TIDMPLAZ
RNS Number : 5551T
Plaza Centers N.V.
21 March 2019
21 March 2019
PLAZA CENTERS N.V.
RESULTS FOR THE YEARED 31 DECEMBER 2018
FURTHER PORTFOLIO REPOSITIONING & DELEVERAGING
Plaza Centers N.V. ("Plaza" / "Company" / "Group") today
announces its results for the year ended 31 December 2018.
Financial highlights:
-- Reduction in total assets to EUR62 million (31 December 2017:
EUR141 million) as a result of the Company's deleveraging including
principal repayments and the redemption in full of Series of bonds
issued in Poland in total amount of EUR40.1 million
-- Book value of the Company's Trading properties decreased by
EUR31 million to EUR42.6 million over the period, due to disposals
(land plots in Poland and Serbia, and disposal of shares of SPV
holding plot in Greece) in line with the restructuring plan and an
impairment of EUR29.5 million of Trading Properties in Romania,
Poland, Greece and Serbia
-- Consolidated cash position as at December 31, 2018 decreased
to EUR1.4 million (31 December 2017: EUR44.8 million) and current
cash position of circa EUR1.28 million
-- Revenue from disposal of trading properties totaled EUR2.3
million (2017: EUR193 million) in line with the Company's disposal
program
-- EUR31.7 million loss recorded at an operating level (December
31, 2017: EUR15 million) where a loss from selling trading
properties was increased by write-down of trading properties and
decreased administrative expenses
-- Administrative Expenses reduced to EUR2.7 million in 2018 due
to cost cutting of professional services and manpower (2017:
EUR6.15 million)
-- Losses increased to EUR38.4 million in 2018 from EUR26.6
million in 2017 as the write down of trading properties increased
by EUR18 million, while net finance expense were EUR7.7 and EUR10.6
million, respectively
-- Basic and diluted loss per share of EUR5.60 (December 31, 2017: loss per share of EUR3.87)
Progress in portfolio rationalisation and financial
highlights:
During 2018 Plaza received gross proceeds of EUR2.3 million from
sales transactions, price adjustments and other income. The
disposals form part of the Company's ongoing strategy to reduce the
Company's debt.
Settlement agreement with the Bondholders:
In January 2018, a settlement agreement was reached and approved
(and all the conditions precedent in the agreement fulfilled)
between the holders of two Series of Israeli Bonds and the Company
regarding the allocation of funds, to be repaid by the Company,
across the Israeli Bonds Series. As a result, the Series A
Bondholders withdrew their request for immediate repayment. It is
clarified that the Settlement Agreement is a separate agreement
among the parties thereto with respect to the Company's
restructuring plan, and as such had no effect on the Polish
Bondholders. On January 31, 2018 the Company paid the bondholders a
total amount of principal and interest of EUR38.5 million.
Retirement of Chief Executive Officer:
On 11 January 2018, the Company announced that the CEO, Dori
Keren, would retire from his position at the end of March 2018. The
Board of Directors appointed Avi Hakhamov, who has been with the
Company for more than 11 years, as Acting CEO commencing 1 April
2018.
Ceasing of rating by S&P
On 18 January 2018, S&P Maalot announced that it ceases
updating the rating of the Company's bonds following the Company's
request.
Motion to reveal and review internal documents:
In March 2018, a Shareholder of the Company has filed a motion
with the Financial Department of the District Court in Tel-Aviv to
reveal and review internal documents of the Company and of Elbit
Imaging Ltd., with respect to the events surrounding that certain
agreements that were signed in connection with the Casa Radio
Project in Romania and the sale of the US portfolio. Such events
were previously announced by the Company and are detailed in the
notes to consolidated financial statements as of December 31, 2018.
In July 2018, the Company has filed a response to the relevant
court. The case is still pending at court. For further information
see Note 17(6).
Redemption of the Polish Bonds:
In May 2018, further to the decision of the Israeli Series A and
Series B Bondholders, the Company has redeemed in full the series
of bonds issued in Poland at their principal amount together with
interest accrued to the maturity date in total amount of EUR2.66
million. Upon completion of the redemption, the Company has no
outstanding bonds issued in Poland.
Earn-out payment for the sale of Torun:
In June 2018, the Company received the earn-out payment for the
sale of Torun Plaza totaling EUR0.35 million, reduced by NAV
adjustment of EUR0.14 million.
Sale of a plot Lodz, Poland ("Lodz Centrum Plaza"):
In July 2018, a subsidiary of the Company has signed a
preliminary agreement with respect to the sale of a 4,000 sqm plot
of land in Lodz, Poland known as "Lodz Centrum Plaza", in
consideration for PLN 1.3 million (circa EUR0.3 million). The plot
was sold in September 2018.
Update on disposal of land plot in Miercurea Ciuc, Romania:
Further to the Company's announcement dated October 17, 2018
regarding signing the pre-agreement for the sale of land plot in
Miercurea Ciuc, Romania, the Company grant an option for the
purchase of the Plot till mid-April 2019 for a total consideration
of EUR0.11 million. The Company has received EUR95,000 in 2018 and
an additional EUR15,000 in 2019 (Non-refundable payments). In March
2019, following negotiations with the purchaser, the parties agreed
that (i) the signing date of a definitive agreement will be
postponed by 3 months to mid-July 2019, (ii) the receipt of
non-refundable advance payments of EUR250,000 in two tranches by
the end of April 2019, and; (ii) the sale price will be increased
by EUR30,000.
To the extent that the Company will enter into a definitive
agreement and consummates the transaction, the Company expects to
receive EUR1.47 million (including non-refundable advanced
payments).
Sale of a plot in Krusevac, Serbia:
On December 3, 2018 the Company announced that it completed the
sale of its (indirectly) 100% stake in a 5-acre plot in Krusevac,
Serbia, for a total consideration of approximately EUR0.29 million
which is slightly below book value.
Preliminary Sale Agreement of Plot in Lodz, Poland:
On June 13, 2017, the Company announced that it has signed a
preliminary sale agreement for the disposal of a 13,770 sqm plot at
its second land holding in Lodz, Poland, (representing 22% of this
holding) to a retail developer, for EUR1.15 million. As part of the
agreement, the purchaser paid an immediate installment of EUR0.035
million followed by an installment of EUR0.073 million paid on 2018
after obtaining environmental permit for investing in the access
road to the plot.
During February 2019 the Company has signed conditional sale
agreement for which the remaining balance less 50% of the sum
invested in the road (up to maximum amount of circa EUR0.19
million) will be paid once the final agreement is signed after the
municipality confirms that it will not exercise pre-emptive rights.
The rest of consideration (circa EUR0.84 million) will be paid in
two instalments: EUR0.75 million at the date of the signing of the
final sale agreement and the remaining amount of EUR0.09 million
till the end of April 2019.
Disposal of land plot in Greece:
On December 24, 2018 the Company signed a definitive agreement
for the sale of its (indirectly) 100% stake in a Greek subsidiary
(on an "as is" basis) for a total gross amount of EUR1.05 million
(out of which EUR0.3 million has already been received as advance
payments during 2017). The total net proceeds to the Company,
following the deduction of working capital adjustments in
accordance with the balance sheet of the SPV and transaction costs,
were circa EUR0.66 million.
As a result of the transaction, an amount EUR1.05 million is
recorded in Revenue from disposal of trading properties and amount
of circa EUR2.28 million is recorded in Cost of trading properties
sold. In addition, as a result of sale on "as is" basis, the
Company reversed tax liability previously recorded in the financial
statements resulted in tax benefit of EUR1.015 million.
Belgrade Plaza:
On January 26, 2017, the Company signed a binding share purchase
agreement with BIG Shopping Centers Ltd ("BIG"), for the sale of
the SPV holding Belgrade Plaza shopping and entertainment centre.
The final agreed value of Belgrade Plaza, which comprise circa
32,300 sqm of GLA, will be calculated based on a general cap rate
of 8.25% as well as the sustainable NOI after 12 months of
operation. The NOI will be re-examined again after 24 months and 36
months of operation, which may lead to an upward adjustment of the
final purchase price.
During June 2018 (the first adjustment date) the First purchase
price adjustment was examined and accordingly no additional proceed
was made.
During December 2018, BIG paid EUR466,000 for the stands and
signage at the Big Fashion mall in Belgrade (previously known as
"Belgrade Plaza"). In addition, BIG further informed us that they
intend to hold an additional EUR1 million until an orderly
engineering examination of the mall's technical conditions is
completed as part of the final Price adjustment to be performed in
May 2020. The Company is currently evaluating its options regarding
BIG's intention to hold the EUR1 million which was not recorded in
the consolidated financial statements due to uncertainty related to
receipt of such amount.
Update re 2012 Disposal of Shopping Centers in the US:
On December 20, 2018 Plaza Centers announced that following its
announcement of 21 November 2017, and the review concluded in 2018
by the Financial Conduct Authority (FCA), no retrospective
disclosures or other actions are required under the FCA's Listing
Rules in relation to this matter.
Elbit Imaging announces it is no longer the Controlling
Shareholder of Plaza Centers:
Elbit Imaging Ltd. (TASE, NASDAQ: EMITF) ("Elbit") informed in
December 2018, that it has signed a trust agreement according to
which Elbit will deposit its shares of Plaza Centers N.V (the
"Shares" and "Plaza", respectively) with a trustee. In accordance
with the trust agreement, Elbit retains the right to receive any
and all rights in connection with the Shares, other than the voting
rights which are vested with the trustee for all matters and
purposes effective from December 18, 2018. In addition, Elbit may
instruct the trustee, from time to time, to sell all or any portion
of the Shares. The trust agreement shall terminate upon the earlier
of: (i) a sale of all of the Shares to a third party; and (ii) the
date on which actions have been taken for realization of any of the
liens Elbit granted in favor of the holders of the Series I Notes
issued by Elbit. The outcome of the above mentioned is that Elbit
no longer considers itself to be the controlling shareholder of
Plaza and accordingly will not consolidate Plaza's financial
reports in its own financial reports.
Sale agreement of plot in Bangalore, India:
In June 2017, Elbit Plaza India Real Estate Holdings Ltd.
("EPI") (in which Plaza holds a 50% stake with its joint venture
partner, Elbit Imaging Ltd.) signed a revised sale agreement with
the former partner (the "Purchaser"). In January 2018, the
Purchaser has notified EPI that due to a proposed zoning change
(initiated by the Indian authorities) which could potentially
impact the development of the land, all remaining payments under
the Agreement will be stopped until a mutually acceptable solution
is reached on this matter. EPI has rejected the Purchaser's claims,
having no relevance to the existing Agreement, and started to
evaluate its legal options. INR 46 Crores (approximately EUR6.06
million) were paid till March 2018.
In March 2018, the Company signed an amended revised agreement
as follows: The Purchaser and EPI have agreed that the total
purchase price shall be increased to INR 350 Crores (approximately
EUR44.5 million). The Final Closing will take place on 31 August
2019 when the final installment of circa INR 212 Crores
(approximately EUR26.9 million) will be paid to EPI against the
transfer of the outstanding share capital of the SPV.
If the Purchaser defaults before the Final Closing, EPI is
entitled to forfeit all amounts paid by now by the Purchaser as
stipulated in the revised agreement. All other existing securities
granted to EPI under the previous agreements will remain in place
until the Final Closing.
On February 4, 2019 Plaza announced that the Purchaser defaults
on payments and that EPI is considering all legal measures
available to it to protect its interest.
During March, 2019, Plaza announced that the Purchaser has
further paid to EPI INR 9.25 cores (approximately EUR1.15 million),
thereby having paid approximately INR 80 crores (approximately
EUR10.26 million) as against approximately INR 92 crores
(approximately EUR11.8 million) that was supposed to be paid by end
of February 2019. The Parties continue to discuss regarding getting
further payments. Plaza part from the consideration is 50%.
Regarding Environmental update on Bangalore project and the
implications on the net realisable value refer to Note 6 (b) (1) in
the consolidated financial statements and key highlights below.
Sale agreement of plot in Chennai, India:
In July 2018, Elbit Plaza India Real Estate Holdings Limited
("EPI"), has signed a term sheet with its local partner ("Buyer"),
relating to the sale of EPI's Indian subsidiary ("SPV") that holds
74.7-acre plot in Chennai, India ("Term Sheet"). Under the terms of
the Term sheet, the Buyer shall have 60 (sixty) days to conduct due
diligence only with respect to the SPV, following which definitive
agreements, for the sale of the SPV in consideration of
approximately EUR13.2 million (INR 1,060 million, the Company's
share approximately EUR6.6 million), (subject to adjustment with
respect to the previous deposit that was placed and the existing
cash in the SPV level), shall be signed and closing shall take
place on the same day. The closing of the transaction was expected
in February 2019. As the transaction was not completed the Term
Sheet was terminated by EPI.
In February 2019 the Chennai Project SPV issued notice to the
buyer terminating the Joint Development Agreement ("JDA") due to
its failure to obtain the access road. The said termination of JDA
has been disputed by the Buyer. Therefore, the Chennai Project SPV
has initiated arbitration proceeding against the Buyer in
accordance with the Arbitration Rules of the Singapore
International Arbitration Centre, in accordance with the JDA
Agreement to protect its rights.
Key highlights since the period end:
Next payment to the holders of series A and series B bonds:
On February 18, 2019 the company paid principal of circa
EUR250,000 and penalty interest on arrears of EUR150,000 following
the bondholder's approval for the deferral of certain principal
payments to July 1, 2019 instead of December 31, 2018.
Pre-agreement for the sale of land plot in Brasov, Romania:
On February 5, 2019 the Company has signed a Pre-Agreement for
the sale of a plot in Brasov, Romania for a total gross amount of
EUR620,000 which is slightly above the last reported book value.
The consummation of the Transaction (which will take place not
later than January 15, 2020) is subject to the fulfillment of
certain conditions, including, inter alia: (i) the former financing
bank of the Project did not exercise its right to purchase the
Property until December 6, 2019; (ii) successful conclusion by the
potential purchaser of its due diligence investigations; and (iii)
the execution of definitive agreement.
As of the date hereof, there can be no certainty that a
definitive agreement will be signed and/or that the Transaction
will be consummated.
Environmental update on Bangalore project - India:
On May 4, 2016, the National Green Tribunal ("NGT"), an Indian
governmental tribunal established for dealing with cases relating
to the environment, passed general directions with respect to areas
that should be treated as "no construction zones" due to its
proximity to water reservoirs and water drains ("Order"). The
restrictions in respect of the "no construction zone" are
applicable to all construction projects.
The government of Karnataka had been directed to incorporate the
above conditions in respect of all construction projects in the
city of Bangalore including the Company's project which is adjacent
to the Varthur Lake and have several storm-water crossing it.
An appeal was filed before the Supreme Court of India against
the Order. On March 2019, the Supreme Court has set aside the Order
thereby restoring the position as it existed before the Order was
passed by NGT.
Non-binding agreement for the sale of the Company's indirect
shareholdings in the Dambovita Center Project ("CASA RADIO"):
On February 11, 2019 the Company signed a non-binding Letter of
Intent ("LOI") with AFI Europe N.V. (the "Purchaser", and together
with the Company, the "Parties"), for the sale of its entire
indirect shareholdings (75%) in the Casa Radio Project, for a
maximum consideration of EUR60 million, subject to the fulfilment
of certain conditions.
Following the execution of the LOI, the Purchaser shall have a
period of 3 months to conduct due diligence investigations (with
the aim of concluding the due diligence investigations before April
19, 2019), after which, if satisfactory, a pre-sale agreement will
be executed within 30 days following the conclusion of the due
diligence investigations (the "Pre-Sale Agreement").
In the framework of the Pre-Sale Agreement, the Purchaser will
pay the Company a non-refundable down payment 15 months following
the execution of the Pre-Sale Agreement, and subject to the
satisfactory fulfilment of certain conditions precedent, the
Parties will sign a sale agreement.
The consummation of the Transaction is subject to the fulfilment
of certain conditions ("the closing conditions"), including, inter
alia: (i) certain confirmations and approvals of competent public
authorities regarding the PPP agreement in place and acceptance of
the Purchaser; (ii) the successful conclusion by the Purchaser of
its due diligence investigations; (iii) obtaining the approval of
the Romanian authorities for the updated structure of the Project
and timetable; (iv) confirmation that the 49-year lease period
under the PPP agreement (signed between the Romanian Authorities
and the Company) will commence from 2012 at the earliest, although,
should the said lease period commence earlier, the parties shall
amicably negotiate a price adjustment mechanism to the Purchaser's
satisfaction and approval; and (v) the execution of definitive
agreements.
During the period commencing on the date of the execution of the
LOI and ending on the earlier of: (i) 18 month, or (ii) the
Purchaser informs the Company of his withdrawal from the
Transaction, the Company and its representatives have undertaken to
refrain from negotiating with any other third party other than the
Purchaser for the purpose of selling its shareholdings in the
Project.
The payment schedule according to the LOI is expected to be set
as follows:
Non-refundable down payment EUR200,000
Execution of Sale Agreement
(following fulfilment of the
conditions precedent) EUR20,000,000
------------------------------
Issuance of Building Permit
for Phase 1 (the construction
of the shopping mall, offices/residential,
Hotel& Casino, Supermarket
and parking). EUR22,000,000
------------------------------
Finalization and inauguration
of Phase 1 EUR17,800,000
------------------------------
The Company is not obligated to participate in the financing of
the Project. In addition, the Purchaser acknowledged the liability
to build the public authority building under the PPP agreement.
As of the date hereof, there can be no certainty that either the
Pre-Sale Agreement, or the Sale Agreement will be executed and/or
that the Transaction will be consummated as presented above or at
all.
Refer to the Company's financial statements section for
additional information.
Commenting on the results, acting CEO Avi Hakhamov said:
"Our active focus has continued to centre on asset disposals in
CEE (including signing pre-agreements for future sales), continuing
efforts to realize projects in India and generating cash flows,
material cost cutting, tight budget control and the optimisation of
the business with the aim of satisfying our obligations to our
stakeholders. This remains our absolute priority for the next
year."
For further details, please contact:
Plaza
Avi Hakhamov, acting CEO + 361 6104523
Notes to Editors
Plaza Centers N.V. (www.plazacenters.com) is listed on the Main
Board of the London Stock Exchange, as of 19 October 2007, on the
Warsaw Stock Exchange (LSE: "PLAZ", WSE: "PLZ/PLAZACNTR") and, on
the Tel Aviv Stock Exchange.
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.
MANAGEMENT STATEMENT
During 2018 the management's focus has almost entirely been on
cost reductions, delivering the EUR2.3 million of disposals of
plots of land that we completed in the 12 months to 31 December,
which produced EUR2 million in net proceeds, and repayment of
material funds - circa EUR38.5 million (principal and interest)
paid to the bondholders following signing settlement agreement on
January 2018 by and among the Company and the two Israeli Series of
Bonds.
In addition, following several years of efforts to promote the
development of the Casa Radio project either by bringing a partner
or through the sale of the Company's holdings, a number of serious
proposals were received during the course of 2018 from serious and
experienced real estate investors which were examined by management
and the board. The management and the board of directors came to
the conclusion that the proposed price and terms of LOI are optimal
and reasonable considering the Company's current status and decided
to sign a LOI with AFI Europe in 2019.
In India, the Company focus its efforts to bring cash flows from
Bangalore project in accordance with the signed sale agreement, and
signed a term sheet for the sale of its 50% stake in a 74.7-acre
plot in Chennai, India. The closing date was extended several times
and in 2019 the company (through its 50% subsidiary) terminated the
the Joint Development Agreement and the Term Sheet and initiated
arbitration proceeding,
As a result of this activity, our total portfolio now comprises
six assets in three countries, including one plot in Poland, three
plots in Romania and two plots in India (under JV with Elbit).
Over the coming months, the Company will maintain its focus on
and commitment to the portfolio rationalisation and continuous
deleveraging of the balance sheet.
Results
During the year, Plaza recorded a EUR38.4 million loss
attributable to the shareholders of the Company. This is a 44%
increase compared to the losses reported in 2017 (loss of EUR26.5
million).
Total result of operations excluding the finance income and
finance cost was loss of EUR31.7 million in 2018 and EUR14.9 in
2017. Losses were generated in both years mainly from write down of
trading properties. Additionally, currently the Company holds no
operating assets.
The consolidated cash position as at 31 December 2018 was EUR1.4
million (31 December 2017: EUR44.8 million) and the current cash
position is circa EUR1.28 million.
Liquidity & Financing
Plaza ended the period with a consolidated cash position of
EUR1.4 million, compared to EUR44.8 million at the end of 2017.
As at December 31 2018 the Group's outstanding obligation to
bondholders is EUR80.5 million after all bank loans were repaid or
disposed. The outstanding balance of the debt to bondholders is
circa EUR84.3 million as of today.
In November 2016, the Group agreed with its bondholders to amend
the terms of the early repayment requirement under the original
debt restructuring plan (the "Restructuring Plan"). On March 15,
2017, the Group repaid the required minimum early repayment to its
bondholders and thus obtained a deferral of one year for the
remaining contractual obligations of the bonds.
In January 2018, a settlement agreement was signed by and among
the Company and the two Israeli Series of Bonds ("Settlement
Agreement"). In the Settlement Agreement it was agreed, inter alia,
to approve:
-- New repayment ratios between the two Israeli Series of Bonds
(new ratio: Bond A- 39% Bond B- 61%);
-- An increase in the level of the mandatory early repayments
from 75% to 78% of the relevant net income;
-- New repayment schedule;
-- An increase in the compensation to be paid to the Bondholders
in the event of successful disposal of Casa Radio Project;
-- A waiver of claims to the Company and its directors and officers; and
-- To waive the request for publication of quarterly financial reports by the Company.
As a result of settlement agreement signing, Series A
Bondholders withdrew their request for immediate repayment.
It is clarified that the Settlement Agreement is a separate
agreement among the parties thereto with respect to the Company's
restructuring plan, and as such has no effect on the Polish
Bondholders.
On January 31, 2018 the Company paid the bondholders a total
amount of principal and interest of EUR38.5 million.
In February 18, 2019 the Company paid approximately EUR400,000
to its Series A and Series B. The bondholders approved the deferral
of payment to July 1, 2019.
Information concerning the Group's obligations and commitments
to make future payments under contracts such as debt agreements in
the 15 months starting April 1, 2019 is aggregated in the following
table:
Total Payment Due by
period
(in TEUR)
Liquidity Requirements Within 1 year Within 1-1.5
year
-------------------------------- ------------- ------------
Bonds including current portion
and interest (*) 56,354 31,118
General & administrative 1,725 750
------------- ------------
Total liquidity requirements 58,079 31,868
Total Sources (**) 6,561 7,015
------------- ------------
Total deficit (51,518) (24,853)
------------- ------------
(*) An amount of Circa EUR 0.4 million was repaid (excluding
interest) by the date of approval of these consolidated financial
statements following the balance sheet date.
(**) The Company expects to increase the amount of its liquid
balances during the 15 months starting April 1, 2019, by sale of
plots of lands (excluding Chennai, India) and others, and on the
assumption that a final agreement for sale Casa Radio Project will
be concluded, not including cash balances as of the date of signing
the financial statements.
The board and management estimate that there are significant
doubts regarding the Company's ability to serve its entire debt
according to the current repayment schedule. Moreover, following
the recent default of purchaser of Bangalore project to meet
payments schedule according to the signed amendment agreement, and
default of purchaser of Chennai Project to complete the sale
transaction, which is detailed above, it is expected that the
Company will not be able to meet its entire contractual obligations
in the upcoming 12 months.
As of December 31, 2018, the Company is not in compliance with
Coverage Ratio Covenant ("CRC") as defined in the restructuring
plan. This may entitle the bondholders to declare that all or a
part of their respective (remaining) claims become immediately due
and payable. In addition, the Minimum Cash Reserve Covenant is not
maintained as of December 31, 2018. If its continued throughout a
period comprising two consecutive quarterly reports following the
year-end report on which such breach has been established, then
such breach shall constitute an event of default under the trust
deeds, and the Bondholders shall be entitled to declare that all or
a part of their respective (remaining) claims become immediately
due and payable.
Moreover, the Company's financial statements as of December 31,
2017 include an auditor's opinion with emphasis of matter to going
concern uncertainty as well as auditor's review report on interim
financial statements as of June 30, 2018 include the same. As a
result, there is a risk that the bondholders could argue that there
are significant doubts with respect to the Company's ability to
repay its obligations, which will trigger the immediate repayment
of the bonds.
In respect of credit rating downgrade followed by withdraw of
credit rating by Standard & Poor at the Company's request refer
to Note 8 (e) to the financial statements.
In the case that the bondholders would declare their remaining
claims to become immediately due and payable, the Company would not
be in a position to settle those claims and would need to enter to
an additional debt restructuring or might cease to be a going
concern. As at the date of these financial statements the
bondholders have not taken steps to assert their rights.
On January 31, 2019 the bondholders of Series A and Series B
approved a partial deferral of the scheduled Principal payment as
of December 31, 2018 to July 1, 2019.
Strategy and Outlook
At this point in time, the Company remains focused on cost
cutting, completing the disposal of the assets identified for sale
(including signing definitive sale agreements), concentration of
efforts with aim to sign a pre-sale agreement of Casa Radio,
getting further payments for Bangalore project, progress and
decision in the arbitration process of Chennai Project and
delivering on its commitments to its stakeholders.
OPERATIONAL REVIEW
Over the course of the year to date, Plaza has continued to make
good progress against its operational and strategic objectives. The
status of the nine projects is outlined in the table below.
The Company's current assets are summarized in the table
below:
Asset/Project Location Nature of asset Plot Size Plaza's Status
sqm effective
ownership
%
Casa Radio Bucharest, Mixed-use retail, 467,000 75 Designated
Romania hotel and leisure (GBA including for sale;
plus office scheme parking Non-binding
spaces) Letter of
Intent signed
-------------- ------------------------ ---------------- ----------- ----------------
Designated
for sale;
Conditional
sale agreement
for part
Retail & entertainment of the plot
Lodz Plaza Lodz, Poland scheme 61,500 100 in place
-------------- ------------------------ ---------------- ----------- ----------------
Miercurea
Ciuc, Retail & entertainment Preliminary
Csiki Plaza Romania scheme 36,500 100 sale agreement
-------------- ------------------------ ---------------- ----------- ----------------
Brasov, Retail & entertainment Preliminary
Brasov Romania scheme 67,000 100 sale agreement
-------------- ------------------------ ---------------- ----------- ----------------
Amended
revised
Bangalore, sale agreement
Bangalore India Residential Scheme 218,500 25 in place
-------------- ------------------------ ---------------- ----------- ----------------
JDA and
term sheet
terminated;
Initiated
Chennai, an Arbitration
Chennai India Residential Scheme 302,400 50 proceeding
-------------- ------------------------ ---------------- ----------- ----------------
FINANCIAL REVIEW
Results
Revenue for the period derived from the disposal of trading
properties amounted to EUR2.3 million, compared to EUR193 million
in 2017, the decrease being largely attributable to the sales of
the last operating shopping and entertainment centres such as
Suwalki Plaza and Torun Plaza in Poland in January and November
2017 respectively, and the disposal of Belgrade Plaza in Serbia in
January 2017, whilst disposals of 2018 included the sale of three
plots: the disposal of shares of SPV holding plot in Greece, land
plot known as "Lodz Centrum Plaza" in Poland and the plot in
Krusevac, Serbia, earn-out payment for the sale of Torun Plaza
reduced by NAV adjustment and income for the stands and signage in
Belgrade Plaza. Other income includes EUR0.22 due to settlement
agreement with the buyer of Kragujevac Plaza mall regarding refund
of claim from the city of Kragujevac.
The write down of trading properties increased from EUR11.5
million in 2017 to EUR29.5 million in 2018. The 2018 write down is
mainly attributable to Lodz Plaza (EUR1.9 million) and Casa Radio
(EUR24.2 million, net) projects.
Following signing of LOI for the sale of Casa Radio project, the
Company measured the net realizable value of the project based on
the signed LOI. For this purpose, a valuation was performed through
an external appraiser whose opinion does not reflect the risk
related to uncertainty in respect of fulfilment of the closing
conditions, as described in Note 5(4)(f) and derived to a value of
EUR 37.7 million. As a result, the Company's management assumed
additional discount of 33.3% in order to reflect this uncertainty
which resulted in value of the proposed deal of EUR 25 million.
Accordingly, since the value based on the Residual technique is
higher than estimated value of the proposed deal, as of December
31, 2018, the Company recorded Casa Radio project at its net
realizable value in the amount of EUR 25 million (trading property
is presented at gross basis in the amount of EUR 39.1 million and
provision for PAB liability in the amount of EUR 14.1 million).
During the year, administrative expenses decreased to EUR2.7
million (2017: EUR6.1 million) as a result of material cost cutting
of professional services and manpower and further reductions are
targeted for 2019.
Finance income increased considerably to EUR3.6 million in 2018,
from EUR0.6 million in 2017. A gain of EUR3.4 million was recorded
in 2018 due to foreign currency gain on bonds.
Finance costs slightly increased to EUR11.3 million in 2018,
from EUR11.2 million in 2017. The main components were:
-- FOREX (NIS-EUR) - foreign currency loss other EUR1.9 million
(the effect on the debentures in 2017 - EUR1.1 million).
-- Interest expenses booked on bank loans and debentures totaled
EUR5.7 million (2017: EUR10.7 million).
-- EUR3.7 million recorded as a cost, associated with the
amortisation of the discount on debentures (2017: EUR0.7 million
non-cash income).
-- No financial costs were capitalized 2018 and 2017.
Tax benefit of circa EUR1 million was recorded as a result of
reversed tax liability previously recorded following the disposal
of SPV holding the plot in Athens, Greece on "as is" basis.
Balance sheet and cash flow
The balance sheet as at 31 December 2018 showed total assets of
circa EUR62 million compared to total assets of EUR141 million at
the end of 2017, largely as a result of the implementation of the
debt reduction strategy through asset disposal, repayment of
principal and interest in total amount of EUR38.5 million in
January 2018 following the signed settlement agreement, and due to
impairment of trading properties recognized in amount of EUR 29.5
million.
The consolidated cash position as at 31 December 2018 decreased
to EUR1.4 million (31 December 2017: EUR44.8 million) mainly due to
payment of principals and interests for bonds in total amount of
circa EUR38.3 million in January 2018 from the cash which was at
the closing balance as of December 31, 2017.
The value of the Company's trading properties decreased from
EUR73.5 million as at 31 December 2017 to EUR42.6 million at the
end of 31 December 2018, following the disposals of shares of SPV
holding plot in Greece, land plot known as "Lodz Centrum Plaza" in
Poland and the plot in Krusevac, Serbia, and the circa EUR24.2
million impairment against the Casa Radio project in Romania as
explained in the results above.
Investments in equity accounted investee companies has decreased
by EUR1.8 million to EUR17.7 million (31 December 2017: EUR19.5
million) mainly as a result of value increase of the Bangalore
project in India in an amount of EUR 1.6 million and cash
distribution of EUR2.5 million (31 December 2017: EUR 5.4
million).
Due to the sale of shares of SPV holding the plot in Greece and
reverse of tax liability previously recorded in 2017 in an amount
of EUR1 million, other current liabilities has decreased from
EUR1.9 million to EUR0.5 million.
As at 31 December 2018, Plaza has a balance sheet liability of
EUR76.7 million (with an adjusted par value of circa EUR80.5
million) from issuing bonds on the Tel Aviv Stock Exchange. These
bonds are presented at amortised cost under current
liabilities.
Provision was created with respect to the obligation connected
to Casa Radio project (Bucharest Romania) in the amount of EUR14.1
million (2017: EUR12.8 million) for the construction of the Public
Authority Building.
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 report's projected cash flow for a period of two
years, commencing from the date of approval of the reports
("Projected Cash Flow").
The Material uncertainty related to going concern was included
in the independent auditors' report and in view of the management's
plans for asset disposals and also in respect of material
uncertainty related to Casa Radio project, as described in Notes 1
(b) and 5 of these Consolidated Financial Statements in this press
release. The board and management estimates that the Company is
unable to serve its entire debt according to the current repayment
schedule. Moreover, following the recent default of purchaser of
Bangalore project to meet payments schedule according to the signed
amendment and default of purchaser of Chennai Project to complete
the sale, it is expected that the Company will not be able to meet
its entire contractual obligations in the following 12 months.
With such warning signs, the Company is required to provide
projected cash flow for the period of 24 months following the
reporting period, and also provide explanations on differences
between previously disclosed estimated projected cash flows with
actual cash flows.
2. Projected cash flow
The Company has implemented the restructuring plan that was
approved by the Dutch court on July 9, 2014 (the "Restructuring
Plan"). Under the Restructuring Plan, principal payments under the
bonds issued by the Company and originally due in the years 2013 to
2015 were deferred for a period of four and a half years, and
principal payments originally due in 2016 and 2017 were deferred
for a period of one year. During first three months 2017, the
Company paid to its bondholders a total amount of NIS 191.7 million
(EUR 49.2 million) as an early redemption. Upon such payments, the
Company complied with the Early Prepayment Term (early redemption
at the total sum of at least NIS 382 million) and thus obtained a
deferral of one year for the remaining contractual obligations of
the bonds.
In January 2018, a settlement agreement was signed by and among
the Company and the two Israeli Series of Bonds (refer to section
"Liquidity and financing").
On November 22, 2018 the Company announced based on its current
forecasts, the Company expected to pay the accrued interest on
Series A and Series B Bonds on December 31, 2018, in accordance
with the repayment schedule determined in the Company's
Restructuring Plan and Settlement Agreement with Series A and
Series B Bondholders from 11 January 2018 (the "Settlement
Agreement"). The Company noted that it will not meet its principal
repayment due on December 31, 2018 as provided for in the
Settlement Agreement. On February 18, 2019 the company paid
principal of circa EUR 250,000 and Penalty interest on arrears of
EUR 150,000 following the bondholder's approval to defer principal
repayment to July 1, 2019.
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 a lower price than
expected by the Company, as well as any other deviation from the
Company's Assumptions (such as additional expenses due to
suspension of trading, delay in submitting the statutory reports
etc.), could have an adverse effect on the Company's cash flow and
the Company's ability to service its indebtedness in a timely
manner.
2019 2020
Cash - Opening Balance 1.48 0.15
Proceeds from selling of trading properties
(1)(2)(3) 6.56 33.18
Total Sources 8.04 33.33
Debentures - principal 0.25 19.36
Debentures - interest 5.74 5.37
Compensation to Bondholders - 2.14
Operational expenses 1.90 1.50
Total Uses 7.89 28.37
Cash - Closing Balance 0.15 4.96
(1) Comprised from the sale of plots: Lodz Mall, Mirecurea Ciuc,
Brasov and Bangalore (Company's share 50%), price adjustment from
Belgrade Plaza during 2019 and 2020;
(2) Assuming EUR/NIS rate of 4.1. The last schedule payment for
Bangalore plot sale is at August 2019. The company took a
conservative approach regarding payment schedule and therefore
payments spread up to and including 2020. Chennai Project
excluded;
(3) Casa Radio project - assuming EUR 20 million to be received (2020).
Below is a summary table of the comparison between forecasted
and actual cash flow, with explanations on the differences
published for the year ending 31 December 2018.
In EUR millions 2018 2018
Forecast Actual
Cash - Opening Balance 44.8 44.8
---------- --------
Proceeds from sales transactions,
price adjustments and other income
(1) 13.6 5.92
---------- --------
Total Sources 58.4 50.72
---------- --------
Debentures - principal (2) 53.9 40.89
---------- --------
Debentures - interest 5.7 5.69
---------- --------
Compensation to Bondholders 0.2 0.20
---------- --------
Operational expenses (3) 3.2 2.46
---------- --------
Total Uses 63.0 49.24
---------- --------
Cash - Closing Balance -4.6 1.48
---------- --------
(1) Forecast included proceeds from: Chennai (EUR3.44 m),
Bangalore (EUR2.70 m), Riga (EUR0.30 m), Kochi Advance (EUR1.4 m),
Greece (EUR3.1 m), Lodz Plaza (EUR1.2 m), Lodz Centrum (EUR0.31 m),
Torun Plaza price adjustment (EUR0.15 m), Belgrade (EUR1.0 m).
Actual included proceeds from: Bangalore (EUR1.85 m), Riga
(EUR0.20 m), Kochi Advance (EUR1.55 m), Greece (EUR0.66 m), Lodz
Plaza (EUR0.07 m), Lodz Centrum (EUR0.30 m), Torun Plaza price
adjustment (EUR0.21 m), Belgrade (EUR0.47 m), Krusevac (EUR0.29 m),
settlement in Kragujevac (EUR0.23 m), Miercurea Ciuc (EUR0.09
m).
(2) Including the payment was made in January 2018 following the
settlement agreement with the bondholders
(3) Decrease as a result of non-cash costs of 2018 (EUR0.4 m)
and material cost cutting of professional services and
manpower.
Avi Hakhamov
Acting CEO
21 March 2019
PLAZA CENTERS N.V.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2018
IN 000 EUR
CONTENTS
Independent Auditors' report
Consolidated statement of financial position
Consolidated statement of profit or loss
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
- - - - - - - - - - - - - - - - - - - - - -
CONSOLIDATED STATEMENT OF FINANCIAL POSITION IN '000 EUR
December 31,
--------------------
Note 2018 2017
------- --------- ---------
ASSETS
Cash and cash equivalents 3 1,405 44,844
Other receivables 4 240 670
Prepayments - 131
Total current assets 1,645 45,645
--------- ---------
Trading properties 2,5 42,600 73,569
Equity - accounted investees 6 17,676 19,530
Property and equipment 19 178
Related parties receivables 18 - 1,753
Total non-current assets 60,295 95,030
--------- ---------
Total assets 61,940 140,675
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bonds at amortized cost 8 76,698 116,914
Trade payables 53 584
Related parties' liabilities 3 87
Other liabilities 7 500 1,878
--------- ---------
Total current liabilities 77,254 119,463
--------- ---------
Provisions 5(4)(e) 14,087 12,849
Total non-current liabilities 14,087 12,849
--------- ---------
Share capital 10 6,856 6,856
Translation reserve 10 (29,598) (28,800)
Other reserves (19,983) (19,983)
Share based payment reserve 10 35,376 35,376
Share premium 10 282,596 282,596
Retained losses (304,648) (267,682)
--------- ---------
Total equity (29,401) 8,363
--------- ---------
Total equity and liabilities 61,940 140,675
--------- ---------
The notes are an integral part of the consolidated financial
statements.
March 20, 2019
--------------------- ---------------------- -----------------------
Avi Hakhamov David Dekel
Date of approval of Acting Chief Executive
the Officer Director and Chairman
financial statements of the Audit Committee
CONSOLIDATED STATEMENT OF PROFIT OR LOSS IN '000 EUR
Year ended
December 31,
-------------------
Note 2018 2017
---- -------- ---------
Revenues and gains
Revenue from disposal of trading properties 5 2,333 192,958
Total revenues 2,333 192,958
-------- ---------
Gains and other
Rental income - 7,908
Other income 14 254 757
-------- ---------
Total gains 254 8,665
Total revenues and gains 2,587 201,623
-------- ---------
Expenses and losses
Cost of trading properties disposed 5 (2,891) (188,868)
Cost of operations (357) (2,231)
Write-down of trading properties 5 (29,450) (11,487)
Share in results of equity-accounted
investees, net of tax 6 1,443 (7,177)
Administrative expenses 13 (2,722) (6,146)
Other expenses 14 (329) (657)
-------- ---------
(34,306) (216,566)
Finance income 15 3,647 577
Finance costs 15 (11,306) (11,196)
(41,965) (227,185)
-------- ---------
Loss before income tax (39,378) (25,562)
Tax benefit (Income tax expense) 1,013 (1,001)
Loss for the year (38,365) (26,563)
-------- ---------
Loss attributable to:
Equity holders of the Company (38,365) (26,563)
======== =========
Earnings per share
Basic and diluted loss per share (EUR) 11 (5.60) (3.87)
======== =========
The notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME IN '000 EUR
Year ended
December 31,
------------------
2018 2017
-------- --------
Loss for the year (38,365) (26,563)
Other comprehensive income
Items that are or may be reclassified to profit
or loss:
Foreign currency translation differences - foreign
operations (Equity accounted investees) (798) (1,697)
Other comprehensive loss for the year, net of
income tax (798) (1,697)
Total comprehensive loss for the year (39,163) (28,260)
======== ========
The notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY IN '000 EUR
Capital
reserve
from acquisition
Share based of
Share Share payment Translation non-controlling Retained
capital Premium reserves Reserve interests losses Total
-------- -------- ----------- ----------- ---------------- --------- --------
Balance at
January 1, 2017 6,856 282,596 35,376 (27,103) (19,983) (241,119) 36,623
Comprehensive
income for
the year
Net loss for the
year - - - - - (26,563) (26,563)
Foreign currency
translation
differences - - - (1,697) - - (1,697)
Total
comprehensive
loss
for the year - - - (1,697) - (26,563) (28,260)
-------- -------- ----------- ----------- ---------------- --------- --------
Balance at
December 31,
2017 6,856 282,596 35,376 (28,800) (19,983) (267,682) 8,363
Adjustments on
initial
application of
IFRS 9 (see
Note 2(u)(2)) - - - - - 1,399 1,399
Comprehensive
income for
the year
Net loss for the
year - - - - - (38,365) (38,365)
Foreign currency
translation
differences - - - (798) - - (798)
Total
comprehensive
loss
for the year - - - (798) - (36,966) (37,764)
-------- -------- ----------- ----------- ---------------- --------- --------
Balance at
December 31,
2018 6,856 282,596 35,376 (29,598) (19,983) (304,648) (29,401)
-------- -------- ----------- ----------- ---------------- --------- --------
The notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS IN '000 EUR
Year ended
December 31,
-------------------
2018 2017
-------- ---------
Cash flows from operating activities
Loss for the year (38,365) (26,563)
Adjustments necessary to reflect cash flows
used in operating activities
Depreciation and impairment of property
and equipment 155 18
Net finance costs 7,659 10,619
Share of loss (Gain) of equity-accounted
investees, net of tax (1,443) 7,177
Loss (Gain) from sale of subsidiaries - (2,900)
Income tax expense (Tax benefit) (1,013) 1,001
(33,007) (10,648)
-------- ---------
Changes in:
Trade receivables 27 (3,102)
Other receivables 2,287 2,914
Provision 1,238 (395)
Trading properties 30,970 23,694
Trade payables (85) (500)
Other liabilities, related parties' liabilities
and provisions (634) (1,586)
33,803 21,025
-------- ---------
Interest paid (5,887) (10,739)
Taxes paid - (41)
Net cash used in operating activities (5,091) (403)
-------- ---------
Cash from investing activities
Proceeds from sale of property and equipment 4 3,127
Proceeds from sale of subsidiaries (Appendix
A) - 89,814
Changes in restricted cash - 3,189
Distribution received from Equity Accounted
Investees 2,503 2,560
Net cash provided by investing activities 2,507 98,690
-------- ---------
Cash from financing activities
Proceeds from bank loans - 4,029
Repayment of debentures (40,065) (62,179)
Repayment of interest-bearing loans from
banks - (939)
Net cash used in financing activities (40,065) (59,089)
-------- ---------
Increase (decrease) in cash and cash equivalents
during the year (43,439) 39,198
Effect of movement in exchange rate fluctuations
on cash held (790) -
Cash and cash equivalents as at January
1(st) 44,844 5,646
-------- ---------
Cash and cash equivalents as at December
31(st) 1,405 44,844
======== =========
The notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS IN '000 EUR
Year ended
December 31,
--------------
2018 2017
---- --------
Appendix A - Proceeds from sale of investments
in previously consolidated subsidiaries:
The subsidiaries assets and liabilities at date
of sale:
Working capital (excluding cash and cash equivalents) - 6,307
Trading Properties - 166,432
Bank loans - (85,365)
Gain (Loss) from sale of subsidiaries - 2,440
---- --------
- 89,814
==== ========
The notes are an integral part of the consolidated financial
statements.
NOTE 1:- GENERAL INFORMATION
a. Plaza Centers N.V. ("the Company" and together with its
subsidiaries, "the Group") was incorporated and is registered in
the Netherlands. The Company's registered office is at
Pietersbergweg 283, 1105 BM, Amsterdam, the Netherlands. In past
the Company conducted 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).
Following debt restructuring plan approved in 2014 the Group main
focus is to reduce corporate debt by early repayments following
sale of assets and to continue with efficiency measures and cost
reduction where possible.
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 jointly
controlled entities.
The Company is listed on the premium segment of the Official
List of the UK Listing Authority and to trading on the main market
of the London Stock Exchange ("LSE"), the Warsaw Stock Exchange
("WSE") and on the Tel Aviv Stock Exchange ("TASE").
The Company's immediate parent company was Elbit Ultrasound
(Luxembourg) B.V. / S.Ã r.l. ("EUL"), which held 44.9% of the
Company's shares, till December 19, 2018 when EUL informed that it
has signed a trust agreement according to EUL will deposit its
shares of the Company with a trustee no longer considers itself to
be the controlling shareholder of Plaza. (December 31, 2017 -
44.9%). For the list of the Group entities, refer to Note 20.
b. Going concern and liquidity 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 obligations of its bonds and other
working capital requirements.
The Group's primary need for liquidity is to repay its debts and
fund general corporate purposes. The Group has incurred losses and
experienced negative operating cash flows for the past several
years, and accordingly, it has taken a number of actions to
continue to support its operations and meet its obligations.
As at December 31, 2018 the Group's outstanding obligations to
bondholders are EUR 80.5 million (refer also to Note 8).
Information concerning the Group's obligations and commitments
to make future payments under contracts such as debt agreements in
the 15 months starting April 1, 2019 is aggregated in the following
tables.
Total Payment Due by
period
(in TEUR)
Liquidity Requirements Within Within
1 year 1-1.5 year
------------------------------ ---------- ------------
Including current portion and
interest (*) 56,354 31,118
General & administrative 1,725 750
---------- ------------
Total liquidity requirements 58,079 31,868
Total Sources (**) 6,561 7,015
---------- ------------
Total deficit (51,518) (24,853)
---------- ------------
NOTE 1:- GENERAL INFORMATION (Cont.)
(*) An amount of Circa EUR 0.4 million was repaid (excluding
interest) by the date of approval of these consolidated financial
statements following the balance sheet date.
(**) The Company expects to increase the amount of its liquid
balances during the 15 months starting April 1, 2019, by sale of
plots of lands (excluding Chennai, India) and others, and on the
assumption that a final agreement for sale Casa Radio Project will
be concluded, not including cash balances as of the date of signing
the financial statements.
Management acknowledges that the above expected cash flows are
based on forward-looking plans and estimations which rely on the
information known to management at the time of the approval of
these financial statements. The materialization of the above
forecast is not certain and is subject to factors beyond the
Company's control. Therefore, delays in the realization of the
Group's assets and investments or realization at lower price than
expected by management could have an adverse effect on the Group's
liquidity position and its ability to meet its contractual
obligations on a timely manner.
Management further acknowledges that the Company is exposed to
foreign currency risk derived from borrowings denominated in
currency other than the functional currency of the Group, more
specifically a further devaluation of the EUR against the NIS can
significantly increase the remaining contractual obligation to
bondholders.
The board and management estimate that the Company is unable to
serve its entire debt according to the current repayment schedule.
Moreover, following the recent default of purchaser of Bangalore
project to meet payments schedule according to the signed amendment
agreement (refer to Note 6(b)(1)), and default of purchaser of
Chennai Project to complete the sale transaction (refer to Note
6(b)(2)), it is expected that the Company will not be able to meet
its entire contractual obligations in the following 12 months.
As of December 31, 2018, the Company is not in compliance with
Coverage Ratio Covenant ("CRC") as defined in the restructuring
plan. This may entitle the bondholders to declare that all or a
part of their respective (remaining) claims become immediately due
and payable. In addition, the Minimum Cash Reserve Covenant as
defined in Note 17(b)(1)(d) is not maintained as of December 31,
2018. If its continued throughout a period comprising two
consecutive quarterly reports following the year-end report on
which such breach has been established, then such breach shall
constitute an event of default under the trust deeds, and the
Bondholders shall be entitled to declare that all or a part of
their respective (remaining) claims become immediately due and
payable.
Moreover, the Company's financial statements as of December 31,
2017 include an auditor's opinion with emphasis of matter to going
concern uncertainty as well as auditor's review report on interim
financial statements as of June 30, 2018 include the same. As a
result, there is a risk that the bondholders could argue that there
are significant doubts with respect to the Company's ability to
repay its obligations, which will trigger the immediate repayment
of the bonds.
In addition, based on trust deeds, in the case of material
deterioration in the Company's business and the existence of
significant doubts regarding the Company's ability to repay the
bonds on time, the bondholders may require an immediate repayment
of bonds due to the Company's breach of a covenant in the trust
deeds.
In respect of credit rating downgrade followed by withdraw of
credit rating by Standard & Poor at the Company's request refer
to Note 8(e) to these consolidated financial statements.
NOTE 1:- GENERAL INFORMATION (Cont.)
In the case that the bondholders would declare their remaining
claims to become immediately due and payable, the Company would not
be in a position to settle those claims and would need to enter to
an additional debt restructuring or might cease to be a going
concern. As at the date of these financial statements the
bondholders have not taken steps to assert their rights.
On January 31, 2019 the bondholders of Series A and Series B
approved a partial deferral of the scheduled Principal payment as
of December 31, 2018 to July 1, 2019 (see Note 8).
A combination of the abovementioned conditions indicates the
existence of a material uncertainty that casts significant doubt
about the Company's ability to continue as a going concern.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. Basis of preparation of these financial statements:
The following accounting policies have been applied consistently
in the financial statements for all periods presented, unless
otherwise stated.
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS"), as adopted by the European Union ("EU").
The consolidated financial statements have been prepared on the
historical cost basis.
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 submitted consolidated financial
statements for the year ended December 31, 2018 in accordance with
the Netherlands Civil Code.
The consolidated financial statements were authorized for issue
by the Board of Directors on March 20, 2019.
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. Investment property vs. trading property classification:
The Group has designated all its properties for sale. The
Company is actively seeking buyers and does not hold the properties
with the intention to gain from capital appreciation. Therefore,
management also believes that these are appropriately classified as
trading properties.
d. Functional and presentation 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 potential buyers and suppliers,
determine its financing activities and budgets and assesses its
currency exposures.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
e. Operating cycle determination:
The Group is unable to clearly identify its actual operating
cycle with respect to trading properties. As such, the Group's
operating cycle relating to trading properties and corresponding
liabilities is 12 months. Trading properties and liabilities
associated therewith are presented as non-current assets and
non-current liabilities, respectively.
Despite of the above, where a sale and purchase agreement exists
as of the end of the reporting period, the asset and related
liabilities are reclassified as current.
f. 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 5 - judgements used in determining the net realisable value of trading properties;
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 5 - key assumptions used in determining the net
realisable value of trading properties;
-- Note 5,16 - recognition and measurement of provisions and
contingencies: key assumptions about the likelihood and magnitude
of an outflow of resources.
g. 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 2:- 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.
When the equity attributable to the owners of an associate
changes as a result of the associate selling or buying shares of
its subsidiaries (that are consolidated in its financial
statements) to third parties while retaining control in those
subsidiaries, the balance of the investment in the associate that
is presented on the Company's books on the equity basis changes.
The Company has chosen the accounting policy of recognizing the
change in the balance of the investment in these cases directly in
Profit or loss.
3. Loss of control:
When the Group loses control over a subsidiary, it derecognises
the assets and liabilities of the subsidiary, and any related NCI
and other components of equity.
Any resulting gain or loss is recognised in profit or loss. Any
interest retained in the former subsidiary is measured at fair
value when control is lost.
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.
h. 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 translated at the exchange rate at
the date of the transaction. Foreign currency differences are
generally recognised in profit or loss.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
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.
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.
3. Index-linked monetary items:
Monetary assets and liabilities linked to the changes in the
Israeli Consumer Price Index ("Israeli CPI") are adjusted at the
relevant index at each reporting date according to the terms of the
agreement.
i. Cash equivalents:
Cash equivalents are considered as highly liquid investments,
including unrestricted short-term bank deposits with an original
maturity of three months or less from the date of investment or
with a maturity of more than three months, but which are redeemable
on demand without penalty and which form part of the Group's cash
management.
j. Financial instruments:
As described in Note 2a(u)(2) regarding the initial adoption of
IFRS 9, "Financial Instruments" ("the Standard"), the Company
elected to adopt the provisions of the Standard retrospectively
without restatement of comparative data.
The accounting policy for financial instruments applied until
December 31, 2017, is as follows:
1. Financial assets:
Financial assets within the scope of IAS 39 are initially
recognized at fair value plus directly attributable transaction
costs, except for financial assets measured at fair value through
profit or loss in respect of which transaction costs are recorded
in profit or loss.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
After initial recognition, the accounting treatment of financial
assets is based on their classification as follows:
a) Loans and receivables:
Loans and receivables are investments with fixed or determinable
payments that are not quoted in an active market. After initial
recognition, loans are measured based on their terms at amortized
cost plus directly attributable transaction costs using the
effective interest method and less any impairment losses.
Short-term borrowings are measured based on their terms, normally
at face value.
2. Financial liabilities:
Financial liabilities are initially recognized at fair value.
Loans and other liabilities measured at amortized cost are
presented less direct transaction costs.
After initial recognition, the accounting treatment of financial
liabilities is based on their classification as follows:
a) Financial liabilities at amortized cost:
After initial recognition, loans and other liabilities are
measured based on their terms at amortized cost less directly
attributable transaction costs using the effective interest
method.
3. Offsetting financial instruments:
Financial assets and financial liabilities are offset and the
net amount is presented in the statement of financial position if
there is a legally enforceable right to set off the recognized
amounts and there is an intention either to settle on a net basis
or to realize the asset and settle the liability
simultaneously.
4. Derecognition of financial instruments:
a) Financial assets:
A financial asset is derecognized when the contractual rights to
the cash flows from the financial asset expire or the Company has
transferred its contractual rights to receive cash flows from the
financial asset or assumes an obligation to pay the cash flows in
full without material delay to a third party and has transferred
substantially all the risks and rewards of the asset, or has
neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.
b) Financial liabilities:
A financial liability is derecognized when it is extinguished,
that is when the obligation is discharged or cancelled or expires.
A financial liability is extinguished when the debtor (the Group)
discharges the liability by paying in cash, other financial assets,
goods or services; or is legally released from the liability.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
5. Impairment of financial assets:
The Group assesses at the end of each reporting period whether
there is any objective evidence of impairment of a financial asset
or group of financial assets as follows:
Financial assets carried at amortized cost:
Objective evidence of impairment exists when one or more events
that have occurred after initial recognition of the asset have a
negative impact on the estimated future cash flows. The amount of
the loss recorded in profit or loss is measured as the difference
between the asset's carrying amount and the present value of
estimated future cash flows (excluding future credit losses that
have not yet been incurred) discounted at the financial asset's
original effective interest rate. If the financial asset has a
variable interest rate, the discount rate is the current effective
interest rate. In a subsequent period, the amount of the impairment
loss is reversed if the recovery of the asset can be related
objectively to an event occurring after the impairment was
recognized. The amount of the reversal, up to the amount of any
previous impairment, is recorded in profit or loss.
The accounting policy for financial instruments applied
commencing from January 1, 2018, is as follows:
1. Financial assets:
Financial assets are measured upon initial recognition at fair
value plus transaction costs that are directly attributable to the
acquisition of the financial assets, except for
financial assets measured at fair value through profit or loss
in respect of which transaction costs are recorded in profit or
loss.
Debt instruments are measured at amortized cost when:
The Company's business model is to hold the financial assets in
order to collect their contractual cash flows, and the contractual
terms of the financial assets give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding. After initial recognition, the
instruments in this category are measured according to their terms
at amortized cost using the effective interest rate method, less
any provision for impairment.
2. Impairment of financial assets:
The Company evaluates at the end of each reporting period the
loss allowance for financial debt instruments which are not
measured at fair value through profit or loss.
3. Derecognition of financial assets:
A financial asset is derecognized only when:
- The contractual rights to the cash flows from the financial asset has expired; or
- The Company has transferred substantially all the risks and
rewards deriving from the contractual rights to receive cash flows
from the financial asset or has neither transferred nor retained
substantially all the risks and rewards of
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
the asset, but has transferred control of the asset; or
- The Company has retained its contractual rights to receive
cash flows from the financial asset but has assumed a contractual
obligation to pay the cash flows in full without material delay to
a third party.
4. Financial liabilities:
a) Financial liabilities measured at amortized cost:
Financial liabilities are initially recognized at fair value
less transaction costs that are directly attributable to the issue
of the financial liability.
After initial recognition, the Company measures all financial
liabilities at amortized cost using the effective interest rate
method.
5. Derecognition of financial liabilities:
A financial liability is derecognized only when it is
extinguished, that is when the obligation specified in the contract
is discharged or cancelled or expires. A financial liability is
extinguished when the debtor discharges the liability by paying in
cash, other financial assets, goods or services; or is legally
released from the liability.
6. Offsetting financial instruments:
Financial assets and financial liabilities are offset and the
net amount is presented in the statement of financial position if
there is a legally enforceable right to set off the recognized
amounts and there is an intention either to settle on a net basis
or to realize the asset and settle the liability
simultaneously.
k. Fair value measurement
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 categorized 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 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Further information about the assumptions made in measuring fair
values is included in the following notes:
-- Note 16 - Financial instruments
l. 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. Income tax relating to
transaction costs of an equity transaction is accounted for in
accordance with IAS 12. Costs attributable to listing existing
shares are expensed as incurred.
m. Trading properties:
Trading properties are being designated for sale in the ordinary
course of business and as such 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-down 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.
n. Impairment of non-financial assets:
The Company evaluates the need to record an impairment of
non-financial assets whenever events or changes in circumstances
indicate that the carrying amount is not recoverable. If the
carrying amount of non-financial assets exceeds their recoverable
amount, the assets are reduced to their recoverable amount. The
recoverable amount is the higher of fair value less costs of sale
and value in use. In measuring value in use, the expected future
cash flows are discounted using a pre-tax discount rate that
reflects the risks specific to the asset. The recoverable amount of
an asset that does not generate independent cash flows is
determined for the cash-generating unit to which the asset belongs.
Impairment losses are recognized in profit or loss.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
An impairment loss of an asset is reversed only if there have
been changes in the estimates used to determine the asset's
recoverable amount since the last impairment loss was recognized.
Reversal of an impairment loss, as above, shall not be increased
above the lower of the carrying amount that would have been
determined had no impairment loss been recognized for the asset in
prior years and its recoverable amount. The reversal of impairment
loss of an asset presented at cost is recognized in profit or
loss.
The following criteria are applied in assessing impairment of
these specific assets:
Investment in associate or joint venture:
After application of the equity method, the Company determines
whether it is 3necessary to recognize any additional impairment
loss with respect to the investment in associates or joint
ventures. The Company determines at each reporting date whether
there is objective evidence that the carrying amount of the
investment in the associate or the joint venture is impaired. The
test of impairment is carried out with reference to the entire
investment, including the goodwill attributed to the associate or
the joint venture.
o. 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.
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.
Legal claims:
A provision for claims is recognized when the Group has a
present legal or constructive obligation as a result of a past
event, it is more likely than not that an outflow of resources
embodying economic benefits will be required by the Group to settle
the obligation and a reliable estimate can be made of the amount of
the obligation.
p. Revenue recognition:
As described in Note 2(u)(1) regarding the initial adoption of
IFRS 15, "Revenue from Contracts with Customers" ("the Standard"),
the Company elected to adopt the provisions of the Standard using
the modified retrospective method with the application of certain
practical expedients and without restatement of comparative
data.
The accounting policy for revenue recognition applied until
December 31, 2017, is as follows:
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.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
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.
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;
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.
The accounting policy for revenue recognition applied commencing
from January 1, 2018, is as follows:
Revenue recognition:
Revenue from contracts with customers is recognized when the
control over the goods or services is transferred to the customer.
Revenues from trading properties are taken into account at the
moment the trading property is sold. The company considers the
moment of sale being the latest of a) receiving the payment for the
trading property; or b) the transfer of the deed at the public
notary. The transaction price is the amount of the consideration
that is expected to be received based on the contract terms,
excluding amounts collected on behalf of third parties (such as
taxes).
In determining the amount of revenue from contracts with
customers, the Company evaluates whether it is a principal or an
agent in the arrangement. The Company is a principal when the
Company controls the promised goods or services before transferring
them to the customer.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In these circumstances, the Company recognizes revenue for the
gross amount of the consideration. When the Company is an agent, it
recognizes revenue for the net amount of the consideration, after
deducting the amount due to the principal.
Revenue from the sale of goods:
Revenue from sale of goods is recognized in profit or loss at
the point in time when the control of the goods is transferred to
the customer, generally upon delivery of the goods to the
customer.
Variable consideration:
The Company determines the transaction price separately for each
contract with a customer. When exercising this judgment, the
Company evaluates the effect of each variable amount in the
contract, taking into consideration discounts, penalties,
variations, claims, and non-cash consideration. In determining the
effect of the variable consideration, the Company normally uses the
"most likely amount" method described in the Standard. Pursuant to
this method, the amount of the consideration is determined as the
single most likely amount in the range of possible consideration
amounts in the contract.
According to the Standard, variable consideration is included in
the transaction price only to the extent that it is highly probable
that a significant reversal in the amount of revenue recognized
will not occur when the uncertainty associated with the variable
consideration is subsequently resolved.
q. Operating lease payments:
The criteria for classifying leases as finance or operating
leases depend on the substance of the agreements and are made at
the inception of the lease in accordance with the following
principles as set out in IAS 17.
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).
r. Finance income and cost:
Interest income and expense which are not capitalized are
recognized in the income statement as they accrue, using the
effective interest method.
s. Income tax:
Income tax expense comprises current and deferred tax. It is
recognised in profit or loss.
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.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
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 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.
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.
t. 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.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
u. Changes in accounting policies - initial adoption of new
financial reporting and accounting standards and amendments to
existing financial reporting and accounting standards:
1. Initial adoption of IFRS 15, "Revenue from Contracts with Customers":
The IASB issued IFRS 15, "Revenue from Contracts with Customers"
("the new Standard") in May 2014. The new Standard replaces IAS 18,
"Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer
Loyalty Programs", IFRIC 15, "Agreements for the Construction of
Real Estate", IFRIC 18, "Transfers of Assets from Customers" and
SIC-31, "Revenue - Barter Transactions Involving Advertising
Services".
The new Standard introduces a five-step model that applies to
revenue earned from contracts with customers.
The new Standard has been applied for the first time in these
financial statements. The Company elected to adopt the provisions
of the new Standard using the modified retrospective method with
the application of certain practical expedients and without
restatement of comparative data. The Company recognizes any
difference between the previous carrying amount and the carrying
amount on the date of initial application of the new Standard as an
adjustment to the opening balance of retained earnings (or another
component of equity, as applicable).
The effect of the initial application of the new Standard on the
Company's financial statements is not significant.
2. Initial adoption of IFRS 9, "Financial Instruments":
In July 2014, the IASB issued the final and complete version of
IFRS 9, "Financial Instruments" ("the new Standard"), which
replaces IAS 39, "Financial Instruments: Recognition and
Measurement". The new Standard mainly focuses on the classification
and measurement of financial assets and it applies to all assets
within the scope of IAS 39.
The new Standard has been applied for the first time in these
financial statements retrospectively without restatement of
comparative data.
The effect of the initial adoption of the new Standard on the
Company's financial statements is as follows:
During 2017, a non-substantial modification to the terms of
previously issued debentures was made by the Company due to
modification of the trust deeds terms. Accordingly, the Company
accounted for the modification in accordance with the principles of
IAS 39.AG7 by adjusting the effective interest rate such that the
revised cash flows, discounted at the new interest rate, was equal
to the carrying amount of the debentures before the modification in
terms. Under the provisions of the new Standard, the change should
be accounted for pursuant to the principles of IAS 39.AG8 whereby
the revised cash flows after the modification in terms are
discounted using the original effective interest rate of the
debentures to arrive at a new carrying amount, with any difference
from the existing carrying amount on the date of modification being
recorded in profit or loss.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The effects of the above changes on the Company's financial
statements are as follows:
In the consolidated statements of financial position:
As previously According
reported The change to IFRS 9
------------- ---------- ----------
EUR in thousands
-------------------------------------
As of January 1, 2018,
Bonds at amortized cost 116,914 (1,399) 115,515
Retained losses (267,682) 1,399 (266,283)
v. Disclosure of new standards in the period prior to their adoption:
1. IFRS 16, "Leases":
In January 2016, the IASB issued IFRS 16, "Leases" ("the new
Standard"). According to the new Standard, a lease is a contract,
or part of a contract, that conveys the right to use
an asset for a period of time in exchange for consideration.
The effects of the adoption of the new Standard are as
follows:
-- According to the new Standard, lessees are required to
recognize all leases in the statement of financial position
(excluding certain exceptions, see below). Lessees will recognize a
liability for lease payments with a corresponding right-of-use
asset, similar to the accounting treatment for finance leases under
the existing standard, IAS 17, "Leases". Lessees will also
recognize interest expense and depreciation expense separately.
-- The accounting treatment by lessors remains substantially
unchanged from the existing standard, namely classification of a
lease as a finance lease or an operating lease.
The new Standard is effective for annual periods beginning on or
after January 1, 2019.
The Company believes, based on an assessment of the impact of
the adoption of the new Standard, that its application is not
expected to have a material effect on the financial statements.
2. IFRIC 23, "Uncertainty over Income Tax Treatments":
In June 2017, the IASB issued IFRIC 23, "Uncertainty over Income
Tax Treatments" ("the Interpretation"). The Interpretation
clarifies the accounting for recognition and measurement of assets
or liabilities in accordance with the provisions of IAS 12, "Income
Taxes", in situations of uncertainty involving income taxes. The
Interpretation provides guidance on considering whether some tax
treatments should be considered collectively, examination by the
tax authorities, measurement of the effects of uncertainty
involving
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
income taxes on the financial statements and accounting for
changes in facts and circumstances in respect of the
uncertainty.
The Interpretation is to be applied in financial statements for
annual periods beginning on January 1, 2019. Early adoption is
permitted. Upon initial adoption, the Company will apply the
Interpretation using one of two approaches:
1. Full retrospective adoption, without restating comparative
data, by recording the cumulative effect as of the date of initial
adoption in the opening balance of retained earnings.
2. Full retrospective adoption including restatement of comparative data.
The Company does not expect the Interpretation to have any
material effect on the financial statements.
3. IAS 28, "Investments in Associates and Joint Ventures":
In October 2017, the IASB published an amendment to IAS 28,
"Investments in Associates and Joint Ventures" ("the Amendment").
The Amendment clarifies that long-term interests in associates and
joint ventures (such as loans receivable or investments in
preferred shares) which form part of the net investment in an
associate or joint venture are initially accounted for according to
the provisions of IFRS 9 (both regarding measurement and
impairment) and subsequently those interests are subject to the
provisions of IAS 28.
The Amendment is to be applied retrospectively for annual
periods beginning on January 1, 2019. Early adoption is
permitted.
The Company is currently evaluating potential effect of the
Amendment on its financial statements.
NOTE 3: - CASH AND CASH EQUIVALENTS
Bank deposits and cash December 31,
--------------
denominated in 2018 2017
------------------------------------------- ------ ------
EUR - bank balances 1,323 11,654
United States Dollar (USD) - bank balances 11 586
New Israeli Shekel (NIS) 4 32,039
Polish Zlotys (PLN) 34 418
Other currencies 33 147
1,405 44,844
====== ======
*) The balances are not bearing interest.
The Group's sensitivity analysis for financial assets and
liabilities are disclosed in Note 16.
NOTE 4:- OTHER RECEIVABLES
Other receivables:
December 31,
--------------
2018 2017
------ ------
Tax receivables and VAT *) 226 133
Others 14 537
------ ------
240 670
====== ======
*) refer to Note 18.
NOTE 5: - TRADING PROPERTIES
December 31,
-------------------
2018 2017
-------- ---------
Balance as at 1 January 73,569 263,695
Construction costs and other (1) - 1,514
Write-down of trading properties, net
(2) (28,212) (11,487)
Trading properties disposed (3) (2,757) (180,153)
-------- ---------
Balance as at 31 December 42,600 73,569
======== =========
Trading properties designated for sale 42,600 73,569
-------- ---------
(1) 2017 - mainly due to construction activities in Serbia.
NOTE 5: - TRADING PROPERTIES (Cont.)
(2) Breakdown of write-downs of trading properties is presented in the table below:
Year ended
December 31,
----------------
Project name (location) 2018 2017
------- -------
Helios Plaza (Athens, Greece) 1,150 -
Krusevac (Krusevac, Serbia) 300 400
Lodz Plaza (Lodz, Poland) 1,940 1,200
Lodz Centrum (Lodz, Poland) 100 -
Casa radio (Bucharest, Romania) 24,172 10,095
Brasov (Brasov, Romania) 550 -
Other, aggregated - 187
------- -------
28,212 11,882
------- -------
Change in provision in respect to
PAB (*) 1,238 (395)
------- -------
Total write-downs 29,450 11,487
------- -------
(*) See also (5)(4)(e) below.
The 2018 write-downs were caused mainly due to the following
factors:
-- EUR 0.1 million of write-down in Lodz Centrum (Residential
Plot), Poland, which is based on the preliminary agreement signed
during July 2018.
-- EUR 1.9 million of write-down regarding plot in Lodz Plaza
("Lodz mall"), Poland based on indications received from the local
brokers regarding investors' interest, including the expected price
level, direct talks with investors and non-binding proposals
received.
-- EUR 0.3 million of write-down in Krusevac, Serbia during
first half of 2018 based on management internal estimation, which
reflects the fact that no proposals have been received for a long
period including brokers for the expected price, and the legal
status of the Plot.
-- EUR 0.55 million of write-down in Brasov plot of land,
Romania, which reflects signed sale agreement (see Note 19(a)).
-- EUR 25.4 million of write-down (including change in provision
in respect to PAB) in Casa Radio project, Romania (see 4 in this
Note).
For detailed information with respect to valuation techniques
and main assumptions, refer also to (5) in this Note.
NOTE 5: - TRADING PROPERTIES (Cont.)
(3) Sale of assets in the reporting period:
a. Lodz Centrum Plaza:
In July 2018, a subsidiary of the Company has signed a
preliminary agreement with respect to the sale of the land plot
known as " Centrum Plaza", in consideration for PLN 1.3 million
(circa EUR 0.3 million). The agreement was conditional upon the
pre-emptive right of the municipality of Lodz. The plot was sold in
September 2018.
b. Preliminary Sale of Plot in Lodz, Poland:
On June 13, 2017, the Company announced that it has signed a
preliminary sale agreement for the disposal of a 13,770 sqm plot at
its second land holding in Lodz, Poland, (representing 22% of this
holding) to a retail developer, for EUR1.15 million. As part of the
agreement, the purchaser paid an immediate installment of EUR 0.035
million followed by an installment of EUR 0.073 million paid on
2018 after obtaining environmental permit for investing in the
access road to the plot.
During February 2019 the Company has signed conditional sale
agreement for which the remaining balance less 50% of the sum
invested in the road (up to maximum amount of circa EUR 0.19
million) will be paid once the final agreement is signed after the
municipality confirms that it will not exercise preemptive rights.
The rest of consideration (circa EUR 0.84 million) will be paid in
two installments: EUR 0.75 million at the date of the signing of
the final sale agreement and the remaining amount of EUR 0.09
million till the end of April 2019.
c. Earn-out payment for the sale of Torun:
On 21 November, 2017 one of the Company's subsidiaries has
completed the sale of Torun Plaza shopping and entertainment center
in Poland to a private investment fund. The Company has received
circa EUR 28.3 million. This net cash is after the deduction of the
bank loan (circa EUR 43.3 million), and other working capital
adjustments in accordance with the balance sheet of the SPV holding
the Project. The above-mentioned sums do not include the earn-out
payments received in 2018. The Company recorded revenue of EUR 71.6
million from the disposal and a loss of circa EUR 1.5 million (not
including the earn-out payment mentioned).
In June 2018 the Company received the earn-out payment for the
sale of Torun Plaza in amount of EUR 0.35 million, reduced by NAV
adjustment of EUR 0.14 million included in Revenue from disposal of
trading properties.
d. Disposal of land plot in Greece:
Following certain preliminary agreement regarding the disposal
of a plot in Piraeus, Greece, several amendments were signed during
2016-2017 the latest amendment deadline had expired on January 20,
2018.
The last selling price of the share of the SPV holding the plot
was set at EUR 3.54 million. In order to secure the prolonged
validity of the initial agreement, the purchaser has paid advance
payments in a total amount of EUR 0.3 million non-refundable to
Plaza. The completion of the transactions was expected to be
concluded in 2018 as an asset deal (instead of the original
agreement of share deal) with a lower sale price of EUR 3.35
million.
NOTE 5: - TRADING PROPERTIES (Cont.)
In May 2018, a third party has filed a legal claim in the court
of Greece against Helios Plaza AE ("HP"), a fully owned subsidiary
of Plaza which holds land property in Athens ("Land Property"). The
claimant is claiming from HP an amount of EUR 2.96 million based on
a certain allegedly agreement that was claimed to be agreed in
2010, and has also filed a request for an injunction with respect
to the Land Property in order to secure its claim. In June 2018,
the injunction was granted until final decision regarding the main
dispute.
On December 24, 2018 the Company signed a definitive agreement
for the sale of its (indirectly) 100% stake in a Greek subsidiary
(on an "as is" basis) for a total gross amount of EUR 1.05 million
(out of which EUR 0.3 million has already been received as advance
payments during 2017). The total net proceeds to the Company,
following the deduction of working capital adjustments in
accordance with the balance sheet of the SPV and transaction costs,
were circa EUR 0.66 million.
As a result of the transaction, an amount EUR 1.05 million is
recorded in Revenue from disposal of trading properties and amount
of circa EUR 2.28 million is recorded in Cost of trading properties
sold. In addition, as a result of sale on "as is" basis, the
Company reversed tax liability previously recorded in the financial
statements resulted in tax benefit of EUR 1.015 million (refer also
to Note 9).
e. Update on disposal of land plot in Miercurea Ciuc, Romania:
Further to the Company's announcement dated October 17, 2018
regarding signing the pre-agreement for the sale of land plot in
Mercuria Ciuc, Romania, the Company grant an option for the
purchase of the Plot till mid-April 2019 for a total consideration
of EUR 0.11 million. The Company has received EUR 95,000 in 2018,
and received an additional EUR 15,000 in 2019 (non-refundable
payments). In March 2019, following negotiations with the
purchaser, the parties agreed that (i) the signing date of a
definitive agreement will be postponed by 3 months to mid-July
2019, (ii) the receipt of non-refundable advance payments of EUR
250,000 in two tranches by the end of April 2019, and; (ii) the
sale price will be increased by EUR 30,000. To the extent that the
Company will enter into a definitive agreement and consummates the
transaction, the Company expects to receive EUR 1.47 million
(including non-refundable advanced payments).
f. Belgrade Plaza
On January 26, 2017, the Company signed a binding share purchase
agreement with BIG Shopping Centers Ltd ("BIG"), for the sale of
the SPV holding Belgrade Plaza shopping and entertainment center.
The final agreed value of Belgrade Plaza, which comprise circa
32,300 sqm of GLA, will be calculated based on a general cap rate
of 8.25% as well as the sustainable NOI after 12 months of
operation, which the Company estimated in the range of EUR 6.2-6.5
million per annum.
Further installments will be due to the Company during the first
year of operation based on this 12-month figure. The NOI will be
re-examined again after 24 months and 36 months of operation, which
may lead to an upward adjustment of the final purchase price. The
Company did not record a gain from expected future purchase price
adjustments at the sale date.
During June 2018 (the first adjustment date) the First purchase
price adjustment was examined and accordingly no additional proceed
was made.
During December 2018, BIG paid to the Company EUR 466,000 for
the stands and signage recorded as Revenue from disposal of trading
property. In addition, BIG further informed the Company that they
intend to hold an additional EUR 1 million until an orderly
engineering examination of the mall's technical conditions is
completed as part of the final Price adjustment to be performed in
May 2020. The Company is currently evaluating its options regarding
BIG's intention to hold the EUR 1 million which was not recorded in
the consolidated financial statements due to uncertainty related to
receipt of such amount.
NOTE 5: - TRADING PROPERTIES (Cont.)
g. Disposal of land plot in Krusevac, Serbia
On December 3, 2018 the Company announced that it completed the
sale of its (indirectly) 100% stake in a 5-acre plot in Krusevac,
Serbia, for a total consideration of approximately EUR 290
thousands which is slightly below book value.
(4) Casa Radio:
(a) General:
In 2006 the Company entered into an agreement according to which
it acquired 75% interest in a company ("Project SPV") which is
under a PPP agreement with the Government of Romania to develop the
Casa radio site in the center of 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 a third party private investor
(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 (37 years remaining at the end of the
reporting period). 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, financed by
loans given to the Project SPV by the Company were performed on the
construction site until 2010, when current construction and
development was put on hold due to lack of progress in the
renegotiation of the PPP agreement with the Authorities, as
discussed in subsection (c) below, and the global financial crisis.
These circumstances (and mainly the bureaucratic deadlock with the
Romanian Authorities to deal with the issues specified below)
caused the Project SPV not to meet the development timeline of the
Project, as specified in the PPP. However, management believes that
it had legitimate reasons for the delays in this timeline, as
discussed in subsection (c) 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 December 13, 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:
Following the Court decision with respect to the PUZ, 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 building
permit. The building permits have not been obtained.
NOTE 5: - TRADING PROPERTIES (Cont.)
However, due to substantial differences between the approved PUD
and stipulations in the PPP agreement as well as changes in the EU
directives concerning environmental considerations in buildings
used by public authorities the Project SPV attempted to renegotiate
the future development of the Project with the Romanian Authorities
on items such as time table, structure and milestones as well as
adaptation of the PAB development to the current EU requirements.
Despite many notifications sent to the Romanian Authorities
expressing a wish to renegotiate the existing PPP agreement no
major breakthrough could be achieved. The Company can be subject to
significant delay penalties under the terms of the PPP agreement if
it is determined that the Company was at fault in causing the
delays.
Because of the failure of the public authorities to cooperate,
negotiate and adjust the PPP agreement, the Project SPV was not
able to meet its obligations under the PPP. This resulted in a
situation where the Project SPV could not "de facto" continue the
execution of the Project and created a risk that the public
authorities could attempt to terminate the PPP agreement. In the
event that the public authorities seek to terminate the PPP
Agreement and/or seek to impose penalties, the Company may incur
penalties and/or recover less than the carrying amount of the Casa
radio asset recorded in the consolidated financial statements as at
year end (EUR 25 million). As of the date of approval of these
consolidated financial statements the Project SPV did not receive
any termination notification by the public authorities.
The Company believes that although there is no formal obligation
for the Romanian Authorities to renegotiate the PPP agreement, such
obligation is implicitly provided
for the situation when significant unexpected circumstances
arise and that the unresponsiveness of the authorities is a
violation of the general undertaking to support the Project SPV in
the execution of the Project as agreed in the PPP agreement.
The Company believes that the risk that the public authorities
may seek to terminate the PPP and/or relevant permits on the basis
of the perceived breach of the Company's commitments and/or may
seek to impose delay penalties on the basis of the PPP contract is
unlikely given the public authorities have not sought to do such
since the perceived breach in 2012 and given the Company believes
that it has basis for counter claims against the relevant public
authorities.
In the case of termination for breach under the PPP agreement
the relationship and compensation between the parties is to be
decided by a competent court of arbitrations. Management believe
that, in the case of termination, the Company has a strong case to
claim compensation for damages.
Since 2016 management has taken a number of steps in order to
unblock the development of the project and mitigate the risk of
termination of the PPP agreement, including commencing a process to
identify third party investors willing and capable to join the
Group for the development of the project and/or potential buyers
for the Project. Management believes that reputable investors with
considerable financial strength can enhance negotiation position
vis-Ã -vis the public authorities and assist in advancing an
amicable agreement with the relevant authorities with respect to
the development of the project. As a result of its ongoing efforts,
a non-binding LOI for the sale of its holdings was signed after the
balance sheet date. (refer to section (f)).
Management considers the risk of termination of the PPP
agreement and/or the imposition of penalties by the authorities to
be unlikely and the consolidated financial statements do not
include any provision in respect to any potential future
NOTE 5:- TRADING PROPERTIES (Cont.)
penalties in respect to the breach of the PPP agreement.
(d) Co-operation with the Romanian Authorities regarding potential irregularities
In 2015, the Board and Management became 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 appointed the chairman of the Audit Committee to
investigate the matters and independent law firms to analyze the
available alternatives in this respect. The chairman of the Audit
Committee did not conclude the investigation as the person with key
information was not available to answer questions. The Board, among
other steps, implemented a specific policy in order to prevent the
reoccurrence of similar issues and appointed the chairman of the
audit committee to monitor the policy's implementation by the
Company's management. In addition, it was decided that in the
future certain agreements will be brought to the Board's approval
prior to signing.
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 initial findings in March
2016 to the Romanian Authorities. The Company, during this process
has been verbally informed by the Romanian Authorities that it has
received immunity from certain potential criminal charges and
received further verbal assurance that the mentioned investigation
should have no effect on the Company's existing legal rights to the
Project and the PPP Agreement. As the investigation by the Romanian
Authorities is still on-going, the Company in unable
to comment further on any details related to this matter.
Management is currently unable to estimate any monetary sanctions
in respect to the potential irregularities, consequently no
provision has been recorded in connection with these matters.
(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 statement of financial
position includes a provision in the amount of EUR 14.1 million in
respect of the construction of the PAB (December 31, 2017: EUR 12.8
million).
During 2018, the Company recorded loss in total amount of EUR
1.2 million from change in PAB provision as part of write down of
trading properties (in 2017 income - EUR 0.4 million).
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) On February 11, 2019 the Company signed a non-binding Letter
of Intent ("LOI") with AFI Europe N.V. (the "Purchaser", and
together with the Company, the "Parties"), for the sale of its
entire indirect shareholdings (75%) in the Casa Radio Project, for
a maximum consideration of EUR 60 million, subject to the
fulfilment of certain conditions.
NOTE 5:- TRADING PROPERTIES (Cont.)
Following the execution of the LOI, the Purchaser shall have a
period of 3 months to
conduct due diligence investigations (with the aim of concluding
the due diligence investigations before April 19, 2019), after
which, if satisfactory, a pre-sale agreement will be executed
within 30 days following the conclusion of the due diligence
investigations. (the "Pre-Sale Agreement").
In the framework of the Pre-Sale Agreement, the Purchaser will
pay the Company a non-refundable down payment. 15 months following
the execution of the Pre-Sale Agreement, and subject to the
satisfactory fulfillment of certain conditions precedent, the
Parties will sign a sale agreement.
The consummation of the Transaction is subject to the
fulfillment of certain conditions ("the closing conditions"),
including, inter alia: (i) certain confirmations and approvals of
competent public authorities regarding the PPP agreement in place
and acceptance of the Purchaser; (ii) the successful conclusion by
the Purchaser of its due diligence investigations; (iii) obtaining
the approval of the Romanian authorities for the updated structure
of the Project and timetable; (iv) confirmation that the 49-year
lease period under the PPP agreement (signed between the Romanian
Authorities and the Company) will commence from 2012 at the
earliest, although, should the said lease period commence earlier,
the parties shall amicably negotiate a price adjustment mechanism
to the Purchaser's satisfaction and approval; and (v) the execution
of definitive agreements.
During the period commencing on the date of the execution of the
LOI and ending on the earlier of: (i) 18 month, or (ii) the
Purchaser informs the Company of his withdrawal from the
Transaction, the Company and its representatives have undertaken to
refrain from negotiating with any other third party other than the
Purchaser for the purpose of selling its shareholdings in the
Project.
The payment schedule according to the LOI is expected to be set
as follows:
Non-refundable down payment EUR 200,000
Execution of Sale Agreement
(following fulfillment of the
conditions precedent) EUR 20,000,000
-------------------------------
Issuance of Building Permit
for Phase 1 (the construction
of the shopping mall, offices/residential,
Hotel& Casino, Supermarket
and parking). EUR 22,000,000
-------------------------------
Finalization and inauguration
of Phase 1 EUR 17,800,000
-------------------------------
The Company is not obligated to participate in the financing of
the Project. In addition, the Purchaser acknowledged the liability
to build the public authority building under the PPP agreement.
As of the date hereof, there can be no certainty that either the
Pre-Sale Agreement, or the Sale Agreement will be executed and/or
that the Transaction will be consummated as presented above or at
all.
NOTE 5:- TRADING PROPERTIES (Cont.)
(5) 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, 2018, amounted to EUR
184.7 million or 79.5% percent of outstanding trading properties
original cost (December 31, 2017 - EUR 171.8 million or 70% 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, 2018, 91.8% of the value of trading properties was
based on valuations done by the independent third-party valuation
service (2017 - 91.3%).
In 2017 the trading property Casa Radio was valued using the
Residual technique which set a value of EUR 50 million. Prior to
the signing of the LOI, the Company had obtained an updated
appraisal as of December 31, 2018 based on the same technique which
reflected a value of EUR 43 million.
Following several years of efforts to promote the development of
the project either by bringing a partner or through the sale of the
Company's holdings, a number of serious proposals were received
during the course of 2018 from serious and experienced real estate
investors which were examined by management and the board. The
management and the board of directors came to the conclusion that
the proposed price and terms of LOI are optimal and reasonable
considering the Company's current status and decided to sign a LOI
with AFI Europe.
Following signing of LOI as described in Note 5(4)(f), the
Company measured the net realizable value of the project based on
the signed LOI .For this purpose, a valuation was performed through
an external appraiser whose opinion does not reflect the risk
related to uncertainty in respect of fulfilment of the closing
conditions, as described in Note 5(4)(f) and derived to a value of
EUR 37.7 million. As a result, the Company's management assumed
additional discount of 33.3% in order to reflect this uncertainty
which resulted in value of the proposed deal of EUR 25 million.
Accordingly, since the value based on the Residual technique is
higher than estimated value of the proposed deal, as of December
31, 2018, the Company recorded Casa Radio project at its net
realizable value in the amount of EUR 25 million (trading property
is presented at gross basis in the amount of EUR 39.1 million and
provision for PAB liability in the amount of EUR 14.1 million).
NOTE 5:- TRADING PROPERTIES (Cont.)
Following parameters have been considered to arrive at the net
realizable value of the property:
7.25% Prime Yield - the prime real
estate yield as a basis for the
computation of the discount rate
since this risk reflects investors'
sentiment regarding the country
risk as well as liquidity/industry
risk; and
0.38% Submarket risk - based on
relevant transactions recently
closed but as well as considering
current market sentiment, the respective
prime yield was adjusted, for each
asset class planned to be developed
on the site
The overall estimated transaction
yield is resulting from the weighted
average, for each asset class,
between the expected GLA and its
Asset risk 7.63% respective transaction yield.
The assessment assumed that all
authorizations will be obtained
Approval therefore no risk was considered
risk 0.00% in this respect.
Project 1.75% Considering the legal specificities
risk of the transaction (PPP legal framework),
the potential delays in obtaining
all authorizations/approvals as
well as the potential findings
during the due diligence phase,
a component of construction risk
as well inherent to a development
project - it was assumed an overall
project risk of 1.75%
Counterparty 5.00% Considering the macroeconomic instability,
risk the end of the ECB's quantitative
easing, the recent widening spread,
the forecasted interest rate growth
as well as local financing conditions,
an estimated of 5% counterparty
risk for this transaction.
Discount
rate 14.38%
============== ======= ===========================================
The following table provides sensitivity analysis on net
realizable value of the property, based on additional discount
implemented by the management:
Discount rate
12.88% 13.38% 13.88% 14.38% 14.88% 15.38% 15.88% 16.38%
Potential
discount 0.00% 39.4 38.8 38.2 37.7 37.2 36.7 36.2 35.7
10.00% 35.5 34.9 34.4 33.9 33.5 33.0 32.6 32.1
20.00% 31.5 31.0 30.6 30.2 29.8 29.4 29.0 28.6
33.33% 26.3 25.9 25.5 25.1 24.8 24.5 24.1 23.8
40.00% 23.6 23.3 22.9 22.6 22.3 22.0 21.7 21.4
50.00% 19.7 19.4 19.1 18.9 18.6 18.4 18.1 17.9
Trading property in India owned by joint controlled entity were
valued using comparable method (refer to Note 6).
All trading properties carrying amounts equal their net
realizable values.
The Company reviews annually (and in certain cases during the
year), the valuation methodologies utilized by the independent
third-party valuator service for each property.
NOTE 5:- TRADING PROPERTIES (Cont.)
The main features included in each valuation are:
(1) 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 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 between the 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, contiguous 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.
NOTE 5:- TRADING PROPERTIES (Cont.)
(6) Below is a summary table for main projects status:
Carrying Carrying
amount amount
Holding December December
Purchase Rate Nature of Plot Size 31, 2018 31, 2017
Project Location year (%) rights Permit status (sqm) (MEUR) (MEUR)
Ownership/
Lodz Perpetual Planning permit
residential Poland 2001 100 usufruct valid 4,000 sold 0.4
--------- ---------- -------- ----------- ----------------- ------------ ----------- ------------
Perpetual Planning permit
Lodz plaza Poland 2009 100 usufruct pending 61,500 1.96 3.9
--------- ---------- -------- ----------- ----------------- ------------ ----------- ------------
Remained
Lease Detailed Urban
period 37 Plan ("PUD") 467,000 GBA
Casa radio Romania 2007 75 years valid (*) (**)39.1 (**) 63.2
--------- ---------- -------- ----------- ----------------- ------------ ----------- ------------
Miercurea No valid permit
Ciuc (Building Permit
Plaza Romania 2007 100 Ownership expired) 36,500 1.0 1.0
--------- ---------- -------- ----------- ----------------- ------------ ----------- ------------
Piraeus
Plaza Greece 2002 100 Ownership - 15,000 sold 3.3
--------- ---------- -------- ----------- ----------------- ------------ ----------- ------------
Brasov Plot (2017-
Other plots,
grouped) (***) 0.55 1.7
-------- ----------- ----------------- ------------ ----------- ------------
Total 42.6 73.5
----------- ------------
(*) Gross Building area (sqm)
(**) Represents gross value including commitment for PAB
construction, which is presented as non-current provision in amount
of EUR 14.09 million as of December 31, 2018 (EUR 12.85 million as
of December 31,2017).
(***) An indirectly subsidiary of Plaza Centers, holding Brasov
plot in Romania, granted to that previous financing bank of the
project the right to purchase the property under conditions of an
option pact for 3 years starting December 6, 2016 for an amount of
EUR 1.1 million free of encumbrances.
NOTE 6:- EQUITY ACCOUNTED INVESTEES
a. The Group has the following interest (directly and
indirectly) in the below joint ventures.
Interest of holding
(percentage)
as at December
31,
---------------------
Company name Country Activity 2018 2017
----------------------- -------- ------------- ---------- ---------
Elbit Plaza India Real Mixed-use
Estate Holdings Ltd. large-scale
("EPI") (*) Cyprus projects 47.5% 47.5%
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 Elbit
and the Company, the holders of the remaining 95% each account for
50% of the results of EPI.
The movement in equity accounted investees (in aggregation) was
as follows:
2018 2017
------- -------
Balance as at 1 January 19,530 30,160
Distribution received from equity-accounted
investees, net (3) (2,499) (1,441)
Share in results of equity-accounted
investees, net of tax (1) 1,443 (7,177)
Effect of movements in exchange rates (798) (1,697)
Dissolving of Equity accounted investee - (315)
Balance as at 31 December (2) 17,676 19,530
======= =======
(1) Breakdown of the Group's share of increase (write-downs) of
trading properties projects held by equity accounted investees is
as follows:
Year ended
December 31
--------------
Project name (holding company
name) 2018 2017
----- -------
Bangalore (held by EPI) (*) 1,623 (4,408)
Chennai (held by EPI) (*) - (988)
1,623 (5,396)
===== =======
(*) Refer to the below paragraphs b(1) and b(2) regarding the properties' write downs.
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
(2) 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.
(3) Repayment of loan granted to the Company by EPI from
proceeds received from the Partner in Bangalore property. See b (1)
below.
b. Material joint ventures:
The summarized financial information of the material joint
venture EPI (due to holding of major schemes in Bangalore and
Chennai) is as follows:
2018 2017
-------- -------
Current assets (*) 1,956 2,794
Trading properties-non current 46,390 45,060
Other current liabilities (12,994) (8,794)
Net assets (100%) 35,352 39,060
Group share of net asset (50%) (**) 17,676 19,530
Carrying amount of interest in joint
venture 17,676 19,530
======== =======
(*) Including cash and cash equivalents in the amount of EUR
1,812 thousand (2017 - EUR 2,592 thousands);
(**) Refer to remark on EPI holding rate in section a above.
2018 2017
----- --------
Increase (write-downs) of trading properties 3,246 (10,792)
Other income (expenses) (360) (3,562)
Total net profit (loss) and comprehensive
income (100%) 2,886 (14,354)
Group share of Profit (loss) and comprehensive
income (50%) 1,443 (7,177)
Total results from investees 1,443 (7,177)
===== ========
(1) Bangalore:
In March, 2008 EPI entered into a share subscription and
framework agreement (the "Agreement"), with a third-party local
developer (the "Partner"), and a wholly owned Indian subsidiary of
EPI which was designated for this purpose ("SPV"), to acquire
together with the Partner, through the SPV, up to 440 acres of land
in Bangalore, India (the "Project") in certain phases as set forth
in the Agreement. As of December 31, 2018, the Partner has
surrendered sale deeds to the SPV for approximately 54 acres (the
"Plot"). In addition, under the Agreement the Partner has also been
granted with 10% undivided interest in the Plot and have also
signed a Joint Development Agreement with the SPV in respect of the
Plot.
On December 2, 2015 EPI has signed an agreement to sell 100% of
its interest in the SPV to the Partner (the "Sale Agreement"). The
total consideration upon completion of the transaction was INR 321
crores (approximately EUR 40.2 million) which should have been paid
no later than September 30, 2016 (" Long Stop Date"). On November
15, 2016, the Partner informed EPI that it will not be able to
execute the advance payments.
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
As a result of the foregoing, the Company has received from the
escrow agent the sale deeds in respect of additional 8.7 acres (the
"Additional Property") which has been mortgaged by the Partner in
favor of the SPV in order to secure the completion of the
transaction on the Long Stop Date. The Additional Property has not
yet been registered in favor of the SPV. In addition, as per the
Sale Agreement, the Company took actions in order to get full
separation from the Partner with respect to the Plot and
specifically the execution of the sale deed with respect of the 10%
undivided interest, all as agreed in the Sale Agreement.
As a result of the failure of the Partner to complete the
transaction under the Sale Agreement and in accordance with the
provisions thereto, EPI has 100% control over the SPV and the
partner is no longer entitled to receive the 50% shareholding.
New payment structure for sale of Project in Bangalore,
India:
In June 2017, EPI signed a revised sale agreement with the
former partner (the "Purchaser").
The Purchaser and EPI have agreed that the purchase price will
be amended to INR 338 Crores (approximately Euro 42.4 million)
instead of the INR 321 Crores (approximately Euro 40.2 million)
agreed in the previous agreement. As part of the agreement, INR 110
Crores (approximately Euro 13.8 million) were supposed to be paid
by the Purchaser in instalments until the Final Closing. The Final
Closing was scheduled on September 1, 2018, when the final
instalment of INR 228 Crores (approximately Euro 29.8 million) were
supposed to be paid to EPI.
In January 2018, the Purchaser has notified EPI that due to a
proposed zoning change (initiated by the Indian authorities) which
could potentially impact the development of the land, all remaining
payments under the Agreement will be stopped until a mutually
acceptable solution is reached on this matter. EPI has rejected the
Purchaser's claims, having no relevance to the existing Agreement,
and started to evaluate its legal options. INR 46 Crores
(approximately EUR 6.06 million) were paid till March 2018.
In March 2018, the Company signed an amended revised agreement
as follows: The Purchaser and EPI have agreed that the total
purchase price shall be increased to INR 350 Crores (approximately
EUR 44.5 million). The Final Closing will take place on 31 August
2019 when the final installment of circa INR 212 Crores
(approximately EUR 26.9 million) will be paid to EPI against the
transfer of the outstanding share capital of the SPV.
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
If the Purchaser defaults before the Final Closing, EPI is
entitled to forfeit all amounts paid by now by the Purchaser as
stipulated in the revised agreement. All other existing securities
granted to EPI under the previous agreements will remain in place
until the Final Closing.
On February 4, 2019 Plaza announced that the Purchaser defaults
on payments and that EPI is considering all legal measures
available to it to protect its interest.
During March 2019, Plaza announced that the Purchaser has
further paid to EPI INR 9.25 cores (approximately EUR 1.15
million), thereby having paid INR 80 crores ( approximately EUR
10.26 million) as against approximately INR 92 crores (EUR 11.8
million) that was supposed to be paid by end of February 2019. The
Parties continue to discuss regarding getting further payments.
Plaza part from the consideration is 50%.
Environmental update on Bangalore project - India:
On May 4, 2016, the National Green Tribunal ("NGT"), an Indian
governmental tribunal established for dealing with cases relating
to the environment, passed general directions with respect to areas
that should be treated as "no construction zones" due to its
proximity to water reservoirs and water drains ("Order"). The
restrictions in respect of the "no construction zone" are
applicable to all construction projects.
The government of Karnataka had been directed to incorporate the
above conditions in respect of all construction projects in the
city of Bangalore including the Company's project which is adjacent
to the Varthur Lake and have several storm-water crossing it.
An appeal was filed before the Supreme Court of India against
the Order. On March 2019, the Supreme Court has set aside the Order
thereby restoring the position as it existed before the Order was
passed by NGT.
Net realizable value measurement of Bangalore project
As for December 31, 2018 and 2017 the Group measured the net
realizable value of the project. The net realizable value of the
project is INR 235 crores (EUR 29.5 million); 2017 - INR 209.1
crores (EUR 27.4).
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
The plot in Bangalore is still in land stage and therefore the
value of the plot has been derived using land comparable method.
The valuation of the property reflects the interest that the
partner still holds in the plot (10% as described above), the size
of the plot and the non-contiguous land parcel. The local
authorities have proposed a revised master plan for Bangalore under
which it is proposed to change certain regulations pertaining to
zoning of the plot which if given effect might adversely affect the
development prospects on the plot. The Company being aggrieved by
the proposed change was entitled to and has filed the necessary
objections with the concerned authorities and believes that the
current zoning regulations will be maintained. Management believes
that the current discount rate used towards this end is an
appropriate estimation in the current circumstances.
The following main parameters have been considered to arrive at
the land value of the subject property by land sale comparison
method:
Parameter Premium (Discount)
Applicable land value (INR Mn/acre) 96
---------------------
Discount on account of Revised Master
Plan 2015 Buffer zone norms (%) -25%
-------------------
Presence of minority shareholder -20%
-------------------
Discount on account of possible
change in zoning (open space/parks) -25%
-------------------
(2) 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 74.73 acres of land situated in the Sipcot Hi-Tech
Park in Siruseri District in Chennai ("Property").
On September 16, 2015, EPI has obtained a backstop commitment
from the Local Partner for the purchase of its 80% shareholding in
the Chennai SPV by January 15, 2016, for a net consideration of
approximately INR 161.7 Crores (EUR 21.1 million). Since the Local
Partner had breached its commitment, EPI exercised its rights and
acquired the Local Partner's 20% holdings in the Chennai Project
SPV. Accordingly, as of the balance sheet date EPI has 100% of the
equity and voting rights in the Chennai Project SPV.
During 2016, Chennai Project SPV has signed a Joint Development
Agreement with a local developer ("Developer" and "JDA",
respectively) with respect to the Property.
Under the terms of the JDA, the Chennai Project SPV granted the
property development rights to the Developer" who shall bear full
responsibility for all of the project costs and liabilities, as
well as for the marketing of the scheme. The JDA also stipulates
specific project milestones, timelines and minimum sale prices.
The JDA may be terminated in the event that the required
governmental approvals for establishment of access road to the
Property has not been achieved within 12
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
(twelve) months period from the execution date of the JDA. The
required approvals have not yet been obtained at the target date.
Upon such termination, the Developer shall be entitled to the
refund of the relevant amounts paid as Refundable Deposit and any
other cost related to such access road or the title over the
Property.
On July 5, 2018 EPI signed a term sheet ("Term Sheet") with the
Developer for the sale of the Property for a total consideration of
approximately Euro 13.2 million (INR 1,060 million). The closing of
the transaction was expected in February 2019. As the transaction
was not completed the Term Sheet was terminated by EPI.
In February 2019 the Chennai Project SPV issued notice to
Developer terminating the JDA due to its failure to obtain the
access road. The said termination of JDA has been disputed by the
Developer. Therefore, the Chennai Project SPV has initiated
arbitration proceeding against the Developer in accordance with the
Arbitration Rules of the Singapore International Arbitration
Centre, in accordance with the JDA Agreement to protect its
rights.
Net realizable value measurement of Chennai project
The valuation of the property is based on the comparable method.
As for December 31, 2018 and 2017 the Group measured the net
realizable value of the project which was INR 1,351 million (EUR
16.93 million);
The following main parameters have been considered to arrive at
the land value of the subject property:
Parameter Premium (Discount)
Applicable Land Value INR million/acre 18.08
------------------------------------------
Discount for shape and contiguity -20%
------------------------------------------
Additional cost to be incurred
at the site due to illegal excavation -5%
------------------------------------------
Total discount on account -58%
------------------------------------------
NOTE 7:- OTHER LIABILITIES
December 31,
--------------
2018 2017
------ ------
Prepayments (*) 202 325
Government institutions and fees - 106
Salaries and related expenses 8 62
Accrued expenses 290 359
Tax liability (refer to Note 5(3)(d)) - 1,015
Other - 11
------ ------
Total 500 1,878
====== ======
(*) Including EUR 107 thousand payable due to refundable deposit
received regarding the sale of plot in Lodz, Poland and EUR 95
thousand prepayments in regard to plot sale in Miercurea Ciuc
Plaza, Romania (In 2017 - EUR 300 thousand prepayments in regards
to plot sale in Greece.
NOTE 8:- BONDS
a. Composition:
Carrying
amounts
Effective Contractual Principal as at
interest interest final Adjusted December
rate (*) rate maturity par value 31 2018
--------- ----------- --------- ---------- ---------
Series A Bonds 11.58% CPI+6% 2020 33,209 31,767
Series B Bonds 13.83% CPI+6.9% 2020 47,260 44,931
80,469 76,698
========== =========
b. Mandatory repayments subsequent to the reporting date (without early repayments):
2019 51,488
2020 28,981
80,469
======
(*) Revised effective interest rate - refer to Note 2(u)(2)
regarding the effect of the initial adoption of IFRS 9 on effective
interest rate.
(1) Pursuant to the Company's Restructuring Plan, the Company
will assign 78% of the net proceeds received from the sale or
refinancing of any of its assets as early repayment.
(2) Approved amendment to an early prepayment term under the Restructuring
The Company has implemented the restructuring plan that was
approved by the Dutch court on July 9, 2014 (the "Restructuring
Plan").
NOTE 8:- BONDS (Cont.)
Under the Restructuring Plan, principal payments under the bonds
issued by the Company and originally due in the years 2013 to 2015
were deferred for a period of four and a half years, and principal
payments originally due in 2016 and 2017 were deferred for a period
of one year.
The Restructuring Plan further provided that, if the Company
does not prepay an aggregate amount of at least NIS 434 million
(EUR 107.3 million) on the principal of the bonds on or before
December 1, 2016 (the "Early Prepayment"), the principal payments
due under the Extended Repayment Schedule will be advanced by one
year (the "Accelerated Repayment Schedule").
On November 29, 2016, the Company's bondholders approved a
postponement of the Early Prepayment date by up to four months and
the reduction of the total amount of the required Early Prepayments
to at least NIS 382 million (EUR 94.5 million) (a reduction of 12%
on the original amount).
In addition, the Company agreed to pay to its bondholders, on
March 31, 2018, a one-time consent fee in the amount of
approximately EUR 238 thousand (which is equal to 0.25% from the
Company's outstanding debt under the bonds at that time) (the
"Consent Fee"). The consent Fee shall be paid to the Company's
bondholders on a pro rata basis.
During first three months 2017, the Company paid to its
bondholders a total amount of NIS 191.7 million (EUR 49.2 million)
as an early redemption. Upon such payments, the Company complied
with the Early Prepayment Term (early redemption at the total sum
of at least NIS 382,000,000) and thus obtained a deferral of one
year for the remaining contractual obligations of the bonds.
In addition to the above, the following terms were approved by
the bondholders:
(a) Casa radio proceeds - If the Company shall sell the Casa
radio project located in Romania (hereinafter: the "Project") to a
third party, including by way of selling its holdings in any of the
entities through which the Company holds the project (and said sale
shall be carried out before the full repayment of the bonds and
until no later than December 31, 2019, and for an amount which
exceeds EUR 45 million net (i.e. after brokerage fees (if any),
taxes, fees, levies or any other obligatory payment due to any
authority in respect to the said sale) which shall actually be
received by the Company, then the holders of bonds shall be
eligible for a one-time payment (which shall come in addition to
the principal and interest payments in accordance with the
repayment schedule), in certain amounts specified in tranches.
(b) Registering of Polish bonds for trade - the Company has
committed to undertake best efforts to admit the Polish bonds for
trading on the Warsaw Stock Exchanges and proceeding in this
respect are ongoing.
(c) Deferred debt ratio of Series B bonds - were reduced to
68.24% from 70.44% following the cancellation of the treasury
bonds. The ratio has been changed for Series B bonds in order to
maintain a distribution ratio between the three series.
NOTE 8: - BONDS (Cont.)
(c) Settlement agreement with Bondholders of Israeli Series of Bonds
On September 26, 2017 the Company announced that, further to the
resolutions of the Israeli series A bondholders and the series B
bondholders in connection with future bondholder repayments (i.e.,
repayments to series A bondholders, to series B bondholders and to
the Polish bondholders), the Company intends to repay a total
amount of circa EUR18,800,000, during October 2017, an amount which
represents 75% of the funds Plaza has received in the last quarter
from sale of real estate assets, as determined in the restructuring
plan ("Mandatory Repayment Amount") to be allocated as follows:
-- To the Polish bondholders: 8.33% of the Mandatory Repayment
Amount - as per the ratio determined in the restructuring plan.
-- To the Israeli series A bondholders: 21.23% of the Mandatory
Repayment Amount - as per the ratio determined in the restructuring
plan.
-- To the Israeli series B bondholders: 31.16% of the Mandatory
Repayment Amount - the proportional amount that corresponds to the
ratio between the outstanding debts of the two Israeli series of
bonds.
The Company intended to deposit the reminder of the funds with a
third-party trustee for the benefit of both Israeli series of bonds
and subsequently approached the competent court in Israel for the
receipt of instructions with regard to the allocation of such
reminder amount.
On October 4, 2017 the Company has received the consent of the
trustees of its Israeli series A bonds and series B bonds for the
allocation of certain funds received by the Company between the
Company's series A bonds and series B bonds due for repayment of
such bonds as detailed above.
During December 2017, the Israeli court has instructed that the
mandatory repayment amounts due to the Israeli series A and series
B bondholders should be allocated according to the ratios set out
in the Company's restructuring plan. The court has also
acknowledged that Plaza is not an interested party in this
bondholder dispute and has granted the Company a protective order
from any claims in this respect. The Israeli Series A bondholders
triggered the immediate repayment of the entire outstanding debt
under the Series A trust deed.
2018
In January 2018, a settlement agreement was signed by and among
the Company and the two Israeli Series of Bonds ("Settlement
Agreement"). In the Settlement Agreement it was agreed, inter alia,
to approve:
-- New repayment ratios between the two Israeli Series of Bonds
(new ratio: Bond A- 39% Bond B- 61%);
-- An increase in the level of the mandatory early repayments
from 75% to 78% of the relevant net income;
-- New repayment schedule;
NOTE 8: - BONDS (Cont.)
-- An increase in the compensation to be paid to the Bondholders
in the event of successful disposal of Casa Radio Project;
-- A waiver of claims to the Company and its directors and officers; and
-- To waive the request for publication of quarterly financial reports by the Company.
As a result of settlement agreement signing, Series A
Bondholders withdraw their request for immediate repayment.
It is clarified that the Settlement Agreement is a separate
agreement among the parties thereto with respect to the Company's
restructuring plan, and as such has no effect on the Polish
Bondholders.
On January 31, 2018 the Company paid the bondholders a total
amount of principal and interest of EUR 38,487 thousand.
(1) The net cash flow received by the Company following an exit
or raising new financial indebtedness (except if taken for the
purpose of purchase, investment or development of real estate
asset) or refinancing of real estate assets after the full
repayment of the asset's related debt that was realized or in
respect of a 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
78% 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.
(2) On November 22, 2018 the Company announced based on its
current forecasts, the Company expected to pay the accrued interest
on Series A and Series B Bonds on December 31, 2018, in accordance
with the repayment schedule determined in the Company's
Restructuring Plan and Settlement Agreement with Series A and
Series B Bondholders from 11 January 2018 (the "Settlement
Agreement"). The Company noted that it will not meet its principal
repayment due on December 31, 2018 as provided for in the
Settlement Agreement. The Company may be able to partially pay the
said principal depending, among other things, on the actual sale of
assets and taking into consideration the cash needs in accordance
with the scope of the forecasted activity.
In January 2019 Plaza announced that based on its current
forecasts, the Company expects to repay on February 18, 2019
approximately EUR 400,000 to its Series A and Series B. The Company
further intends to act for the postponement of the repayment of the
remaining balance of the Bonds, all in coordination with the
trustee of the Bonds and subject to the receipt of the Bondholders'
approval as required by the relevant deeds of trust. The
bondholders approved the deferral of payment to July 1, 2019 and
the company paid principal of circa EUR 250,000 and Penalty
interest on arrears of EUR 150,000.
NOTE 8: - BONDS (Cont.)
d. Covenants:
The bonds' covenants are detailed in Note 16(b).
In respect of the Coverage Ratio Covenant ("CRC"), as defined in
the restructuring plan, as at December 31, 2018 the CRC was 98.48%,
in comparison with 118% minimum ratio required. As a result of
covenants breach, the Company classified its bonds in the total
amount of EUR 76,698 thousand as current liabilities in the
financial statements as of 31 December 2018.
e. Credit rating:
In January 2018, Standard & Poor's Maalot, the Israeli
credit rating agency which is a division of International Standard
& Poor's has discontinued tracking Plaza's rating at the
Company's request.
f. Redemption at Maturity of Series of Bonds issued in Poland
On May 16, 2018 further to the decision of the Israeli Series A
and Series B Bondholders, the Company has redeemed in full the
series of bonds issued in Poland at their principal amount together
with interest accrued to the maturity date. Upon completion of the
redemption, the Company has no outstanding bonds issued in
Poland.
NOTE 9:- INCOME TAXES
a. Deferred taxes recognized are attributable to the following items:
Recognized
December in Profit December
31, or loss 31,
Assets/(liabilities)
2018 2017 2018 2018
---------------------------- -------- ---------- --------
Bonds (1,561) 618 (943)
Tax value of carry-forwards
loss recognized (*) 1,561 (618) 943
Deferred tax asset
(liability), net - - -
======== ========== ========
Recognized
December in Profit December
31, or loss Out of 31,
Assets/(liabilities) Consolidation
2017 2016 2017 2017
---------------------------- -------- ---------- ------------- --------
Property, equipment
and other assets (116) 55 61 -
Bonds (2,024) 463 - (1,561)
Tax value of carry-forwards
loss recognized (*) 2,024 (463) - 1,561
-------------
Deferred tax asset
(liability), net (116) 55 61 -
======== ========== ============= ========
(*) Due to tax losses created at the Company level.
NOTE 9:- INCOME TAXES (Cont.)
b. Unrecognized deferred tax assets
Deferred tax assets have not been recognized in respect of tax
losses in a total amount of EUR
111,669 thousand (2017: EUR 111,043 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, 2018, the expiry date status of tax losses
to be carried forward is as follows:
Total tax
losses carried After
forward 2019 2020 2021 2022 2023 2023
--------------- ----- ----- ------ ------ ------ ------
115,439 5,271 9,339 13,165 25,385 18,568 43,710
Tax losses are mainly generated from operations in the
Netherlands. Tax settlements may be subject 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.
c. Amounts recognized in profit or loss:
Year ended
December 31
--------------
2018 2017
----- -------
Adjustment in respect of previous years
taxes (refer to Note 5(3)(d)) 1,013 (1,056)
Origination and reversal of time differences - 55
----- -------
Total 1,013 (1,001)
===== =======
d. Reconciliation of effective tax rate:
2018 2017
-------- --------
Dutch statutory income tax rate 25% 25%
-------- --------
Loss from continuing operations before
income taxes (39,378) (25,562)
Tax benefit at the Dutch statutory income
tax rate (9,844) (6,390)
Recognition of previously unrecognized
tax losses 5 (229)
Effect of tax rates in foreign jurisdictions 3,043 862
Adjustment in respect of previous years
taxes (1,015) 1,056
Current year tax loss and other timing
differences for which no deferred taxes
are created (1) 5,622 3,070
Non-deductible expenses (exempt income) 1,176 2,632
Tax Expense (Tax Benefit) (1,013) 1,001
======== ========
(1) 2018 and 2017 - Mainly due to write-down of trading property
not recognized for tax purposes.
NOTE 9:- INCOME TAXES (Cont.)
e. 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. The Dutch participation exemption gives a full exemption from
corporation tax applies to benefits such as dividends and capital
gains derived from a qualifying participation. The participation
exemption generally applies if the parent Company holds at least 5
percent of the shares in the participation. The requirements to
meet the participation exemption are as follows:
1. The parent Company has an interest of at least 5 percent in the participation; and
2. At least one of the following three tests is met:
a) The parent Company's objective with respect to its
participation is to obtain a return that is higher than a return
that may be expected from normal active asset management ("Motive
Test"); or
b) The participation is subject to a "reasonable taxation" according to Dutch tax standards ("Subject-to-Tax Test"); or
c) The direct and indirect assets of the participation generally
consist of less than 50 percent of 'low taxed free passive
investments' ("Asset Test").
NOTE 10:- EQUITY
December 31,
----------------------
2018 2017
---------- ----------
Remarks Number of shares
-------- ----------------------
Authorized ordinary shares of par
value EUR 1 each 10,000,000 10,000,000
========== ==========
Issued and fully paid 6,855,603 6,855,603
========== ==========
Share based payment reserve
Share based payment reserve is in respect of Employee Share
Option Plans ("ESOP") in the total amount of EUR 35,376 thousand as
of December 31, 2018 (2017 - EUR 35,376 thousand).
Translation reserve
The translation reserve comprises, as of December 31, 2018, all
foreign currency differences arising from the translation of the
financial statements of foreign operations 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 Bonds (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.
NOTE 10:- EQUITY (Cont.)
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 11:- EARNINGS PER SHARE
The calculation of basic earnings per share ("EPS") at December
31, 2018 was based on the loss attributable to ordinary
shareholders of EUR 38,365 thousand (2017: loss of EUR 26,563
thousand) and a weighted average number of ordinary shares
outstanding of 6,856 thousand (2017: 6,856 thousand).
Weighted average number of ordinary shares:
In thousands of shares with a EUR 1 par
value December 31,
--------------
2018 2017
------ ------
Issued ordinary shares at 1 January 6,856 6,856
------ ------
Weighted average number of ordinary shares
at 31 December 6,856 6,856
====== ======
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 1 par
value December 31,
--------------
2018 2017
------ ------
Weighted average number of ordinary shares
(basic) 6,856 6,856
Effect of share options on issue - -
------ ------
Weighted average number of ordinary shares
(diluted) at 31 December 6,856 6,856
====== ======
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 12:- EMPLOYEE SHARE OPTION PLAN
On October 26, 2006 the Company's Board of Directors approved
the grant of up to 338,345 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 200. Exercise of the options is subject to the
following mechanism:
NOTE 12:- EMPLOYEE SHARE OPTION PLAN (Cont.)
Contractual
Number life of options
Grant date / employees entitled of options (1)
------------------------------------------- ----------- ----------------
ESOP No.1(3)
Option grant to key management at October
27, 2006 132,180 15 years
Option grant to employees at October 15 years
27, 2006 18,585
-----------
Total granted in 2006 150,765 15 years
-----------
Total granted in 2007 (2) 10,161 15 years
Total granted in 2008 (2) 7,638 15 years
Total granted in 2009 (2) 3,916 15 years
Total granted in 2011(2) 1,200 15 years
ESOP No.2(3)
Total granted in 2011 (2) 44,790 10 years
Total granted in 2012 (2) 8,600 10 years
Total granted in 2013 (2) 8,450 10 years
-----------
Total share options Granted 235,520
-----------
(1) Following the 4(th) 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 - 1,000 share
options; 2008 - 2,600 share options; 2009 - 733 share options;
2011- 32,250 share options (ESOP No. 2); 2012 - 4,500 share
options; 2013 - 1,500 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 324, the opening price shall be set at
GBP 324 (Except 2(nd) 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 Weighted
average average
exercise Number exercise Number
price (*) of options price of options
---------- ----------- --------- -----------
2018 2017
----------------------- ----------------------
GBP GBP
---------- ---------
Outstanding at the beginning
of the year 43 235,520 43 235,520
Forfeited during the period
- back to pool (**) - -
Outstanding at the end of
the year 43 235,520 43 235,520
----------- -----------
Exercisable at the end of
the year 235,520 235,520
=========== ===========
(*) The options outstanding at 31 December 2018 have an exercise
price in the range of GBP 28 to GBP 54 (app. EUR 31.3 - EUR 60.4),
and have weighted average remaining contractual life of tree
years.
NOTE 12:- EMPLOYEE SHARE OPTION PLAN (Cont.)
(**) The total accumulated share-based payment costs due to
options exercise and forfeiture were 13,319 thousand as of December
31, 2018 and December 31, 2017.
The maximum number of shares issuable upon exercise of all
outstanding options as of the end of the reporting period is
357,774. The estimated fair value of the services received were
measured based on a binomial lattice model.
During 2018 and 2017 there were no employee costs for the share
options granted.
NOTE 13:- ADMINISTRATIVE EXPENSES
Year ended
December 31
--------------
2018 2017
------ ------
Salaries and related expenses 1,092 2,870
Professional services 1,258 2,644
Offices and office rent 130 199
Travelling and accommodation 54 160
Depreciation and amortization 1 14
Others 187 259
------ ------
Total 2,722 6,146
====== ======
NOTE 14:- OTHER INCOME AND OTHER EXPENSES
Year ended
December 31
--------------
2018 2017
------ ------
Other income (1) 254 757
------ ------
Total other income 254 757
====== ======
Other expenses 329 657
Total other expenses 329 657
====== ======
(1) 2018 - Including EUR 225 thousand due to a settlement
agreement with the buyer of Kragujevac shopping centre regarding
refund of claim from the city of Kragujevac.
2017 - Including EUR 460 thousand following the sale of an
office building in Budapest.
NOTE 15: - FINANCE INCOME AND FINANCE COSTS
Year ended
December 31
------------------
2018 2017
-------- --------
Recognized in profit or loss
Interest income on bank deposits - 22
Interest from loans to related parties 24 221
Other finance income 64 334
Foreign currency gain other 148 -
Foreign currency gain on bonds 3,411 -
-------- --------
Finance income 3,647 577
-------- --------
Interest expense on bonds (9,436) (8,627)
Interest expense on bank loans - (1,339)
Foreign currency losses on bonds - (1,186)
Foreign currency losses other (1,870) -
Other finance expenses - (44)
Finance costs (11,306) (11,196)
-------- --------
Net finance costs (7,659) (10,619)
======== ========
NOTE 16: - 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.
NOTE 16: - FINANCIAL INSTRUMENTS (Cont.)
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 had a credit policy in place and the exposure to
credit risk is monitored on an ongoing basis.
Cash and deposits and other financial assets
The Group limits its exposure to credit risk in respect to cash
and deposits, 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).
Liquidity risk
The following are the contractual maturities of financial
liabilities, including estimated interest payments and excluding
the impact of netting agreements:
December 31, 2018
6 months
Carrying Contractual or less 6-12 More than
amount cash flows (*) Months 1-2years 2-5 years 5 years
-------- ----------- -------- ------- -------- --------- ---------
Non-derivative
financial liabilities
Bonds issued
(*) 76,698 84,505 (51,067) (3,515) (29,923) - -
Trade and other
payables 60 (60) (60) - - - -
Related parties 3 (3) (3) - - - -
-------- ----------- -------- ------- -------- --------- ---------
76,761 (84,568) (51,130) (3,515) (29,923)
- -
======== =========== ======== ======= ======== ========= =========
(*) Refer to Note 8.
December 31, 2017
6 months 6-12
Carrying Contractual or less Months More than
amount cash flows (*) (**) 1-2years 2-5 years 5 years
-------- ----------- -------- -------- -------- --------- ---------
Non-derivative
financial liabilities
Secured bank
loans - - - - - - -
Bonds issued
(*) 116,914 (133,322) (37,153) (25,725) (70,444) - -
Trade and other
payables 190 (190) (190) - - - -
Related parties 87 (87) (87) - - - -
-------- ----------- -------- -------- -------- --------- ---------
117,191 (133,599) (37,430) (25,725) (70,444) - -
======== =========== ======== ======== ======== ========= =========
(*) Refer to Note 8.
NOTE 16: - 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
(Bonds issued in Israel) that are denominated in NIS.
The Company ceased the using of currency options effective
October 2015 in order to avoid liquidity risk. The Company can
carry out hedging transactions occasionally using derivatives
subject to limitation set by the Board.
The following exchange rate of EUR/NIS applied during the
year:
Reporting date
----------------
Average rate Spot rate
-------------- ----------------
EUR 2018 2017 2018 2017
------ ------ ------- -------
NIS 1 0.235 0.246 0.233 0.241
NIS denominated bonds - A change of 5 percent in EUR/NIS rates
at the reporting date would have increase profit by EUR 3.65
million or increase loss by EUR 3.83 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 (including inflation):
The Group's interest rate risk arises mainly from Bonds issued
at fixed interest rate expose the Group to changes in fair value,
if the interest is changing. As the Israeli inflation risk is
diminishing to a level that management believes is acceptable
(Israeli CPI 2018 - 0.8%; 2017 - 0.4%) and due to liquidity
constraints, the Company has stopped using hedging of CPI in recent
years.
Sensitivity analysis - effect of changes in Israeli CPI on
carrying amount of NIS bonds
A change of 3 percent in Israeli Consumer Price Index ("CPI") at
the reporting date (and in 2017) 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 Carrying amount CPI increase CPI
December 31, of bonds effect decrease effect
------------------- --------------- ------------ ----------------
2018 76,698 (2,300) 2,300
2017 111,796 (3,354) 3,354
NOTE 16: - FINANCIAL INSTRUMENTS (Cont.)
Profile
As of the reporting date the interest rate profile of the
Group's interest-bearing financial instruments was:
Carrying amount
-------------------
2018 2017
-------- ---------
Fixed rate instruments
Bonds (76,698) (116,914)
Other financial liabilities - Loan
from EPI (315) -
Shareholders' equity management:
Refer to Note 13 in respect of shareholders equity components in
the restructuring plan including dividend policy. 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.
Fair values:
The table below is a comparison between the carrying amount and
fair value of the Company's financial instruments that are
presented in the financial statements not at fair value:
Carrying amount Fair value(*)
----------------- ---------------
2018 2017 2018 2017
-------- ------- ------- ------
Bonds at amortized cost
- Polish bonds - 5,119 - 4,022
Bonds A at amortized
cost - Israeli bonds 31,767 45,963 9,388 30,493
Bonds B at amortized
cost - Israeli bonds 44,931 65,832 14,365 49,536
(*) The fair value is based on Level 1 in fair value hierarchy,
and measured based on market quote.
Management believes that the carrying amount of cash, trade
receivables and trade payables approximate their fair value to the
short-term maturities of these instruments.
NOTE 17:- CONTINGENT LIABILITIES AND COMMITMENTS
a. Contingent liabilities and commitments to related parties:
1. The Company entered into an indemnity agreement with all of
the Company's directors and 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.
2. The Company maintains Directors' and Officers' liability
cover, presently at the maximum amount of USD 60 million for a term
of 18 months commencing on 1 November 1, 2017. 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 8), the Group has taken the following commitments and
collaterals towards the creditors:
a) Restrictions on issuance of additional bonds - The Company
undertakes not to issue any additional bonds other than as
expressly provided for in the Restructuring Plan.
b) Restrictions on amendments to the terms of the bonds- The
Company shall not be entitled to amend the terms of the bonds, 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 bonds issued by the Company by ordinary majority
Refer to Note 11 for recent amendments.
c) Coverage Ratio Covenant ("CRC") - the CRC is a fraction
calculated based on known Group valuation reports and consolidated
financial information available at each reporting period. The CRC
to be complied with by the Group is 118% ("Minimum CRC") in each
reporting period. For December 31, 2018 the calculated CRC is
98.48% (also refer to Note 8(d) regarding breach of covenant). 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 investment 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.
NOTE 17:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
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 bonds terms, and the
Bondholders shall be entitled to declare that all or a part of
their respective (remaining) claims become immediately due and
payable.
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 bondholders 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 not maintained as of December 31, 2018.
e) Negative Pledge on REA of the Company - The Company
undertakes that until the bonds have 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 bonds 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-pledge as of December 31, 2018.
(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.
NOTE 17:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
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 a 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 bonds debt (as of November 30, 2014) have been
repaid in full, except in any of the following events:
(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.
(ii) At least 75% of the net cash flow resulting from the
incurrence of new FI is used for a 75% early prepayment of the
bonds. 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 - The Company's ability to pay
dividend is limited unless certain conditions as described in note
18 are met.
i) 75% mandatory early repayment - Refer to note 11 and to other
sections in this note regarding changes in crease of repayment to
78%.
2. General commitments and warranties in respect of trading property disposals:
In the framework of the transactions for the sale of the Group's
real estate assets, the Group has provided indemnities which are
customary for such transactions to the respective purchasers.
Such indemnifications are limited in time and amount. No
indemnifications were exercised against the Group till the date of
the statement of financial position. The Company's management
estimates that no significant costs will be borne thereby,in
respect of these indemnifications.
3. 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.
NOTE 17:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
In case Tesco leaves the mall before expiration of lease period
the Company will be liable to repay the remaining consideration in
amount of EUR 1.77 million as of balance sheet date, unless the
buyer finds another tenant that will pay higher annual lease
payment than Tesco. The management does not expect to bear a
material loss.
4. 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
material outflow of resources to settle them is remote, and
therefore no provision or disclosure is required.
5. Certain issues with respect to an agreement from 2011:
The Company became made aware that commission paid to an agent
in connection with the disposal of the US portfolio in 2012 may
have benefited a former director of the Company, and it is probable
therefore that those arrangements should have been classified as a
related party transaction under the Listing Rules. At the time of
the disposal, it appears that the Company was not aware that there
was any potential related party interest with respect to the
commission arrangements. The Company was discussing this matter
with its Sponsor and the UKLA and were seeking appropriate advice
as to whether any retrospective disclosures or other actions may be
required under the Listing Rules.
In order to address this matter, Plaza's Board has appointed, on
April 25, 2017, the chairman of the audit committee Mr. David
Dekel, to investigate and examine the issues raised as part of a
joint committee together with a special committee formed for the
purpose by EI, and with the joint committee's external legal
advisors. The internal committees have concluded their examination
of these matters and submitted their recommendations to the
Company's board of directors. The Company's board of directors
fully adopted the committee's recommendations, and is working to
implement them. Please also see Note 5(4)(d) in this respect, with
respect to Elbit's settlement with the SEC.
Elbit, the Company's former parent company, announced in March
2016 that it appointed a special committee to examine these matters
as they may contain potential violation of the requirements of the
U.S. Foreign Corrupt Practices Act (FCPA), including the books and
records provisions of the FCPA, and that it has approached and is
co-operating fully with the US Securities and Exchange Commission
(SEC).
Following discussions with the SEC regarding the potential
violation of the requirements of the FCPA, Elbit submitted an Offer
of Settlement ("Offer"). Solely
for the purpose of the proceedings brought by or on behalf of
the SEC and without admitting or denying the findings in the Offer,
Elbit consented to the entry of an order containing the SEC's
findings.
The SEC has determined to accept the Offer and ordered that: (i)
Elbit cease and desist from committing or causing any violations
and any future violations of Sections 13(b)(2)(A) and 13(b)(2)(B)
of the Exchange Act; and (ii) Elbit shall pay a civil money penalty
in the amount of $500,000 to the SEC for transfer to the general
fund of the United States Treasury, subject to Exchange Act Section
21F(g)(3).
NOTE 17:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
In determining to accept the Offer, the SEC considered remedial
acts that Elbit promptly undertook, its self-reporting, and its
cooperation afforded to the SEC staff, including having conducted a
thorough internal investigation, voluntarily providing detailed
reports to the staff, fully responding to the staff's requests for
additional information in a timely manner, and providing
translations of certain documents.
Since 2012, Plaza has made significant changes to update and
strengthen its financial controls and corporate governance in order
to address the issues identified by SEC and to prevent any
recurrence. In addition, a review was ongoing, as announced on 21
November 2017, with regard to one of the payments referred to by
the SEC made in 2012 and which should have been treated as a
related party transaction under the Listing Rules.
Following the review concluded in 2018 by the Financial Conduct
Authority (FCA), no retrospective disclosures or other actions are
required under the FCA's Listing Rules in relation to this
matter.
6. Motion to reveal and review internal documents:
In March 2018, a Shareholder of the Company has filed a motion
with the Financial Department of the District Court in Tel-Aviv to
reveal and review internal documents of the Company and of Elbit
Imaging Ltd., with respect to the events surrounding that certain
agreements that were signed in connection with the Casa Radio
Project in Romania and the sale of the US portfolio. Such events
were previously announced by the Company and are detailed in notes
5(4)(d)and 17(5) of these annual financial statements. In July
2018, the Company has filed a response to the relevant court. On
January 13, 2019, a Court hearing was held following which the
judge decided that the board of directors of each of the two
companies will examine the relevant facts and the allegations
raised by the plaintiff and decide whether or not they should file
a law suit against any of its officers. The two companies will
submit their conclusion to both the court and the plaintiff (not
later than May 12, 2019) and afterwards the plaintiff will notify
the court weather or not he wishes to continue with the Motion.
7. Request to reveal documents:
An indirect subsidiary of the Group in Romania (which holds plot
of land outside Bucharest) received a request from Romanian
authorities to reveal documents regarding the years in 2007-2011 as
part of an ongoing investigation procedures. The company is unaware
of the subject of investigation and any illegal acts or
irregularities which may cause investigation initiated. The company
has submitted all relevant documents in respect of the said
years.
NOTE 18:- 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.
During the year, Group entities had the following trading
transactions with related parties that are not members of the
Group:
Year ended
December 31,
--------------
2018 2017
------ ------
Income
Interest on balances with EI 24 47
Costs and expenses
Recharges - EI 33.4 23.6
Compensation to key management personnel
(2) 196 615
Performance linked benefits - management 6 302
Compensation to board members (1), (2) 321 370
Lease agreement for office in Bucharest - 13
The amounts disclosed in the table are the amounts recognised as
an expense during the reporting period related to key management
personnel.
(1) 2018 - three board members; 2017 - four board members (out
of which one non-executive director resigned in September).
(2) There was no change in the number of Company share options
granted to key personnel in 2018. There are no other benefits
granted to directors.
As of December 31, 2018, the Company identified York Capital
Management Global Advisors, LLC ("York") and Davidson Kempner
Capital Management LLC ("DK") among 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 18.94% of the outstanding shares of EI,
and also has a direct holding of 3.43% 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.
York is holding, as of December 31, 2018, 2.97% out of the total
Israeli bonds' series B debt of the Company. Interest paid on Bonds
held by York at year-end were circa EUR 0.05 million.
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 failed 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.
NOTE 18:- RELATED PARTY TRANSACTIONS (Cont.)
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 favor of the Company),
following which EI was obliged to repay the Reimbursement amount in
few instalments until mid-2018. As a result of the agreement
reached, the Company recorded a gain of EUR 4.6 million in 2015. EI
has repaid the reimbursement amount of EUR 1.55 million in 2018 and
an amount of circa EUR 0.226 million is recorded as other
receivables from tax authorities. The parties are negotiating the
expected payment.
NOTE 19:- EVENTS AFTER THE REPORTING PERIOD
a. Pre-Agreement for the sale of a Plot of Land in Brasov, Romania
On February 5, 2019 the Company signed a Pre-Agreement for the
sale of a plot in Brasov, Romania for a total gross amount of EUR
620,000. The consummation of the Transaction (which will take place
not later than January 15, 2020) is subject to the fulfilment of
certain conditions, including, inter alia:
(i) the former financing bank of the Project did not exercise
its right to purchase the Property until December 6, 2019; (ii)
successful conclusion by the potential purchaser of its due
diligence investigations; and (iii) the execution of definitive
agreement.
During the period commencing on the date of the execution of the
Pre-Agreement and ending on the earlier of: (i) January 15, 2020,
or (ii) the date of the termination of the Pre-Agreement, the
Company and its representatives have undertaken to refrain from
negotiating with any other third party other than the Purchaser
(and other than the bank as mentioned above) for the purpose of
selling its Plot of land.
As of the date hereof, there can be no certainty that a
definitive agreement will be signed and/or that the Transaction
will be consummated.
b. Update regarding the transaction for the sale of Plot in Chennai and Bangalore in India
Please refer to Note 6.
c. Non-binding agreement for the sale of the Company's indirect
shareholdings in the Dambovita Center Project ("CASA RADIO")
Please refer to Note 5.
NOTE 20:- LIST OF GROUP ENTITIES
As of December 31, 2018, the Company owns the following
companies (all are 100% held subsidiaries at the end of the
reporting period presented unless otherwise indicated):
Activity Remarks
---------------------------------------- ------------------ --------------------------------
Hungary
---------------------------------------- ------------------ --------------------------------
Directly wholly owned
---------------------------------------- ------------------ --------------------------------
HOM Ingatlanfejlesztesi és Management company
Vezetesi Kft.
---------------------------------------- ------------------ --------------------------------
Plaza Centers Establishment Holding company
B.V.
---------------------------------------- ------------------ --------------------------------
Szombathely 2002 Ingatlanhasznosito Inactive
es Vagyonkezelo Kft.
---------------------------------------- ------------------ --------------------------------
Tatabanya Plaza Ingatlanfejlesztesi Inactive
Kft.
---------------------------------------- ------------------ --------------------------------
Plasi Invest 2007 kft. Inactive
---------------------------------------- ------------------ --------------------------------
Indirectly or jointly owned
---------------------------------------- ------------------ --------------------------------
Kerepesi 5 Irodaepulet Ingatlanfejleszto Holder of land 100% held by Plaza Centers
Kft. usage rights Establishment B.V.
Arena Plaza Extension project
- October 2017 concluded
an agreement on the termination
of land use rights
---------------------------------------- ------------------ --------------------------------
Poland
---------------------------------------- ------------------ --------------------------------
Directly wholly owned
---------------------------------------- ------------------ --------------------------------
Lodz Centrum Plaza Sp. z o.o. Owns plot of Lodz (Residential) project
land
---------------------------------------- ------------------ --------------------------------
Wloclawek Plaza Sp. z o.o. Mixed-use project Lodz Plaza project
---------------------------------------- ------------------ --------------------------------
O2 Fitness Club Sp. z o.o. Inactive O2 Fitness Club project;
Company under liquidation
in 2018
---------------------------------------- ------------------ --------------------------------
Kielce Plaza Sp. z o.o. Inactive Kielce Plaza project- Sold
June 2017;
Company under liquidation
in 2018
---------------------------------------- ------------------ --------------------------------
Leszno Plaza Sp. z o.o. Inactive Leszno Plaza project - Sold
July 2017;
Company under liquidation
in 2018
---------------------------------------- ------------------ --------------------------------
EDMC Sp. z o.o. Inactive Company under liquidation
in 2018
---------------------------------------- ------------------ --------------------------------
Plaza Centers (Poland) Sp. Management company Company under liquidation
z o.o. in 2018
---------------------------------------- ------------------ --------------------------------
Szczecin Plaza Sp. z o.o. Inactive
---------------------------------------- ------------------ --------------------------------
Wloclawek Plaza Sp. z o.o. Inactive Company under liquidation
SKA (previously Legnica Plaza in 2018
Spolka z ograniczona odpowiedzialnoscia
1 S.K.A.)
---------------------------------------- ------------------ --------------------------------
Indirectly or jointly owned
---------------------------------------- ------------------ --------------------------------
EDP 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
---------------------------------------- ------------------ --------------------------------
Hokus Pokus Rozrywka Sp. z Inactive 50% held by Plaza Centers
o.o. N.V.
50% held by P.L.A.Z.A B.V.
---------------------------------------- ------------------ --------------------------------
Fantasy Park Suwalki Sp. z Inactive 100% held by Mulan B.V.;
o.o. w likwidacji Company under liquidation
---------------------------------------- ------------------ --------------------------------
Fantasy Park Torun Sp. z o.o. Inactive 100% held by Mulan B.V.;
w likwidacji Company under liquidation
---------------------------------------- ------------------ --------------------------------
Fantasy Park Zgorzelec Sp. Inactive 100% held by Mulan B.V.;
z o.o. w likwidacji Company under liquidation
---------------------------------------- ------------------ --------------------------------
Fantasy Park Poznań Sp. Inactive 100% held by Mulan B.V.;
z o.o. w upad ości likwidacyjnej Company under liquidation
---------------------------------------- ------------------ --------------------------------
Fantasy Park Kraków Sp. Inactive 100% held by Mulan B.V.;
z o.o. Company under liquidation
---------------------------------------- ------------------ --------------------------------
NOTE 20:- LIST OF GROUP ENTITIES (Cont.)
Activity Remarks
--------------------------------- ------------------ ----------------------------------
Latvia
--------------------------------- ------------------ --------------------------------
Indirectly or jointly owned
--------------------------------- ------------------ --------------------------------
Diksna SIA Operating shopping Equity accounted investee,50%
center - Sold held by Plaza Centers N.V.;
2016 50% held by JV partner Riga
Plaza project.
--------------------------------- ------------------ --------------------------------
Romania
--------------------------------- ------------------ --------------------------------
Directly wholly owned
--------------------------------- ------------------ --------------------------------
S.C. North Gate Plaza S.R.L. Shopping center Csiki Plaza (Miercurea Ciuc)
project project
--------------------------------- ------------------ --------------------------------
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 95% held by Plaza Bas B.V.
project 5% held by Plaza Centers
Management B.V.
Valley View project
--------------------------------- ------------------ --------------------------------
Serbia
--------------------------------- ------------------ --------------------------------
Directly wholly owned
--------------------------------- ------------------ --------------------------------
Plaza Centers (Estates) B.V. Inactive
--------------------------------- ------------------ --------------------------------
Plaza Centers Management D.O.O. Management company
--------------------------------- ------------------ --------------------------------
Plaza Centers Holding B.V. Inactive
--------------------------------- ------------------ --------------------------------
Plaza Centers (Ventures) B.V. Inactive
--------------------------------- ------------------ --------------------------------
Czech Republic
--------------------------------- ------------------ --------------------------------
Directly wholly owned
--------------------------------- ------------------ --------------------------------
Plaza Centers Czech Republic Inactive
S.R.O.
--------------------------------- ------------------ --------------------------------
Bulgaria
--------------------------------- ------------------ --------------------------------
Directly wholly owned
--------------------------------- ------------------ --------------------------------
Shumen Plaza EOOD Inactive Shumen Plaza project - Sold
03/2017;
Company under liquidations
in 2018
--------------------------------- ------------------ --------------------------------
Plaza Centers Management Bulgaria Management company Company under liquidations
EOOD in 2018
--------------------------------- ------------------ --------------------------------
Plaza Centers Development Inactive Company under liquidations
EOOD in 2018
--------------------------------- ------------------ --------------------------------
Cyprus - Ukraine
--------------------------------- ------------------ --------------------------------
Directly wholly owned
--------------------------------- ------------------ --------------------------------
Tanoli Enterprises Ltd. Inactive
--------------------------------- ------------------ --------------------------------
PC Ukraine Holdings Ltd. Inactive
--------------------------------- ------------------ --------------------------------
Plaza Centers Ukraine Ltd. Inactive 100% held by PC Ukraine Holdings
Ltd.
--------------------------------- ------------------ --------------------------------
NOTE 20:- LIST OF GROUP ENTITIES (Cont.)
Activity Remarks
----------------------------- -------------------- ----------------------------------
The Netherlands
----------------------------- ------------------ ----------------------------------
Directly wholly owned
----------------------------- ------------------ ----------------------------------
Plaza Dambovita Complex Holding company
B.V.
----------------------------- ------------------ ----------------------------------
Plaza Centers Enterprises Finance company 100% held by Plaza Dambovita
B.V. Complex B.V.
----------------------------- ------------------ ----------------------------------
Mulan B.V. (Fantasy Park Holding company Holds Fantasy Park subsidiaries
Enterprises B.V.) in CEE
----------------------------- ------------------ ----------------------------------
P.L.A.Z.A B.V. Inactive 100% held by Mulan B.V.
----------------------------- ------------------ ----------------------------------
Plaza Centers Management Holding company
B.V.
----------------------------- ------------------ ----------------------------------
Dambovita Centers Holding Holding company 100% held by Plaza Centers N.V.
B.V.
----------------------------- ------------------ ----------------------------------
Plaza Bas B.V. Holding company 50.1% held by Plaza Centers
N.V.
----------------------------- ------------------ ----------------------------------
Plaza Cenetrs Establishment
B.V.
----------------------------- ------------------ ----------------------------------
Plaza Centers (Estates) Holding company
B.V.
----------------------------- ------------------ ----------------------------------
Cyprus - India
----------------------------- ------------------ ----------------------------------
Directly wholly owned
----------------------------- ------------------ ----------------------------------
PC India Holdings Public Holding company
Company Ltd.
----------------------------- ------------------ ----------------------------------
Indirectly or jointly
owned
----------------------------- ------------------ ----------------------------------
HOM India Management Services Management company 99.99% held by PC India Holdings
Pvt. Ltd. Public Company Ltd.
----------------------------- ------------------ ----------------------------------
Elbit Plaza India Real Holding company Equity accounted investee
Estate Holdings Ltd. 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 Management company 99.99% held by Polyvendo Ltd.
Services Pvt. Ltd.
----------------------------- ------------------ ----------------------------------
Vilmadoro Ltd. Holding company 100% held by Elbit Plaza India
Real Estate Holdings Ltd.
----------------------------- ------------------ ----------------------------------
Kadavanthra Builders Pvt. Mixed-use project 100% held by Elbit Plaza India
Ltd. Real Estate Holdings Ltd.
Chennai (SipCot) project
----------------------------- ------------------ ----------------------------------
Aayas Trade Services Pvt. Mixed-use project 99.9% held by Elbit Plaza India
Ltd. Real Estate Holdings Ltd.
Bangalore project
----------------------------- ------------------ ----------------------------------
NOTE 20:- LIST OF GROUP ENTITIES (Cont.)
Entities disposed or dissolved in 2017 and 2018
------------------------------------------------------------------------------------------------------------
Activity Remarks
--------------------------------- ------------------ ----------------------------------------------
Hungary
--------------------------------- ------------------ --------------------------------------------------
Plaza House Ingatlanfejelsztesi Office building David House - Sold 02/2017
Kft.
--------------------------------- ------------------ --------------------------------------------------
POLAND
--------------------------------- ------------------ --------------------------------------------------
Bytom Plaza Sp. z Inactive Company dissolved in 2018
o.o. w likwidacji
--------------------------------- ---------------------- --------------------------------------------
Gdansk Centrum Plaza Inactive Company dissolved in 2018
Sp. z o.o. w likwidacji
--------------------------------- ---------------------- --------------------------------------------
Gorzow Wielkopolski Inactive Company dissolved in 2018
Plaza Sp. z o.o. w
likwidacji
--------------------------------- ---------------------- --------------------------------------------
Jelenia Gora Plaza Inactive Company dissolved in 2018
Sp. z o.o. w likwidacji
--------------------------------- ---------------------- --------------------------------------------
Katowice Plaza Sp. Inactive Company dissolved in 2018
z o.o. w likwidacji
--------------------------------- ---------------------- --------------------------------------------
P ock Plaza Sp. z Inactive Company dissolved in 2018
o.o. w likwidacji
--------------------------------- ---------------------- --------------------------------------------
Olsztyn Plaza Sp. Inactive Company dissolved in 2018
z o.o. w likwidacji
--------------------------------- ---------------------- --------------------------------------------
Radom Plaza Sp.z.o.o. Inactive Company dissolved in 2018
--------------------------------- ---------------------- --------------------------------------------
Torun Centrum Plaza Inactive 100% held by Plaza Centers Administrations
Sp. z o.o.w likwidacji B.V.; Company under liquidation
--------------------------------- ---------------------- --------------------------------------------
Suwalki Plaza Sp. Operating shopping 100% held by Plaza Centers Polish
z o.o. center Operations B.V.
Suwalki Plaza project - Sold 01/2017
--------------------------------- ---------------------- --------------------------------------------
Legnica Plaza - Sp. General Partner General Partner of Legnica Plaza
z o.o. Spolka z ograniczona odpowiedzialnoscia
S.K.A and Legnica Plaza Spolka z
ograniczona odpowiedzialnoscia 1
S.K.A - Sold 10/2017
--------------------------------- ------------------ --------------------------------------------------
Legnica Plaza Spolka Operating shopping 100% held by Bydgoszcz Plaza Sp.
z ograniczona odpowiedzialnoscia center z o.o.
S.K.A. Torun Plaza project - Sold 10/2017
--------------------------------- ------------------ --------------------------------------------------
Bydgoszcz Plaza Sp. Holding company 100% held by Plaza Centers Polish
z o.o. Operations B.V. - Sold 10/2017
--------------------------------- ------------------ --------------------------------------------------
Fantasy Park Bytom Inactive 100% held by Mulan B.V.;
Sp. z o.o. w likwidacji Company under liquidation
--------------------------------- ------------------ --------------------------------------------------
Fantasy Park Poland Inactive Liquidated 01/2017
Sp. z o.o.
--------------------------------- ------------------ --------------------------------------------------
Romania
--------------------------------- ------------------ --------------------------------------------------
S.C Plaza Centers Inactive Liquidated in 2018
Management Romania
s.r.l
--------------------------------- ------------------ --------------------------------------------------
S.C. Elite Plaza S.R.L. Shopping center Timisoara Plaza project - sold August
project 2017; Company dissolved
--------------------------------- ------------------ --------------------------------------------------
S.C. North Eastern Shopping center Constanta Plaza project - sold August
Plaza S.R.L. project 2017; Company dissolved
--------------------------------- ------------------ --------------------------------------------------
S.C. Palazzo Ducale Inactive Company dissolved
S.R.L.
--------------------------------- ------------------ --------------------------------------------------
Serbia
--------------------------------- ------------------ --------------------------------------------------
Accent D.O.O. Inactive Company dissolved
--------------------------------- ------------------ --------------------------------------------------
Leisure Group D.O.O. Shopping center 100% held by Plaza Centers (Estates)
project B.V.
Belgrade Plaza (Visnjicka) project
- Sold 02/2017
--------------------------------- ------------------ --------------------------------------------------
United States of America
--------------------------------- -------------------- --------------------------------------------
Indirectly or jointly
owned
--------------------------------- -------------------- --------------------------------------------
Elbit Plaza USA II Holding company Equity accounted investee: 50% held
LP (EPUS II) 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)
--------------------------------- -------------------- --------------------------------------------
Greece
--------------------------------- ------------------ --------------------------------------------------
Helios Plaza S.A. Shopping center Piraes Plaza - Sold 12/2018
project
--------------------------------- ------------------ --------------------------------------------------
CYPRUS-INDIA
--------------------------------- ------------------ --------------------------------------------------
Permindo Ltd. Holding company 100% held by PC India Holdings Public
Company Ltd.
--------------------------------- ------------------ --------------------------------------------------
THE NETHERLANDS
--------------------------------- ------------------ --------------------------------------------------
Plaza Centers Polish Holding company Company dissolved in 2018
Operations B.V.
--------------------------------- ------------------ --------------------------------------------------
Plaza Centers administrations Inactive Company dissolved in 2018
b.v.
--------------------------------- ------------------ --------------------------------------------------
Plaza Centers Connections Inactive Company dissolved in 2018
B.V.
--------------------------------- ------------------ --------------------------------------------------
Plaza Centers Engagements Inactive Company dissolved in 2018
B.V.
--------------------------------- ------------------ --------------------------------------------------
Plaza Centers Foundations Inactive Company dissolved in 2018
B.V.
--------------------------------- ------------------ --------------------------------------------------
Plaza Centers Logistic Inactive Company dissolved in 2018
B.V.
--------------------------------- ------------------ --------------------------------------------------
S.S.S. Project Management Inactive Company dissolved in 2018
B.V.
--------------------------------- ------------------ --------------------------------------------------
Obuda B.V Inactive Company dissolved in 2018
--------------------------------- ------------------ --------------------------------------------------
Plaza Centers Holding Inactive Company dissolved in 2018
B.V.
--------------------------------- ------------------ --------------------------------------------------
Plaza Centers Investments Inactive Company dissolved in 2018
B.V.
--------------------------------- ------------------ --------------------------------------------------
Plaza Centers (Ventures) Inactive Company dissolved in 2018
B.V.
--------------------------------- ------------------ --------------------------------------------------
- - - - - - - - - - - - - - - - - - -
F:W2000w200060252262M18E$12-PLAZA CENTERS.docx
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(END) Dow Jones Newswires
March 21, 2019 03:14 ET (07:14 GMT)
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