for the next six months, the Company expects contractual
cash flows due to secured bank loans in the amount of EUR 29.4
million and trade and other payables in the amount of EUR 5.4
million to be revolved.
(***)As the Company's primary objective is to obtain the
Deferral, this liquidity risk note is taking into account the
repayment in 2016 of the minimum net amount, as mentioned in note
2(c).
NOTE 27 - FINANCIAL INSTRUMENTS (cont.)
Liquidity risk (cont.)
December 31, 2014
More
Carrying Contractual 6 months 6-12 1-2 2-5 than
amount cash or less months years years 5 years
flows
Derivative
financial
liabilities
IRS Derivatives 989 (1,053) (263) (163) (319) (308) -
Non-derivative
financial
liabilities
Secured bank
loans 150,847 (173,058) (39,616) (5,697) (10,202) (86,362) (31,181)
Debentures
issued 162,862 (238,451) (6,228) (6,602) (25,466) (200,155) -
Trade and
other payables 15,068 (15,068) (15,068) - - - -
Related parties 1,161 (1,161) (1,161) - - - -
--------- ------------ ---------
329,938 (427,738) (62,073) (12,299) (35,668) (286,517) (31,181)
Currency risk
The Company's main currency risk is in respect of its NIS
denominated debentures. Following the discontinuance and full
settlement of all currency options effective October 2015, the
Company is exposed to changes in EUR/NIS rate.
The following exchange rate of EUR/NIS applied during the
year:
Reporting date
Average rate Spot rate
EUR 2015 2014 2015 2014
-------
NIS 1 0.232 0.211 0.235 0.212
PLN denominated debentures - A change of 6 percent in EUR/PLN
rates at the reporting date would have increased/(decreased) profit
or loss by EUR 0.8 million, as a result of having issued PLN linked
bonds.
NIS denominated debentures - A change of 11 percent in EUR/NIS
rates at the reporting date would have increased/(decreased) profit
or loss by EUR 18.5 million (2014: EUR 14.8 million), as a result
of having issued NIS linked bonds.
This effect assumes that all other variables, in particular CPI
index, remain constant.
Interest rate risk
Profile
As of the reporting date the interest rate profile of the
Group's interest-bearing financial instruments was:
Carrying amount
2015 2014
Fixed rate instruments
Financial assets 20,433 41,683
Variable rate instruments
Debentures (181,589) (162,862)
Other financial liabilities (102,512) (150,847)
(284,101) (313,709)
NOTE 27 - FINANCIAL INSTRUMENTS (cont.)
Cash flow sensitivity analysis for variable rate instruments
A change of 53 basis points in Euribor interest rates (2014 - 5
basis points) at the reporting date would have increased
(decreased) profit or loss by the amounts shown below. This
analysis assumes that all other variables, in particular foreign
currency rates, remain constant. The analysis is performed on the
same basis for 2014.
Variable Interest rate effect (excluding debentures)
Profit or Loss
Increase Decrease
December 31, 2015 (500) 500
December 31, 2014 (75) 75
NIS Debentures
Sensitivity analysis - effect of changes in Israeli CPI on
carrying amount of NIS debentures
A change of 3 percent in Israeli Consumer Price Index ("CPI") at
the reporting date (and in 2014) would have increased (decreased)
profit or loss by the amounts shown below. This analysis assumes
that all other variables, in particular foreign currency rates,
remain constant.
Profit (loss) effect
For the year ended December 31, Carrying amount of debentures CPI increase effect CPI decrease effect
2015 168,632 (5,059) 5,059
2014 149,635 (4,489) 4,489
Fair values
Fair values measurement versus carrying amounts
In respect to the Company's financial assets instruments not
presented at fair value, being mostly short term market interest
bearing liquid balances, the Company believes that the carrying
amount approximates fair value. In respect the Company's financial
instruments liabilities:
For the Israeli debentures presented at amortized cost, the fair
value would be the market quote of the relevant Israeli debenture,
had they been measured at fair value.
Carrying amount Fair value
2015 2014 2015 2014
Statement of financial position
Debentures at amortized cost - Polish bonds 12,957 13,227 11,569 12,699
Debentures A at amortized cost - Israeli bonds 59,072 53,257 50,172 47,148
Debentures B at amortized cost - Israeli bonds 109,560 96,378 91,614 92,666
In respect of most of other non-listed borrowings, the Group was
not asked to raise interest rates or to bring forward maturities as
a result of the restructuring procedure, as most financing banks
does not expect the restructuring procedure to have a material
effect on the security the banks hold under non-recourse loans, and
therefore the Company has a basis to believe that the fair value of
non-listed borrowings approximates the carrying amount.
NOTE 27 - FINANCIAL INSTRUMENTS (cont.)
Fair value Hierarchy
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels in the fair value hierarchy. It does not include fair value
information for financial assets and financial liabilities not
measured at fair value if the carrying amount is a reasonable
approximation of fair value:
Carrying amount as
at December 31,
Note Fair value hierarchy 2015 2014
---------- ---------
Financial assets not
measured at fair value
Cash and cash equivalents 4 15,659 33,363
Restricted bank deposits-
short term 5 4,774 6,886
Held for trading financial Level
assets 1 - 1,434
Trade receivables,
net 6 1,654 2,719
Other receivables 7a 1,350 2,963
Loan to Diksna 10 4,298 6,121
Restricted bank deposits
- long term - 25
Total 27,735 53,511
========== =========
Carrying amount as
at December 31,
Note Fair value hierarchy 2015 2014
---------- ---------
Financial liabilities not measured at fair value
Level
Interest bearing loans from banks 12 2 102,513 150,847
Level
Debentures at amortized cost 16 2 181,589 162,862
Trade and other payables 9,268 15,068
Related parties 14 109 1,161
Total 293,479 329,938
========== =========
Carrying amount as
at December 31,
Note Fair value hierarchy 2015 2014
---------- ---------
Financial liabilities measured at fair value
Level
Derivatives 11 3 754 989
Total 754 989
========== =========
NOTE 28 - CONTINGENT LIABILITIES AND COMMITMENTS
a. Contingent liabilities and commitments to related parties
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
1. In October 2006, the Company and EI entered into an
agreement, pursuant to which with effect from 1 January 2006 the
Company will pay commissions to EI in respect of all and any
outstanding corporate and first demand guarantees which have been
issued by EI in favour of the Company up to 0.5% of the amount or
value of the guarantee, per annum. As of the end of the reporting
period the Group has no outstanding guarantees from EI and no
consideration was paid in this respect.
NOTE 28 - CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
a. Contingent liabilities and commitments to related parties (cont.)
2. On November 28, 2014 the Company entered into an indemnity
agreement with all of the Company's newly appointed directors and
on June 20, 2011 with part of the Company's senior management - the
maximum indemnification amount to be granted by the Company to the
directors shall not exceed 25% of the shareholders' equity of the
Company based on the shareholders' equity set forth in the
Company's last consolidated financial statements prior to such
payment. No consideration was paid by the Company in this respect
since the agreement was signed.
3. The Company maintains Directors' and Officers' liability
cover, presently at the maximum amount of USD 60 million for a term
of 12 months commencing on 29 April 2015. Pursuant to the terms of
this policy, all the Directors and senior manager are insured. The
new policy does not exclude past public offerings and covers the
risk that may be incurred by the Directors through future public
offerings of equity up to the amount of USD 50 million.
b. Contingent liabilities and Commitments to others
1. As part of the completion of the restructuring plan (refer
also to note 29 (e)), the Group has taken the following commitments
and collaterals towards the creditors:
a. Restrictions on issuance of additional debentures - The
Company undertakes not to issue any additional debentures other
than as expressly provided for in the Restructuring Plan.
b. Restrictions on amendments to the terms of the debentures-
The Company shall not be entitled to amend the terms of the
debentures, with the exception of purely technical changes, unless
such amendment is approved under the terms of the relevant series
and the applicable law and the Company also obtains the approval of
the holders of all other series of debentures issued by the Company
by ordinary majority
c. Coverage Ratio Covenant ("CRC") - the CRC is a fraction
calculated based on known Group valuations reports and consolidated
financial information available at each reporting period. Minimum
CRC deemed to be complied with by the Group is 118% in each
reporting period. For the December 31, 2015 calculated CRC refer to
note 29 (k). In the event that the CRC is lower than the Minimum
CRC, then as from the first cut-off date on which a breach of the
CRC has been established and for as long as the breach is
continuing, the Company shall not perform any of the following: (a)
a sale, directly or indirectly, of a Real Estate Asset ("REA")
owned by the Company or a subsidiary, with the exception that it
shall be permitted to transfer REA's in performance of an
obligation to do so that was entered into prior to the said cut-off
date, (b) investments in new REA's; or (c) an investments that
regards an existing project of the Company or of a subsidiary,
unless it does not exceed a level of 20% of the construction cost
of such project (as approved by the lending bank of these projects)
and the certain loan to cost ratio of the projects are met.
If a breach of the Minimum CRC has occurred and continued
throughout a period comprising two consecutive quarterly reports
following the first quarterly/year end report on which such breach
has been established, then such breach shall constitute an event of
default under the trust deeds and Polish debentures terms, and the
group of (i) Series A Debentures holders, (ii) Series B Debentures
holders, (iii) Polish Debentures holders, and (iv) guarantee and
other creditors shall, each as a separate group acting by majority
vote, be entitled to declare by written notice to the Company that
all or a part of their respective (remaining) claims become
immediately due and payable.
NOTE 28 - CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
d. Minimum Cash Reserve Covenant ("MCRC") - cash reserve of the
Company has to be greater than the amount estimated by the
Company's management required to pay all administrative and general
expenses and interest payments to the debenture holders falling due
in the following six months, minus sums of proceeds from
transactions that have already been signed (by the Company or a
subsidiary) and closed and to the expectation of the Company's
management have a high probability of being received during the
following six months. MCRC is maintained as of December 31,
2015.
e. Negative Pledge on REA of the Company - The Company
undertakes that until the debentures has been repaid in full, it
shall not create any encumbrance on any of the REA, held, directly
or indirectly, by the Company except in the event that the
encumbrance is created over the Company's interests in a subsidiary
as additional security for financial indebtedness ("FI") incurred
by such subsidiary which is secured by encumbrances on assets owned
by that subsidiary.
f. Negative Pledge on the REA of Subsidiaries - The subsidiaries
shall undertake that until the debentures have been repaid in full,
none of them will create any encumbrance on any of REA except in
the event that:
(i) the subsidiary creates an encumbrance over a REA owned by
such subsidiary exclusively as security for new FI incurred for the
purpose of purchasing, investing in or developing such REA;
Notwithstanding the aforesaid, subsidiaries shall be entitled to
create an encumbrance on land as security for FI incurred for the
purpose of investing in and developing, but not for purchasing, an
REA held by a different Group company (hereinafter: a "Cross
Pledge"), provided the total value of the lands owned by the Group
charged with Cross Pledges after the commencement date of the plan
does not exceed EUR 35 million, calculated on the basis of book
value (the "Sum of Cross Pledges"). When calculating the Sum of
Cross Pledges, lands that were charged with Cross Pledges created
prior to the commencement date of the plan or created solely for
the purpose of refinancing an existing FI shall be excluded. The
Group did not have cross-default as of December 31, 2015.
(ii) The encumbrance is created over an asset as security for
new FI that replaces existing FI and such asset was already
encumbered prior to the refinancing. Any excess net cash flow
generated from such refinancing, shall be subject to the mandatory
early prepayment of 75%.
(iii) The encumbrance is created over interests in a Subsidiary
as additional security for FI incurred by such subsidiary which is
secured by encumbrances on assets owned by that subsidiary as
permitted by sub-section (i) above. The encumbrance is created as
security for new FI that is incurred for purposes other than the
purchase of and/or investment in and development of an REA,
provided that at least 75% of the net cash flow generated from such
new FI is used for mandatory early prepayment.
g. Limitations on incurring new FI by the Company and the
subsidiaries - The Company undertakes not to incur any new FI
(including by way of refinancing an existing FI with new FI) until
the outstanding debentures debt (as of November 30, 2014) have been
repaid in full, except in any of the following events:
NOTE 28 - CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
(i) the new FI is incurred for the purpose of investing in the
development of a REA, provided that: (a) the Loan To Cost ("LTC")
Ratio of the investment is not less than 50% (or 40% in special
cases); (b) the new FI is incurred by the subsidiary that owns the
REA or, if the FI is incurred by a different subsidiary, any
encumbrance created as security for such new FI is permitted under
the negative pledge stipulation above; and (c) following such
investment the consolidated cash is not less than the MCRC;
(ii) The new FI is incurred by a subsidiary for the purpose of
purchasing a new REA by such Subsidiary, provided that following
such purchase the cash reserve is not less than the MCRC.
(iii) At least 75% of the net cash flow resulting from the
incurrence of new FI is used for a 75% early prepayment of the
debentures. Subject to the terms of the plan, the Group may also
refinance existing FI if this does not generate net cash flow.
h. No distribution policy - Refer to note 18 on Dividend Policy.
i. 75% mandatory early repayment - Refer to note 29(e) and to other sections in this note.
j. Permitted Disposals - provisions with respect to the four
shopping malls - the Company will be allowed to sell the four
shopping malls (Torun, Suwalki, Kragujevac and Riga) or to perform
refinancing for any of these (hereinafter: "Disposal Event"),
subject to the cumulative net cash flow in the Disposal Event in
respect of these four shopping malls being no less than EUR 70
million. In case no Disposal Event occurs for the four shopping
malls together, the Company will be allowed to perform a special
purpose Disposal Event only if after execution of the special
purpose Disposal Event, the surplus value of shopping malls not
sold (according to the valuation deducting the specific debt to
banks) is no less than EUR 70 million, deducting the net cash flows
received from previous Disposal Events and deducting the net cash
flows from the special purpose Disposal Event.
2. General commitments and warranties in respect of trading
property disposals.
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
In the framework of the transactions for the sale of the Group's
real estate assets, the Group has undertaken to indemnify the
respective purchasers for any losses and costs incurred in
connection with the sale transactions. The indemnifications usually
include: (i) Indemnifications in respect of completeness of title
on the assets and/or the shares sold (i.e that the assets and/or
the shares sold are owned by the Group and are clean from any
encumbrances and/or mortgage and the like). Such indemnifications
generally survived indefinitely and are capped to the purchase
price in each respective transaction; and (ii) Indemnifications in
respect of other representation and warranties included in the
sales agreements (such as: development of the project,
responsibility to defects in the development project, tax matter
and others).
Such indemnifications are limited in time (generally 3 years
from signing a closing agreement) and are generally capped to 25%
to 50% of the purchase price. No indemnifications were provided by
the Group till the date of the statement of financial position.
The Hungarian tax authorities have challenged the applied tax
treatment in two of the entities previously sold in Hungary by the
Company to Klepierre in the course of the Framework Agreement dated
30 July, 2004 ("Framework Agreement"). In respect of two of the
former subsidiaries of the Company, the tax authorities decision of
reducing the tax base by and imposed a penalty in the sum of HUF
428.5 Million (circa EUR 1.4 million), were challenged by the
previously held entities at the competent courts.
NOTE 28 - CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
Klepierre has submitted an indemnification request claiming that
the tax assessed in the described procedures falls into the scope
of the Framework Agreement tax indemnification provisions and the
Company in its response rejected such claims. Subsequently
Klepierre has submitted a claim to the International Chamber of
Commerce in Brussels for arbitration procedure. As of the reporting
date the procedure is still undergoing, the last hearing was held
on February 29, 2016, while the decision of the arbitrary court is
expected in the third quarter of 2016.
The Company's management estimates that no significant costs
will be borne thereby, in respect of these indemnifications.
Tesco - The Company is liable to the buyer of its previously
owned shopping center in the Czech Republic ("NOVO") - sold in June
2006 - in respect to one of its tenants ("Tesco"). Tesco leased an
area within the shopping center for a period of 30 years, with an
option to extend the lease period for an additional 30 years, in
consideration for EUR 6.9 million which was paid in advance.
According to the lease agreement, the tenant has the right to
terminate the lease agreement subject to fulfilment of certain
conditions as stipulated in the agreement. The Company's management
believes that it is not probable that this commitment will result
in any material amount being paid by the Company.
The Company is retaining a 100% holding in all its projects in
Serbia after it was decided to discontinue the negotiations with a
Serbian developer. The Company has a contingent obligation to pay
the developer in any case there is major progress in the projects.
The total remaining potential obligation is EUR 0.8 million.
Apart from point 4 above, the Company has contractual
commitments in respect of its project in Serbia (Visnjicka) in a
total amount of EUR 2 million in respect of construction
activities, to be paid during 2016 and 2017.
c. Contingent liabilities due to legal proceedings
The Company is involved in litigation arising in the ordinary
course of its business. Although the final outcome of each of these
cases cannot be estimated at this time, the Company's management
believes, that the chances these litigations will result in any
outflow of resources to settle them is remote, and therefore no
provision or disclosure is required.
d. Securities, guarantees and liens under bank finance agreements with subsidiaries
1. Certain companies within the Group which are engaged in the
purchase, construction or operation of shopping centres ("Project
Companies") have secured their respective credit facilities (with
withdrawn facility amounts totalling EUR 130 million, as of
December 31, 2015) awarded by financing banks (for projects in
Poland and Latvia), by providing first or second ranking (fixed or
floating) charges on property owned thereby, including right in and
to real estate property as well as the financed projects, on rights
pertaining to certain contracts (including lease, operation and
management agreements), on rights arising from insurance policies,
and the like. Shares of certain Project Companies were also pledged
in favour of the financing banks.
NOTE 28 - CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
d. Securities, guarantees and liens under bank finance agreements with subsidiaries (cont.)
In respect of corporate guarantee for the fulfilment of its
subsidiaries obligations under loan agreements, refer to note
12.
Shareholders loans as well as any other rights and/or interests
of shareholders in and to the Project Companies were subordinated
to the respective credit facilities.
Payment to the shareholders is permitted (including the
distribution of dividends but excluding management fees) subject to
fulfilling certain preconditions.
Certain loan agreements include an undertaking to fulfil certain
financial and operational covenants throughout the duration of the
credit, namely: complying with "a minimum debt services cover
ratio", "loan outstanding amount" to secured assets value ratio;
complying with certain restrictions on interest rates; maintaining
certain cash balances for current operations; maintaining equity to
project cost ratio and net profit to current bank's debt; occupancy
percentage and others. In respect of breach of covenants, refer to
note 12.
The Project Companies undertook not to make any disposition in
and to the secured assets, not to sell, transfer or lease any
substantial part of their assets without the prior consent of the
financing bank.
In certain events the Project Companies undertook not to allow,
without the prior consent of the financing bank:
(i) any changes in and to the holding structure of the Project
Companies nor to allow for any change in their incorporation
documents;
(ii) execution of any significant activities, including issuance
of shares, related party transactions and significant transactions
not in the ordinary course of business;
(iii) certain changes to the scope of the project;
(iv) the assumption of certain liabilities by the Project
Companies in favour of third parties;
(v) Receipt of loans by the Project Companies and/or the
provision thereby of a guarantee to third parties; and the
like.
2. Commitment in respect of derivative transaction
Within the framework of derivative transactions (refer to note
11), executed between the Group and commercial banks (the "Banks"),
the Group agreed to provide the Banks with collaterals or cash
deposits.
Accordingly, and in respect of Torun IRS the project company
also established a bail mortgage up to EUR 5.4 million encumbering
the real estate project.
NOTE 29 - SIGNIFICANT EVENTS
A. Selling of the SPV holding Koregaon park shopping center in
Pune, India
On May 13, 2015, the Company signed an agreement to sell the SPV
holding Koregaon Park Plaza, the retail, entertainment and office
scheme located in Pune, India for circa EUR 35 million (2,500
million INR). The net cash proceeds received (after repayment of
the related bank loan, other liabilities and transaction costs)
from the sale totalled EUR 7.4 million (525 million INR). In line
with the Company stated restructuring plan, all the net cash
proceeds from the transaction were retained within the Company. The
Company recorded a loss of EUR 6.5 million from this transaction
due to realization of foreign currency translation reserve
accumulated relating to the SPV. An additional loss of EUR 2.3
million was recorded mainly due to impairment of related various
receivables.
B. Selling of undeveloped plots in Romania
On June 24, 2015, the Company reached an agreement to sell its
46,500 sqm development site in Iasi, Romania in two separate
transactions (one for the sale of 37,334 sqm and the other for the
sale of 9,166 sqm), for a gross consideration of EUR 7.3 million.
There was neither bank debt secured against the property, nor
profit or loss was recorded as a result of the transaction.
In May 2015, the Company concluded (through its 50.1% held
subsidiary ("Plaza Bas")) the sale of a circa 17,000 sqm plot in
Brasov, Romania for a total consideration of EUR 330 thousand. No
profit or loss resulted from this transaction.
In June 2015 the Company concluded an additional sale (by Plaza
Bas) of an SPV holding circa 1,200 sqm plot in Ploiesti, Romania
for a total consideration of EUR 240 thousand. The proceeds were
used to repay a bank loan outstanding and no proceeds were obtained
by the Group. A waiver was obtained for the remaining of the unpaid
bank loan facility in a total amount of EUR 1.4 million and the
Company recorded accordingly a gain, included as finance income in
these reports.
In line with the Company stated restructuring plan, 75% of the
net cash proceeds from the abovementioned transactions (where
applicable) were distributed to the Company's bondholders as an
early repayment in late September 2015.
C. Liberec Plaza - settlement with financing bank
On September 29, 2015 one of the Company's wholly owned
subsidiaries won a tender to buy the bank loan to the wholly owned
SPV of Liberec Plaza shopping and entertainment centre in the Czech
Republic.
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
A EUR 20.4 million bank facility was provided by two commercial
banks to which the Company agreed to pay and paid an amount of EUR
8.5 million, reflecting a discount of 58%. The Company recorded a
EUR 11.9 million profit on the discount in these financial
statements, included as finance income.
D. Selling of an office building in Romania
In September 2015 the Company sold Palazzo Ducale, its wholly
owned office building of 823 sqm GLA in Bucharest, Romania, for
circa EUR 1.1 million, and recorded a small impairment of EUR 0.2
million.
In line with the Company stated restructuring plan, 75% of the
net cash proceeds from the abovementioned transaction were
distributed to the Company's bondholders as an early repayment in
late September 2015.
NOTE 29 - SIGNIFICANT EVENTS (cont.)
E. Restructuring plan
On November 14, 2013, the Company announced that its board of
directors has concluded that the Company will withhold payment on
the upcoming maturities of its bonds and approach its creditors
with a restructuring plan. The restructuring plan was approved on
June 26, 2014 by the vast majority of the creditors, and
subsequently approved by the Court on July 9, 2014, becoming an
irrevocable decision on July 21, 2014. The company announced
publication of prospectus in respect of Rights offering on October
16, 2014. The Shareholders approved the rights offering on November
28, 2014 followed by capital injection of EUR 20 million by
existing shareholders of the company on that date. All conditions
precedent of the restructuring plan were fulfilled till November
30, 2014.
Actual first payment of both principal and interest to
Debentures occurred on January 7, 2015, with the Company
transferring all funds already effective December 23, 2014 to
governing authorities.
The following are material commercial features of the
restructuring plan:
-- An injection of a EUR 20 million into the Company at a price
per-share of EUR 0.0675, ("Equity Contribution", refer also to note
18)
-- The Company issued to the holders of unsecured debt (i.e.,
outstanding debt under the Israeli Series A and B Notes and the
Polish Notes) ("Unsecured Debt") 13.21% of the Company's shares
(post Equity Contribution) for payment of par value of shares. Such
shares issuance was distributed among the holders of Unsecured Debt
pro rata to the relative share of each relevant creditor in the
Deferred Debt ("Deferred Debt Ratio").
-- Each principal payment under the debentures due in the years
2013, 2014 and 2015 pursuant to the original terms of the
debentures shall be deferred by exactly four and a half years and
each principal payment due pursuant to the original terms of the
debentures in subsequent years (i.e., 2016 and 2017) will be
deferred by exactly one year.
In the event that the Company does not succeed in prepaying an
aggregate amount of at least NIS 434 million (EUR 102 million) of
the principal of the debentures, excluding linkage differentials
within a period of two years before 1 December 2016, then all
principal payments under the debentures deferred in accordance with
above, shall be advanced by one year (i.e., shall become due one
year earlier).
-- All unpaid interest accrued on the Israeli debentures and
polish debentures until and including December 31, 2013 will be
added to the principal and paid together with it.
-- As of 1 January 2014, the annual interest rate of the
Unsecured Debt shall be increased by 1.5%.
-- The Company paid to the holders of the Unsecured Debt an
amount of EUR 13.8 million of 2014 interest payments.
-- The Company, its directors and officers and its controlling
shareholder are fully released from claims.
-- The net cash flow received by the Company following an exit
or raising new FI (except if taken for the purpose of purchase,
investment or development of real estate asset) or refinancing of
REA's after the full repayment of the asset's related debt that was
realized or in respect of a
--
NOTE 29 - SIGNIFICANT EVENTS (cont.)
E. Restructuring plan (cont.)
loan paid in case of debt recycling (and in case where the exit
occurred in the subsidiary - amounts required to repay liabilities
to the creditors of that subsidiary) and direct expenses in respect
of the asset (any sale and tax costs, as incurred) , will be used
for repayment of the accumulated interest till that date in all of
the series (in case of an exit which is not one of the four
shopping centers only 50% of the interest) and 75% of the remaining
cash (following the interest payment) will be used for an early
repayment of the close principal payments for each of the series
(A, B, Polish) each in accordance with its relative share in the
deferred debt. Such prepayment will be real repayment and not in
bond purchase.
-- The restructuring plan also includes, inter alia: (i) certain
limitations on distribution of dividends, actual investments and
incurring of new indebtedness (refer to note 18); (ii) negative
pledge on direct and indirect holdings of the Company on real
estate assets (refer also to note 28 (b)); (iii) financial
covenants and undertakings of the Company with respect to the sale
and financing of certain projects and investment in new projects
(refer also to note 28(b) and to note 29(k) below); (iv) compliance
with financial covenants CRC and MCRC (refer to note 28(b) and (v)
commitment to publish quarterly financial statements as long as the
Unsecured Debt is outstanding.
F. Update in respect of the Bangalore and Chennai projects
Bangalore
In March, 2008 EPI entered into an amended and reinstated share
subscription and framework agreement (the "Amended Framework
Agreement"), with a third party (the "Partner"), and a wholly owned
Indian subsidiary of EPI which was designated for this purpose
("SPV"), to acquire, through the SPV, up to 440 acres of land in
Bangalore, India (the "Property") in certain phases as set forth in
the Amended Framework Agreement.
As of December 31, 2015, the SPV holds joint development rights
in approximately 54 acres of the Property for a total aggregate
consideration of approximately INR 2,843 million (EUR 40 million).
In addition, the SPV has paid to the Partner advances of
approximately INR 2,536 million (EUR 35 million) on account of
future acquisitions by the SPV of a further 51.6 acres.
On December 2, 2015 EPI has signed an agreement to sell 100% of
its interest in the SPV to the Partner. The total consideration for
the sale upon completion of the transaction is INR 321 Crores
(approximately EUR 45.4 million, the Company part is expected to be
50% of this amount, i.e EUR 22.7 million) which will be paid at
transaction closing.
The transaction is subject to certain conditions precedent, and
closing will take place once these conditions are met and no later
than 30 September 2016. The Investor has provided certain security
in order to guarantee the aforementioned deadline.
NOTE 29 - SIGNIFICANT EVENTS (cont.)
F. Update in respect of the Bangalore and Chennai projects (cont.)
Chennai
In December 2007, EPI executed agreements for the establishment
of a special purpose vehicle ("Chennai Project SPV") together with
a local developer in Chennai ("Local Partner"). The Chennai Project
SPV acquired 74.3 acres of land situated in the Sipcot Hi-Tech Park
in Siruseri District in Chennai, India in consideration of a total
of INR 2,367 million (EUR 31 million) (EPI share). In addition, as
of December 31, 2015, EPI paid advances in the amount of INR 564
million (EUR 7 million) in order to secure acquisition of an
additional 8.4 acres.
EPI holds 80% of the equity and voting rights in the Chennai
Project SPV, while the Local Partner holds the remaining 20%.
The Chennai Project was designated at the end of 2014 as project
for development. During 2015, due to changes in the Group's
activities and objectives, Management has decided not to develop
the Chennai project but rather to dispose it in its current
situation. In this respect, on September 16, 2015, EPI has obtained
a backstop commitment for the purchase of Chennai, India
Scheme.
EPI which has been in discussions regarding the sale of Chennai
Project SPV, has obtained a commitment that, subject to the
fulfilment of certain conditions precedent, the sale transaction
will be completed by 15th of January 2016 (the "Long Stop Date")
for the consideration of approximately EUR 21.6 million (INR 1,617
millions), net of all transaction related costs. If completion does
not take place by the Long Stop Date, then EPI's stake in the
Chennai Project SPV will be increased to 100%.In line with the Sale
Transaction agreement, since the local Indian partner (the
"Partner") failed to complete the transaction by the Long Stop
Date, EPI's shall exercise its right to get the Partner's 20%
holdings in the Indian company, Kadavanthara Builders Private
Limited.
G. Additional write-downs
For additional write-downs information refer to note 8.
H. Kochi project advanced payment settlement
In November 2013 the Company exercised the corporate guarantee
in the amount of EUR 4.3 million including interest thereon up till
such date (the "Reimbursement Payment") provided by EI to the
Company in the framework of the Indian JV Agreement on the ground
of EI's default to finalize and conclude the transfer of the Kochi
Project Rights to the Indian JV Vehicle. Due to uncertainty
concerning the recovery of the receivable, the Company has impaired
the Reimbursement payment in its 2013 financial statements.
In June 2015 the Company reached an agreement with EI, based on
the mentioned JV Agreement and its ancillary documents (including
corporate guarantee issued by EI in favour of the Company),
following which EI was obliged to repay the Reimbursement amount in
few instalments until mid-2018.
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
As a result of the agreement reached, the Company recorded a
gain of EUR 4.6 million, included as other income in the statement
of profit or loss. Group liabilities towards EI in the amount of
EUR 0.8 million) were offset from this balance, with partial
repayment of EUR 1 million performed in late September 2015, thus
balance as of December 31, 2015 is EUR 2.8 million (including
accrued interest on remaining balance).
NOTE 29 - SIGNIFICANT EVENTS (cont.)
I. Sale of Cina property in Bucharest
On March 13, 2015, one of the Company's subsidiaries in Romania,
having a 49 years leasehold rights over a plot in Bucharest,
Romania ("Property" and "Rights", respectively), signed a
pre-agreement for waiving its Rights for a certain consideration to
be further agreed with the owner of the Property (a subsidiary of
EI) and approved by the relevant organs of these entities.
On December 14, 2015 the Romanian subsidiary concluded the
transaction to waive its leasing rights to the Cina property in
Bucharest, which has been sold by the owner. The gross cash
proceeds due to Plaza's subsidiary was EUR 2.7 million (out of a
total consideration of EUR 4 million) and the net proceeds, after
related taxes and transaction costs, was circa EUR 2.2 million. The
Company recorded a gain of EUR 2.6 million in its income
statement.
In line with the Company's stated restructuring plan, 75% of the
net cash proceeds from the transaction will be distributed to the
Company's bondholders by the end of March 2016 as an early
principal repayment.
J. Advance payment settlement in Koregaon park shopping center in Pune, India
In respect of one of the advances provided in 2013 and 2014 to
the sold SPV in Pune (refer to note 29(a)) in the amount of INR 200
million (EUR 2.6 million), the Company has reached a settlement in
February 2015 with the potential buyer to settle the liability, in
view of the cancellation of the signed pre-agreements, to refund
the potential buyer with INR 150 (EUR 1.9 million) of advances
received. The Company recorded a gain of INR 50 million (EUR 0.7
million) as a result of this settlement, included as part of other
income in the statement of profit or loss.
K. Update on covenants
In respect of covenants update on bank facilities, refer to note
12. In respect of the CRC, as defined in the restructuring plan, as
of December 31, 2015 the CRC was 129%, in comparison with 118%
minimum ratio required.
L. Treasury bond held
As of December 31, 2015, the Company holds through its wholly
owned subsidiary 14.7 million NIS par value bonds in series B
debentures (adjusted par value of NIS 17.0 million (EUR 4.0
million).
M. Key management personnel compensation
As a result of the termination of the services of the Group's
CEO, the CEO received his retirement entitlement. Accordingly, the
Group has recognised an expense of EUR 400 thousand for the year
ended December 31, 2015 (2014: nil).
N. Building permits obtained
In July 2015 the Company received the building permit to develop
Timisoara Plaza, a circa 40,000 sqm GLA shopping and entertainment
centre in Timisoara, western Romania. A binding financing offer has
also been agreed with a commercial bank for circa 65% of the
project cost.
Also in July 2015, the Company received the building permit to
develop Belgrade Plaza (Visnjicka), a circa 32,000 sqm GLA shopping
and entertainment centre in Belgrade, Serbia.
NOTE 30 - RELATED PARTY TRANSACTIONS
Related party transactions
Transactions between the Company and its subsidiaries have been
eliminated on consolidation and are not disclosed in this note.
Details of transactions between the Group and other related parties
are disclosed below.
The Company has currently five directors. The annual
remuneration of the directors in 2015 amounted to EUR 0.6 million
(2014 - EUR 1 million) and the annual share based payments expenses
was nil in 2015 (2014- EUR 20 thousands). There was no change in
the number of Company share options granted to key personnel in
2015. There are no other benefits granted to directors. For
information about related party balances as of December 31, 2015
and 2014 refer to notes 14 and in respect of details of the Kochi
transaction, refer to note 29(h). In respect of the CIna
transaction, refer to note 29(i).
Trading transactions
During the year, Group entities had the following trading
transactions with related parties that are not members of the
Group:
For the year ended
December 31,
2015 2014
Income
Interest on balances with EI 181 -
Costs and expenses
Recharges - EI 264 194
Previous executive director (1) - 115
Compensation to key management personnel (2) 469 -
Lease agreement on plot in Bucharest (3) 45 60
Lease agreement for office in Bucharest 30 30
(1) The Executive director, who is also the former controlling
shareholder of the ultimate parent company, was receiving an annual
salary of USD 300 thousand, until July 2014.
(2) Due to termination of agreements with former Chief Executive
officers (refer also to note 29(m)).
(3) The Company signed in 2007 a 49 years lease agreement with a
subsidiary of EI for monthly fees of EUR 5 thousands on a plot
located in Bucharest, Romania. Refer also to note 29(i) regarding
the waiver of lease rights.
As of December 31, 2015 the Company identified York Capital
Management Global Advisors, LLC ("York") and Davidson Kempner
Capital Management LLC ("DK") as the Company's related parties.
DK holds 26.3% of the Company's outstanding shares of the
Company as of the reporting date, following the finalization of the
Restructuring plan. DK has no outstanding balance as of the
reporting date with any of the Group companies. York is the main
shareholder in EI, holding 19.8% of the outstanding shares of EI,
and also has a direct holding of 3.6% in the Company's shares.
There were no transactions with DK or York in the reporting period
and there are no outstanding balances with DK or York.
DK and York are holding, as of December 31, 2015, 22% out of the
total Israeli debentures debt of the Company.
NOTE 31 - OPERATING SEGMENTS
The Group comprises the following main reportable geographical
segments: CEE and India. None of the Group's tenants is accounting
for more than 10% of the total revenue. Also, no revenue is derived
in the Netherlands, where the Company is domiciled. The Group's CEO
reviews the internal management reports of each segment at least
quarterly. In presenting information on the basis of geographical
segments, segment revenue is based on the revenue resulted from
either the selling or operating of assets geographically located in
the relevant segment. Refer to note 8 for further detail by
property on carrying amounts of Trading Properties and note 12 for
detail on project secured bank loans by property.
Year ended December 31, 2015:
Central & Eastern Europe India Total
NOI (1) 16,420 (41) 16,379
Sale of properties (Koregaon Park/Cina) 2,589 (8,802) (6,213)
Income from operation/selling 19,009 (8,843) 10,166
Net finance costs (2) (5,094) (846) (5,940)
Net expenses from operation of other CEE assets (plots, Fantasy park) (838) - (838)
Other expenses, net (527) 1,330 803
Write-downs (3) (17,843) (1,540) (19,383)
Share in results of equity-accounted investees - (1,755) (1,755)
Reportable segment loss before tax (5,293) (11,654) (16,947)
Less - general and administrative (6,999)
Other income - Dutch level (refer to note 29(h)) 4,653
Unallocated finance costs (Dutch corporate level- mainly debentures
finance cost) (25,802)
Loss before income taxes (45,095)
Income tax expense (1,021)
Loss for the year (46,116)
Assets and liabilities as at December 31, 2015
Total segment assets (3) 341.849 25,779 367,628
Unallocated assets (Mainly Cash and other financial instruments held on
Dutch level) 24,383
Total assets 392,011
Segment liabilities 126,372 54 126,426
Unallocated liabilities (Mainly debentures) 182,717
Total liabilities 309,143
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
(1) NOI- net operating income earned by shopping malls,
including Company's part in equity accounted investee Diksna, which
holds Riga Plaza (refer to note 10). NOI earned in Poland - EUR
11.9 million.
(2) CEE- Including net finance cost of EUR 0.8 due to equity accounted investee Diksna
(3) Refer to note 8 for the breakdown of trading properties impairments by location.
NOTE 31 - OPERATING SEGMENT (cont.)
Year ended December 31, 2014:
Central & Eastern Europe India Total
NOI (1) 18,903 (1,135) 17,768
Sale of properties (Bas) (4,048) - (4,048)
Income from operation/selling 14,855 (1,135) 13,720
Net finance costs (2) (6,747) (3,165) (9,912)
Net expenses from operation of other CEE assets (plots, Fantasy park) (266) - (266)
Other expenses, net (2,310) 2,287 (23)
Write-downs (3) (77,211) (11,965) (89,176)
Share in results of equity-accounted investees - (2,365) (2,365)
Reportable segment loss before tax (71,679) (16,343) (88,022)
Less - general and administrative (7,434)
Other income/expenses - restructuring costs and gain 1,055
Unallocated finance costs (Dutch corporate level- mainly debentures
finance cost) (26,568)
Loss before income taxes (120,969)
Tax benefit 1,282
Loss for the year (119,687)
Assets and liabilities as at December 31, 2014
Total segment assets (3) 362,910 62,584 425,494
Unallocated assets (Mainly Cash and other financial instruments held on
Dutch level) 40,603
Total assets 466,097
Segment liabilities 153,547 29,523 183,070
Unallocated liabilities (Mainly debentures) 163,454
Total liabilities 346,524
(1) NOI- net operating income earned by shopping malls,
including Company's part in equity accounted investee Diksna, which
holds Riga Plaza (refer to note 10). NOI earned in Poland - EUR
11.8 million
(2) CEE - Including net finance cost of EUR 0.9 due to equity accounted investee Diksna.
(3) Refer to note 8 for the breakdown of trading properties impairments by location.
NOTE 32 - EVENTS AFTER THE REPORTING PERIOD
A. Disposal of a shopping center in the Czech Republic
On March 4, 2016 the Company agreed to sell its subsidiary
holding Liberec Plaza, a shopping and entertainment centre in the
Czech Republic, for EUR 9.5 million. In line with the terms of the
agreement, the buyer has deposited 15% of the consideration in
escrow.
The due diligence process, final closing and settlement is
expected to conclude by the end of March.
The disposal follows an agreement announced by the Company in
September 2015 (refer to note 29(C)) whereby a wholly owned
subsidiary of the Company ("PCE") won a tender to buy the loan to
the holding and operating company for Liberec Plaza for EUR 8.5
million.
Upon completion of the Liberec Plaza disposal, PCE will receive
EUR 8.5 million on account of the bank loan it previously
purchased. Out of the remaining proceeds, at least 75% will be
distributed to the Company's bondholders by the end of June this
year, in line with the Company's stated restructuring plan.
B. Disposal of a plot in Romania
On March 24, 2016 the Company sold its 23,880 sqm site in
Slatina, Romania, to a third party developer for EUR 0.66 million,
consistent with the asset's last reported book value.
In line with the Company's stated restructuring plan, 75% of the
cash proceeds will be distributed to the Company's bondholders by
the end of June 2016 as an early repayment
C. Change in remuneration of Chairman of the Board
Effective February 2016 the monthly remuneration of the Chairman
of the Board of the Company was reduced from USD 20 thousands to
USD 18 thousands.
NOTE 33 - BASIS OF MEASUREMENT
The consolidated financial statements have been prepared on the
historical cost basis except for the following items, which are
measured on an alternative basis on each reporting date
Derivative financial instruments Fair value
Held for trading financial assets (2014) Fair value
NOTE 34 - SIGNIFICANT ACCOUNTING POLICIES
The Group has consistently applied the following accounting
policies to all periods presented in these consolidated financial
statements.
a. Basis of consolidation
1. Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date on which control
commences until the date on which control ceases.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group in the consolidated
financial statements.
NOTE 34 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
2. Interests in equity-accounted investees
The Group's interests in equity-accounted investees comprise
interests in associates and joint ventures.
Associates are those entities in which the Group has significant
influence, but not control or joint control, over the financial and
operating policies. A joint venture is an arrangement in which
the
Group has joint control, whereby the Group has rights to the net
assets of the arrangement, rather than rights to its assets and
obligations for its liabilities.
Interests in associates and the joint venture are accounted for
using the equity method. They are recognised initially at cost,
which includes transaction costs. Subsequent to initial
recognition, the consolidated financial statements include the
Group's share of the profit or loss and other comprehensive income
of equity-accounted investees, until the date on which significant
influence or joint control ceases.
3. Non-controlling interests
Non-controlling interests are measured at their proportionate
share of the acquiree's identifiable net assets at the acquisition
date. Changes in the Group's interest in a subsidiary that do not
result in a loss of control are accounted for as equity
transactions.
4. Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated.
Unrealised gains arising from transactions with equity-accounted
investees are eliminated against the investment to the extent of
the Group's interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the
extent that there is no evidence of impairment.
b. Foreign currency
1. Foreign currency transactions
Transactions in foreign currencies are translated to the
respective functional currencies of Group companies at exchange
rates at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies are translated to the
functional currency at the exchange rate at the reporting date.
Non-monetary assets and liabilities that are measured at fair value
in a foreign currency are translated to the functional currency at
the exchange rate when the fair value was determined. Foreign
currency differences are generally recognised in profit or loss.
Non-monetary items that are measured based on historical cost in a
foreign currency are not translated.
However, foreign currency differences arising from the
translation of available-for-sale equity investments (except on
impairment in which case foreign currency differences that have
been recognised in other comprehensive income are reclassified to
profit or loss) are recognised in other comprehensive income.
2. Foreign operations
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on acquisition, are
translated into euro at the exchange rates at the reporting date.
The income and expenses of foreign operations are translated into
euro at the exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive
income, and accumulated in the translation reserve, except to the
extent that the translation difference is allocated to
non-controlling interest.
NOTE 34 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
When a foreign operation is disposed of in its entirety or
partially such that control, significant influence or joint control
is lost, the cumulative amount in the translation reserve related
to that foreign operation is reclassified to profit or loss as part
of the gain or loss on disposal. If the Group disposes of part of
its interest in a subsidiary but retains control, then the relevant
proportion of the cumulative amount is reattributed to
non-controlling interest.
When the Group disposes of only part of an associate or joint
venture while retaining significant
influence or joint control, the relevant proportion of the
cumulative amount is reclassified to profit or loss.
If the settlement of a monetary item receivable from or payable
to a foreign operation is neither planned nor likely to occur in
the foreseeable future, then foreign currency differences arising
from such item form part of the net investment in the foreign
operation. Accordingly, such differences are recognised in other
comprehensive income and accumulated in the translation
reserve.
c. Financial instruments
(1) Non-derivative financial assets and financial liabilities -
recognition and de-recognition.
The Group initially recognises loans and receivables and debt
securities issued on the date when they are originated. All other
financial assets and financial liabilities are initially recognised
on the trade date.
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows in a transaction in
which substantially all of the risks and rewards of ownership of
the financial asset are transferred, or it neither transfers nor
retains substantially all of the risks and rewards of ownership and
does not retain control over the transferred asset. Any interest in
such derecognised financial assets that is created or retained by
the Group is recognised as a separate asset or liability. The Group
derecognises a financial liability when its contractual obligations
are discharged or cancelled, or expire.
Financial assets and financial liabilities are offset and the
net amount presented in the statement of financial position when,
and only when, the Group has a legal right to offset the amounts
and intends either to settle them on a net basis or to realise the
asset and settle the liability simultaneously. Refer to note 27 for
the list of Non-derivative financial assets and financial
liabilities.
(2) Non-derivative financial assets - measurement
Cash and cash equivalents and restricted bank deposits
In the consolidated statement of cash flows, cash and cash
equivalents includes bank deposits deposited for periods which do
not exceed three months. Restricted bank deposits are deposit
restricted due to bank facilities and derivatives entered into.
Loans and receivables
These assets are initially recognised at fair value plus any
directly attributable transaction costs. Subsequent to initial
recognition, they are measured at amortised cost using the
effective interest method. The collectability of receivables is
reviewed on an ongoing basis. Debts which are known to be
uncollectable are written off in the period in which they are
identified. Doubtful receivables are impaired when there is
objective evidence that the Group will not collect all amounts due.
These types of assets are discussed in note 6, 7a and 7b.
NOTE 34 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Held for trading financial assets
These assets are initially recognised at fair value. Subsequent
to initial recognition, they are measured at fair value and changes
therein, are recognised in statement of profit or loss.
c. Financial instruments (cont.)
(3) Non-derivative financial liabilities
Financial assets at fair value through profit or loss
A financial asset is classified as at fair value through profit
or loss if it is classified as held-for-trading or is designated as
such on initial recognition. Directly attributable transaction
costs are recognised in profit or loss as incurred. Financial
assets at fair value through profit or loss are measured at fair
value and changes therein, including any interest or dividend
income, are recognised in profit or loss
Financial Liabilities at fair value through profit or loss
Financial Liabilities at fair value through profit or loss
included in 2014 selected unsecured non-convertible Debentures
series A and series B (refer to note 16).
Upon initial recognition a financial liability may be designated
by the Company at fair value through profit or loss. Financial
instruments are designated at fair value through profit or loss if
the Group manages such instruments and makes purchase and sale
decisions based on their fair value in accordance with the Group's
documented risk management or investment strategy, or to eliminate
or significantly reduce a measurement or recognition inconsistency.
Upon initial recognition attributable transaction costs are
recognised in profit or loss when incurred. Financial liabilities
at fair value through profit or loss are measured at fair value,
and changes therein are recognised in profit or loss.
Other non-derivative financial liabilities
Non-derivative financial liabilities are initially recognised at
fair value less any directly attributable transaction costs.
Subsequent to initial recognition, these liabilities are measured
at amortised cost using the effective interest method. The Group
has the following non-derivative financial liabilities: interest
bearing loans, debentures (refer to note 16), trade payables,
related parties and other liabilities at amortized cost.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating the
interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash
payments through the expected life of the financial liability or,
when appropriate, a shorter period to the net carrying amount of
the financial liability.
When calculating the effective interest rate, the Group
estimates cash flows considering all contractual terms of the
financial liability (for example, prepayment, call and similar
options). The calculation includes all fees and points paid or
received between parties to the contract that are an integral part
of the effective interest rate, transaction costs, and all other
premiums or discounts.
When the Group revises its estimates of payments, it adjusts the
carrying amount of the financial liability to reflect actual and
revised estimated cash flows. The Group recalculates the carrying
amount by computing the present value of estimated future cash
flows at the financial liability's original effective interest
rate. The adjustment is recognised in profit or loss as a financial
expense.
NOTE 34 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
(4) Derivative financial instruments
The Group holds derivative financial instruments to hedge its
foreign currency and interest rate risk exposures. Embedded
derivatives are separated from the host contract and accounted for
separately if certain criteria are met. Derivatives are recognised
initially at fair value; any directly attributable transaction
costs are recognised in profit or loss as they are incurred.
Subsequent to initial recognition, derivatives are measured at fair
value, and changes therein are generally recognised in profit or
loss.
d. Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to issue of ordinary shares and share options
are recognized as a deduction from equity, net of any tax effect.
Costs attributable to listing existing shares are expensed as
incurred.
e. Trading properties
Properties that are being constructed or developed for sale in
the ordinary course of business and empty plots acquired to be
developed for such a sale are classified as trading properties
(inventory) and measured at the lower of cost and net realizable
value.
Net realizable value is the estimated selling price in the
ordinary course of business less the estimated costs to complete
construction and selling expenses. If net realisable value is less
than the cost, the trading property is written down to net
realisable value.
In each subsequent period, a new assessment is made of net
realisable value. When the circumstances that previously caused
trading properties to be written down below cost no longer exist or
when there is clear evidence of an increase in net realisable value
because of changed economic circumstances, the amount of the
write-down is reversed so that the new carrying amount is the lower
of the cost and the revised net realisable value.
The amount of any write-down of trading properties to net
realisable value and all losses of trading properties are
recognised as a Write-down of trading properties expense in the
period the write-down or loss occurs. The amount of any reversal of
such write downs arising from an increase in net realisable value
is recognised as a reduction in the expense in the period in which
the reversal occurs.
Costs comprise all costs of purchase, direct materials, direct
labour costs, subcontracting costs and other direct overhead costs
incurred in bringing the properties to their present condition.
Borrowing costs directly attributable to the acquisition or
construction of a qualifying asset are capitalized as part of the
costs of the asset. A qualifying asset is an asset that necessarily
takes a substantial period of time to get ready for its intended
use or sale. Other borrowing costs are recognized as an expense in
the period in which they incurred.
Capitalization of borrowing costs commences when the activities
to prepare the asset are in progress and expenditure and borrowing
costs are being incurred. Capitalization of borrowing costs may
continue until the asset is substantially ready for its intended
use (i.e. upon issuance of certificate of occupancy).
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
In certain cases, where the construction phase is suspended for
an unplanned period expected to exceed 25% of the total scheduled
time for construction, cessation of the capitalisation of borrowing
cost will apply, until construction phase is resumed.
NOTE 34 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
e. Trading properties (cont.)
Non-specific borrowing costs are capitalised to such qualifying
asset, by applying a capitalization rate to the expenditures on
such asset. The capitalization rate is the weighted average of the
borrowing costs applicable to the borrowings of the Group that are
outstanding during the period, other than borrowing made
specifically for the purpose of obtaining a qualifying asset.
The amount of borrowing costs capitalized during the period does
not exceed the amount of borrowing costs incurred during that
period.
f. Property and equipment
Items of property and equipment are measured at cost less
accumulated depreciation and any accumulated impairment losses
(refer to accounting policy 34(g)).If significant parts of an item
of property and equipment have different useful lives, then they
are accounted for as separate items (major components) of property,
plant and equipment.
Any gain or loss on disposal of an item of property and
equipment is recognised in profit or loss. Depreciation is
calculated to write off the cost of items of property and equipment
less their estimated residual values using the straight-line method
over their estimated useful lives, and is generally recognised in
profit or loss. Land is not depreciated.
The estimated useful lives of property for current and
comparative periods and equipment are as follows:
Years
Land - owned 0
Office buildings 25-50
Equipment, fixture and fittings 10-15
Other (*) 3-18
(*) Consists mainly of motor vehicles, equipment, computers,
peripheral equipment, etc.
Depreciation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
g. Impairment
(1) Non-derivative financial assets
Financial assets not classified as at fair value through profit
or loss, including interest on loan to equity accounted investee,
are assessed at each reporting date to determine whether there is
objective evidence of impairment.
Objective evidence that financial assets are impaired
includes:
-- default or delinquency by a debtor;
-- restructuring of an amount due to the Group on terms that the
Group would not consider otherwise;
-- indications that a debtor or issuer will enter bankruptcy;
-- adverse changes in the payment status of borrowers or issuers;
-- the disappearance of an active market for a security; or
-- observable data indicating that there is measurable decrease
in expected cash flows from a group of financial assets
NOTE 34 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
g. Impairment (cont.)
Financial assets measured at amortized cost
The Group considers evidence of impairment for these assets at
both an individual asset and a collective level. All individually
significant assets are individually assessed for impairment. Those
found not to be impaired are then collectively assessed for any
impairment that has been incurred but not yet individually
identified. Assets that are not individually significant are
collectively assessed for impairment. Collective assessment is
carried out by grouping together assets with similar risk
characteristics.
In assessing collective impairment, the Group uses historical
information on the timing of recoveries and the amount of loss
incurred, and makes an adjustment if current economic and credit
conditions are such that the actual losses are likely to be greater
or lesser than suggested by historical trends.
An impairment loss is calculated as the difference between an
asset's carrying amount and the present value of the estimated
future cash flows discounted at the asset's original effective
interest rate. Losses are recognised in profit or loss and
reflected in an allowance account. When the Group considers that
there are no realistic prospects of recovery of the asset, the
relevant amounts are written off.
If the amount of impairment loss subsequently decreases and the
decrease can be related objectively to an event occurring after the
impairment was recognised, then the previously recognised
impairment loss is reversed through profit or loss.
(2) Non - financial assets and interests in equity accounted investees
At each reporting date, the Group reviews the carrying amounts
of its non-financial assets (other than investment property,
trading property and deferred tax assets)) and interests in equity
accounted investees to determine whether there is any indication of
impairment. If any such indication exists, then the asset's
recoverable amount is estimated.
For impairment testing, assets are grouped together into the
smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of
other assets or cash generating units ("CGU").
The recoverable amount of an asset or CGU is the greater of its
value in use and its fair value less costs to sell. Value in use is
based on the estimated future cash flows, discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset or CGU. An impairment loss is recognised if
the carrying amount of an asset or CGU exceeds its recoverable
amount.
NOTE 34 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
g. Impairment (cont.)
Impairment losses are recognised in profit or loss. They are
allocated first to reduce the carrying amount of any goodwill
allocated to the CGU, and then to reduce the carrying amounts of
the other assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is never reversed. For
other assets, an impairment loss is reversed only to the extent
that the asset's carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation, if no
impairment loss had been recognised.
h. Provisions
Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to
the liability. The unwinding of the discount is recognised as
finance cost.
Construction costs
Provisions are recognized when the Group has a present
obligation (legal or constructive) as a result of a past event, and
it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
Where the Group expects some or all of a provision to be
reimbursed, the reimbursement is recognized as a separate asset but
only when the reimbursement is virtually certain.
The expense relating to any provision is presented in the income
statement net of any reimbursement.
Warranties
A provision for warranties is recognised when the underlying
products or services are sold, based on historical warranty data
and a weighting of possible outcomes against their associated
probabilities.
Restructuring plan
A provision for restructuring is recognised when a detailed and
formal Restructuring plan was approved by all relevant bodies, and
the restructuring either has commenced or has been announced
publicly. Future operating losses are not provided for.
i. Revenue
Revenue is measured at the fair value of the consideration
received or receivable. Amounts disclosed as revenue are net of
returns, trade allowances, rebates and amounts collected on behalf
of third parties.
The Group recognises revenue when the amount of revenue can be
reliably measured, it is probable that future economic benefits
will flow to the entity and specific criteria have been met for
each of the Group's activities as described below. The Group bases
its estimates on historical results, taking into consideration the
type of customer, the type of transaction and the specifics of each
arrangement.
NOTE 34 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
i. Revenue (cont.)
Rental income
The Group leases real estate to its customers under leases that
are classified as operating leases. Rental income from trading
property is recognized in profit or loss on a straight-line basis
over the term of the lease. Lease origination fees and internal
direct lease origination costs are deferred and amortized over the
related lease term. Lease incentives granted are recognized as an
integral part of the total rental income, over the term of the
lease.
The leases generally provide for rent escalations throughout the
lease term. For these leases, the revenue is recognized on a
straight line basis so as to produce a constant periodic rent over
the term of the lease. The leases may also provide for contingent
rent based on a percentage of the lessee's gross sales or
contingent rent indexed to further increases in the Consumer Price
Index ("CPI").
Where rentals that are contingent upon reaching a certain
percentage of the lessee's gross sales, the Group recognizes rental
revenue when the factor on which the contingent lease payment is
based actually occurs. Rental revenues for lease escalations
indexed to future increases in the CPI are recognized only after
the changes in the index have occurred.
Revenues from selling of trading property
Revenue from selling of trading property is measured at the fair
value of the consideration received or receivable. Revenues are
recognized when all the following conditions are met:
a. the Group has transferred to the buyer the significant risks and rewards of ownership;
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
b. the Group retains neither continuing managerial involvement
to the degree usually associated with ownership nor effective
control over the property sold;
c. the amount of revenue can be measured reliably;
d. it is probable that the economic benefits associated with the
transaction will flow to the Group (including the fact that the
buyer's initial and continuing investment is adequate to
demonstrate commitment to pay);
e the costs incurred or to be incurred in respect of the
transaction can be measured reliably; and
f. there are no remaining significant performance obligations.
Determining whether these criteria have been met for each sale
transaction, requires certain degree of judgment by the Group
management. The judgment is made in determination whether, at the
end of the reporting period, the Group has transferred to the buyer
the significant risks and rewards associated with the real estate
assets sold.
Such determination is based on an analysis of the terms included
in the sale agreement executed with the buyer as well as an
analysis of other commercial understandings with the buyer in
respect of the real estate sold. In certain cases, the sale
agreement with the buyer is signed during the construction period
and the consummation of the transaction is subject to certain
conditions precedents which have to be fulfilled prior to delivery.
Revenues are, therefore, recognized when all the significant
condition precedent included in the agreement have been fulfilled
by the Group and/or waived by the buyer prior to the end of the
reporting period.
Generally, the Group is provided with a bank guarantee from the
buyer for the total estimated proceeds in order to secure the
payment by the buyer at delivery. Therefore, the Group is not
exposed to any significant risks in respect of payment of the
proceeds by the buyer.
NOTE 34 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
j. Operating lease payments
Payments made under operating leases (in respect of plots of
land under usufruct) are recognized in profit or loss on a straight
line basis over the term of the lease but are capitalized in
relation to land used for the development of trading properties
during the construction period (similar to borrowing costs).
k. Finance income and cost
For the composition of finance income and cost refer to note 25.
For capitalisation of borrowing costs please refer to Note 8.
Interest income and expense which are not capitalized are
recognized in the income statement as they accrue, using the
effective interest method. For the Group's policy regarding
capitalization of borrowing costs refer to note 34(e).
l. Income tax
Income tax expense comprises current and deferred tax. It is
recognised in profit or loss except to the extent that it relates
to a business combination, or items recognised directly in equity
or in other comprehensive income.
Current tax
Current tax comprises the expected tax payable or receivable on
the taxable income or loss for the year and any adjustment to tax
payable or receivable in respect of previous years. It is measured
using tax rates enacted or substantively enacted at the reporting
date. Current tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if certain
criteria are met.
Deferred tax
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for:
-- temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss;
-- temporary differences related to investments in subsidiaries
and joint arrangements to the extent that the Group is able to
control the timing of the reversal of the temporary differences and
it is probable that they will not reverse in the foreseeable
future; and
-- taxable temporary differences arising on the initial recognition of goodwill
Deferred tax assets are recognised for unused tax losses, unused
tax credits and deductible temporary differences to the extent that
it is probable that future taxable profits will be available
against which they can be used. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised. Such
reduction is reversed when the probability of future taxable
profits improved.
NOTE 34 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
l. Income tax (cont.)
Unrecognised deferred tax assets are reassessed at each
reporting date and recognised to the extent that it has become
probable that future taxable profits will be available against
which they can be used.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset only if certain
criteria are met.
m. Segment reporting
Segment results that are reported to the Group's Board of
Directors (the chief operating decision makers) include items
directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Unallocated items comprise mainly
corporate debt, assets (primarily the Company's headquarters), head
office expenses, and tax assets and liabilities.
n. Employee benefits
1. Bonuses
The Group recognizes a liability and an expense for bonuses,
which are based on agreements with employees or according to
management decisions based on Group performance goals and on
individual employee performance. The Group recognizes a liability
where contractually obliged or where past practice has created a
constructive obligation to pay this amount as a result of past
service provided by the employee and the obligation can be
estimated reliably.
2. Share-based payment transactions
The fair value of options granted to employees to acquire shares
of the Company is recognized as an employee expense or capitalized
if directly associated with development of trading property, with a
corresponding increase in equity. The fair value is measured at
grant date and spread over the period during which the employees
become unconditionally entitled to the options. The amount
recognized as an expense is adjusted to reflect the actual number
of share options that vest.
Where the terms of an equity-settled award are modified, the
minimum expense recognized is the expense as if the terms had not
been modified. An additional expense is recognized for any
modification, which increases the total fair value of the
share-based payment arrangement, or is otherwise beneficial to the
employees as measured at the date of modification. The fair value
of the amount payable to employees in respect of share-based
payments, which may be settled in cash, at the option of the
holder, is recognized as an expense, with a corresponding increase
in liability, over the period in which the employees become
unconditionally entitled to payment. The fair value is re-measured
at each reporting date and at settlement date. Any changes in the
fair value of the liability are recognized as an additional cost in
salaries and related expenses in the income statement. As of the
end of the reporting period share-based payments which may be
settled in cash are options granted to only one person and can be
cash settled at the option of the holder.
NOTE 34 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
o. New standards not yet adopted
A number of new standards and amendments to standards are
effective for annual periods beginning after 1 January 2015;
however, the Group has not applied the following new or amended
standards in preparing these consolidated financial statements.
The following new or amended standards are not expected to have
a significant impact of the Group's consolidated financial
statements:
-- Amendments to IFRS 11- Accounting for Acquisitions of Interests in Joint Operations.
-- Amendments to IAS 1.
-- Amendments to IAS 16 and IAS 38 - Clarification of Acceptable
Methods of Depreciation and Amortisation.
-- Amendments to IAS 16 Property Plant and Equipment and IAS 41 Agriculture
-- Amendments to IAS 19 - Defined Benefit Plans: Employee Contributions
NOTE 35 - LIST OF GROUP ENTITIES
As of December 31, 2015, the Company owns the following
companies (all are 100% held subsidiaries at the end of the
reporting period presented unless otherwise indicated):
Hungary
Directly wholly owned
HOM Ingatlanfejlesztesi és Vezetesi Management company
Kft.
Plaza House Ingatlanfejelsztesi Kft. Office building David House
Plaza Centers Establishment B.V. Holding company Arena Plaza extension
Szombathely 2002 Ingatlanhasznosito es Inactive
Vagyonkezelo Kft.
Tatabanya Plaza Ingatlanfejlesztesi Kft. Inactive
Indirectly or jointly owned
Kerepesi 5 Irodaepulet Ingatlanfejleszto Holder of land usage rights 100% held by Plaza Centers Establishment
Kft. B.V.
Arena Plaza Extension project
Poland
Directly wholly owned
Kielce Plaza Sp. z o.o. Owns plot of land Kielce Plaza project
Leszno Plaza Sp. z o.o. Owns plot of land Leszno Plaza project
Lodz Centrum Plaza Sp. z o.o. Owns plot of land Lodz (Residential) project
Wloclawek Plaza Sp. z o.o. Mixed-use project Lodz Plaza project
O2 Fitness Club Sp. z o.o. Fitness O2 Fitness Club project
Plaza Centers Polish Operations B.V. Holding company
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
EDMC Sp. z o.o. Management company
Plaza Centers (Poland) Sp. z o.o. Management company
Bytom Plaza Sp. z o.o. Inactive
Bielsko-Biala Plaza Sp. z o.o. Inactive
Bydgoszcz Plaza Sp. z o.o. Inactive
Chorzow Plaza Sp. z o.o. Inactive
Gdansk Centrum Plaza Sp. z o.o. Inactive
Gliwice Plaza Sp. z o.o. Inactive
Gorzow Wielkopolski Plaza Sp. z o.o. Inactive
Jelenia Gora Plaza Sp. z o.o. Inactive
Katowice Plaza Sp. z o.o. Inactive
Legnica Plaza Sp. z o.o. Inactive
Opole Plaza Sp. z o.o. Inactive
Radom Plaza Sp. z o.o. Inactive
Rzeszow Plaza Sp. z o.o. Inactive
Szczecin Plaza Sp. z o.o. Inactive
Tarnow Plaza Sp. z o.o. Inactive
Tychy Plaza Sp. z o.o. Inactive
Indirectly or jointly owned
Legnica Plaza Spolka z ograniczona Operating shopping center 100% held by Plaza Centers Polish Operations
odpowiedzialnoscia S.K.A. B.V.
Torun Plaza project
Suwalki Plaza Sp. z o.o. Operating shopping center 100% held by Plaza Centers Polish Operations
B.V.
Suwalki Plaza project
Zgorzelec Plaza Sp. z o.o. Operating shopping center 100% held by Plaza Centers Polish Operations
B.V.
Zgorzelec Plaza project
EDP Plaza Sp. z o.o. Inactive 50% held by Plaza Centers N.V. with
Israeli-based partner
Lublin Or Sp. z o.o. Inactive 50% held by Plaza Centers N.V. with
Israeli-based partner
P.L.A.Z.A B.V. Inactive 50% held by Plaza Centers N.V.
50% held by Mulan B.V.
Hokus Pokus Rozrywka Sp. z o.o. Inactive 50% held by Plaza Centers N.V.
50% held by P.L.A.Z.A B.V.
Fantasy Park Sp. z o.o. Inactive 100% held by Mulan B.V.
Fantasy Park Suwalki Sp. z o.o. Inactive 100% held by Mulan B.V.
Fantasy Park Torun Sp. z o.o. Inactive 100% held by Mulan B.V.
Fantasy Park Zgorzelec Sp. z o.o. Inactive 100% held by Mulan B.V.
Fantasy Park Bytom Sp. z o.o. Inactive 100% held by Mulan B.V.
Fantasy Park Lodz Sp. z o.o. Inactive 100% held by Mulan B.V.
Fantasy Park Warszawa Sp. z o.o. Inactive 100% held by Mulan B.V.
Fantasy Park Investments Sp. z o.o. Inactive 100% held by Mulan B.V.
Latvia
Indirectly or jointly owned
Diksna SIA Operating shopping center Equity accounted investee,50% held by Plaza
Centers N.V.
50% held by JV partnerRiga Plaza project.
Fantasy Park Latvia SIA Entertainment 100% held by Mulan B.V.
Romania
Directly wholly owned
Dambovita Centers Holding B.V. Holding company 100% held by Plaza Centers N.V.
Plaza Centers Management B.V. Holding company
S.C. Elite Plaza S.R.L. Shopping center project Timisoara Plaza project
S.C. North Eastern Plaza S.R.L. Shopping center project Constanta Plaza project
S.C. North Gate Plaza S.R.L. Shopping center project Csiki Plaza (Miercurea Ciuc) project
S.C. Eastern Gate Plaza S.R.L. Inactive
S.C. South Gate Plaza S.R.L. Shopping center project Slatina Plaza project
S.C. Palazzo Ducale S.R.L. Inactive
S.C. Plaza Centers Management Romania Management company
S.R.L.
S.C. Blue Plaza S.R.L. Inactive
S.C. South Eastern Plaza S.R.L. Inactive
Indirectly or jointly owned
S.C. Dambovita Center S.R.L. Mixed-use project 75% held by Dambovita Centers Holding B.V.
Casa Radio project
Plaza Bas B.V. Holding company 50.1% held by Plaza Centers N.V.
Adams Invest S.R.L. Residential project 95% held by Plaza Bas B.V.
5% held by Plaza Centers Management B.V.
Valley View project
Sunny Invest S.R.L. Residential project 95% held by Plaza Bas B.V.
5% held by Plaza Centers Management B.V.
Green Land project
Serbia
Directly wholly owned
Plaza Centers (Estates) B.V. Holding company
Plaza Centers (Ventures) B.V. Holding company
Plaza Centers Management D.O.O. Management company
Plaza Centers Holding B.V. Inactive
Indirectly or jointly owned
Leisure Group D.O.O. Shopping center project 100% held by Plaza Centers (Estates) B.V.
Belgrade Plaza (Visnjicka) project
Krusevac Plaza project
Orchid Group D.O.O. Shopping center project 100% held by Plaza Centers (Ventures) B.V.
Belgrade Plaza (MUP) project
Accent D.O.O. Inactive 100% held by Plaza Centers Logistic B.V.
Czech Republic
Directly wholly owned
P4 Plaza S.R.O. Operating shopping center Liberec Plaza project
Plaza Centers Czech Republic S.R.O. Management company
Bulgaria
Directly wholly owned
Shumen Plaza EOOD Shopping center project Shumen Plaza project
Plaza Centers Management Bulgaria EOOD Management company
Plaza Centers Development EOOD Inactive
Greece
Directly wholly owned
Helios Plaza S.A. Shopping center project Pireas Plaza project
Indirectly or jointly owned
Elbit Cochin Island Ltd. Inactive 40% held by Plaza Centers N.V.
Cyprus - Ukraine
Directly wholly owned
Tanoli Enterprises Ltd. Finance activity
PC Ukraine Holdings Ltd. Inactive
Plaza Centers Ukraine Ltd. Inactive 100% held by PC Ukraine Holdings Ltd.
Nourolet Enterprises Ltd. Inactive 100% held by PC Ukraine Holdings Ltd.
The Netherlands
Directly wholly owned
Plaza Dambovita Complex B.V. Holding company
Plaza Centers Enterprises B.V. Finance company 100% held by Plaza Dambovita Complex B.V.
Mulan B.V. (Fantasy Park Enterprises B.V.) Holding company Holds Fantasy Park subsidiaries in CEE
Plaza Centers Administrations B.V. Inactive
Plaza Centers Connections B.V. Inactive
Plaza Centers Engagements B.V. Inactive
Plaza Centers Foundations B.V. Inactive
Plaza Centers Logistic B.V. Inactive
S.S.S. Project Management B.V. Inactive
Obuda B.V Inactive
Cyprus - India
Directly wholly owned
PC India Holdings Public Company Ltd. Holding company
Indirectly or jointly owned
Permindo Ltd. Holding company 100% held by PC India Holdings Public
Company Ltd.
HOM India Management Services Pvt. Ltd. Management company 99.99% held by PC India Holdings Public
Company Ltd.
Spiralco Holdings Ltd. Inactive 100% held by PC India Holdings Public
Company Ltd.
Rebeldora Ltd. Inactive 100% held by PC India Holdings Public
Company Ltd.
Rosesmart Ltd. Inactive 100% held by PC India Holdings Public
Company Ltd.
Xifius Services Ltd. Inactive 100% held by PC India Holdings Public
Company Ltd.
(MORE TO FOLLOW) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
Dezimark Ltd. Inactive 100% held by PC India Holdings Public
Company Ltd.
Elbit Plaza India Real Estate Holdings Ltd. Holding company Equity accounted investee
47.5% held by Plaza Centers N.V.
Polyvendo Ltd. Holding company 100% held by Elbit Plaza India Real Estate
Holdings Ltd.
Elbit Plaza India Management Services Pvt. Management company 99.99% held by Polyvendo Ltd.
Ltd.
Kadavanthra Builders Pvt. Ltd. Mixed-use project 80% held by Elbit Plaza India Real Estate
Holdings Ltd.
Chennai (SipCot) project
Aayas Trade Services Pvt. Ltd. Mixed-use project 99.9% held by Elbit Plaza India Real Estate
Holdings Ltd.
Bangalore project
Elbit India Architectural Services Ltd. Inactive 100% held by Elbit Plaza India Real Estate
Holdings Ltd.
United States of America
Indirectly or jointly owned
Elbit Plaza USA II LP (EPUS II) Holding company Equity accounted investee
50% held by Plaza Centers N.V.
50% held by Elbit Imaging Ltd.
EPN REIT II Inactive 100% held by Elbit Plaza USA II LP (EPUS II)
Entities disposed or dissolved in 2014 and 2015
Hungary
Szeged 2002 Ingatlanhasznosito es Inactive Liquidated
Vagyonkezelo Kft.
ROMANIA
Primavera Invest S.R.L. Office project 95% held by Plaza Bas B.V.
5% held by Plaza Centers Management B.V.
Primavera Tower Ploiesti project
Colorado Invest S.R.L. Residential project 95% held by Plaza Bas B.V.
5% held by Plaza Centers Management B.V.
Pine Tree project
Malibu Invest S.R.L. Residential project Equity account investee
25%/75% held by Plaza Bas B.V. with partner
Fountain Park project
Spring Invest S.R.L. Office project Equity accounted investee
50%/50% held by Plaza Bas B.V. with partner
Primavera Tower Brasov project
Bas Developement S.R.L. Residential project Equity accounted investee
50%/50% held by Plaza Bas B.V. with partner
Acacia Park project
The Dutch Antilles
Dreamland Entertainment N.V. Inactive
India
Anuttam Developers Pvt. Ltd. Operating shopping center 99.99% held by Permindo Ltd.
Koregaon Park Plaza project
Serbia
Sek D.O.O. Operating shopping center 100% held by Plaza Centers Holding B.V.
Kragujevac Plaza project
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UKVSRNSAOUAR
(END) Dow Jones Newswires
March 29, 2016 11:08 ET (15:08 GMT)
Plaza Centers N.v (LSE:PLAZ)
Historical Stock Chart
From Jun 2024 to Jul 2024
Plaza Centers N.v (LSE:PLAZ)
Historical Stock Chart
From Jul 2023 to Jul 2024
