TIDMARO
RNS Number : 7899N
Arricano Real Estate PLC
12 September 2013
12 September 2013
Arricano Real Estate plc
("Arricano" or the "Company" or, together with its subsidiaries,
the "Group")
First day of dealings on AIM
Placing raising gross proceeds of US$24 million
Acquisition for development property portfolio
Market capitalisation at placing price of approximately US$241
million
Arricano (AIM:ARO), one of the leading real estate developers in
Ukraine specialising in operating shopping centres, is pleased to
announce the admission today of its ordinary shares to trading on
the AIM market of the London Stock Exchange and the commencement of
dealings in its Ordinary Shares under the ticker ARO.L.
As part of the admission process, the Company raised gross
proceeds of US$24 millionthrough private placing of 10,300,423 new
Ordinary Shares, at a placing price of US$2.33 per Ordinary Share
(the "Placing Price").
In addition, the Company has acquired four development
properties, through the purchase of shares in the SPVs that own
them, in consideration for the issue of 28,350,214 Ordinary Shares
(with a value of approximately US$66 million at the Placing Price)
and, in relation ot one property, deferred consideration of not
more than US$20 million in cash. In addition, the vendor has agreed
to assign the benefit of certain loans made to the SPVs to
Arricano.
On Admission, the Company will have a market capitalisation of
approximately US$241 million at the Placing Price.
Overview:
-- Arricano is one of the leading real estate developers in
Ukraine and specialises in operating shopping centres. The Group
has a strong management team, which consists of local as well as
international experts with long standing track records in real
estate.
-- Arricano's key strengths are:
o Strong market position with a modern, flexible and diversified
portfolio;
o The Company's ability to secure debt financing;
o Strategic and geographically diverse network of shopping
centres;
o Established network of core international and domestic
tenants;
o Experienced management team;
o Strong corporate governance; and
o Strong relationships in the real estate sector.
-- The Group currently owns and operates (or, in the case of Sky
Mall, has an interest in) five shopping centres in Ukraine with
approximately 160,000 sq. m GLA. The properties are located in the
capital Kyiv (Sky Mall and M26/RayON), Kryvyi Rih (SEC Sun
Gallery), Zaporizhzhia (SC City Mall) and Simferopol (SC South
Gallery).
-- All of these properties were developed and put into operation
by the Group and, with the exception of the Sky Mall property that
is co-owned with a joint venture partner, all of the properties are
managed by the Group's property management team.
-- Its business is anchored by an existing cash-producing core
business of operating portfolio properties with, in the Directors'
opinion, relatively low-level downside risks for occupancy and rent
levels.
-- The Company has acquired four development properties:
Prospect/Krasnotkatsha (Kyiv), Petrivka (Kyiv), Rozumovska (Odesa)
and Lukianivka (Kyiv).
-- The net proceeds of the Placing will be used to continue the
development of Arricano's existing portfolio of operating assets,
as well as the development properties being acquired, and to fund
future short term working capital requirements.
Smith & Williamson is nominated adviser and joint broker to
the Company. The Company is also pleased to announce the
appointment of Whitman Howard Limited as joint broker to the
Company with immediate effect.
Emil Budilovsky, CEO of Arricano, commented:"The Directors
believe that the Group is well positioned to capitalise on the
under developed retail real estate market in Ukraine. It has been
one of the very few developers in Ukraine capable of completing
sizeable retail schemes during the financial crisis of 2008-2009.
Its management has a combination of local and international
expertise and Arricano is one of the few enterprises able to offer
a platform to both international and local retailers. The group
combines stable operating cash flow from existing properties with
good growth prospects in relation to its proposed development
portfolio and its ability to obtain bank financing.
The Group intends to remain focused on Ukraine for the
foreseeable future. Over the next three and half years, the Group
intends to extend its portfolio to approximately nine
properties."
For further information please contact:
Arricano Real Estate plc Tel: +380 44 569 6708
Emil Budilovsky, CEO
Nominated Adviser and Joint Broker:
Smith & Williamson Corporate Finance Limited Tel: +44 (0)20 7131 4000
Azhic Basirov, Siobhan Sergeant, Oliver Cummings
Joint Broker
Whitman Howard Limited Tel: +44 (0)20 7087 4555
Ranald McGregor-Smith
BACKGROUND INFORMATION
The Company was incorporated in 2008 with the main objective of
developing and operating shopping centres in Ukraine. The Company's
various subsidiaries have been active in the Ukrainian market since
2005 as subsidiaries of the current majority shareholder, Retail
Real Estate S.A.
The Group is one of the leading real estate developers in
Ukraine and specialises in operating shopping centres. The Group
has a strong management team, which consists of local as well as
international experts with long standing track records in real
estate.
The Group currently owns and operates (or, in the case of Sky
Mall, has an interest in) five shopping centres in Ukraine with a
total GLA of approximately 160,000 sq. m. The properties are
located in the capital Kyiv (Sky Mall and M26/RayON), Kryvyi Rih
(SEC Sun Gallery), Zaporizhzhia (SC City Mall) and Simferopol (SC
South Gallery). All of these properties have been developed and put
into operation by the Group and, with the exception of the Sky Mall
property that is co-owned with a joint venture partner, all of the
properties are managed by the Group's property management team.
The Group has approximately 117 employees in various capacities,
who are responsible for the development and management of the
Group's assets. In addition, external service providers are engaged
in the day-to-day servicing of the Group's assets, such as
cleaning, security and maintenance activities.
The Company is engaged in the full cycle of retail real estate
development, from the acquisition of land plots for development to
the delivery and operation of shopping centres.
Summary Financial Information
Audited Audited Audited Unaudited
For the For the For the For the six
year ended year ended year ended months ended
31 December 31 December 31 December 30 June
Year end 31 December 2010 2011 2012 2013
US $'000 US $'000 US $'000 US$'000
Revenue 14,466 16,356 16,421 12,151
Revaluation gains/(losses) 54,491 12,943 26,893 (1,689)
Gain/(loss) from
operating activities 59,244 19,085 22,573 (62)
Net profit/(loss) 43,009 7,988 19,823 (3,514)
Total assets 414,171 210,786 250,083 264,582
Total liabilities (285,138) (96,097) (115,515) (133,531
Net assets 129,033 114,689 134,568 131,051
Placing Statistics
Placing Price per Ordinary Share US$2.33
Number of Ordinary Shares in issue before the Placing 64,620,000
Number of Placing Shares 10,300,423
Number of Acquisition Shares 28,350,214
Number of Ordinary Shares in issue following the
Placing and the Acquisition 103,270,637
Gross proceeds of the Placing US$24 million
Estimated expenses of Admission payable by the Company US$1 million
Market capitalisation of the Company at the Placing
Price on Admission (approx.) US$241 million
Placing Shares expressed as a percentage of the
Increased Issued Share Capital 9.97%
The Opportunity
The Group's business is anchored by an existing cash-producing
core business of operating portfolio properties with, in the
Directors' opinion, low-level downside risks for occupancy and rent
levels.
The Directors believe that the Group is well positioned for
future growth through the further development and extension of its
existing projects and the acquisition of an attractive pipeline of
projects for development in Kyiv and Odesa. In addition, the Group
has strong banking relationships with many financial institutions
active in the Ukrainian market.
Despite the overall uncertainty in the current global economic
environment, the Directors believe that there is still potential
for growth in the emerging markets of Eastern Europe, particularly
in those sectors in which the markets remain structurally
undersupplied. Industry experts such as Colliers International, DTZ
and CBRE consider Ukraine to have a relatively low saturation of
retail space (based on perceived demand versus supply for quality
retail space) compared to other European countries generally.
Key strengths
Strong market position with a modern, flexible and diversified
portfolio
The Group has demonstrated a consistent and successful track
record operating in Ukraine, unlike many international participants
that have entered the Ukrainian market and domestic competitors.
The Group has commissioned a project every year since 2007, despite
the economic slowdown that has affected the global economy since
2008, and has acquired the four additional Development
Properties.
The Group has projects in several large Ukrainian cities, all of
which are modern properties that, in the Directors' opinion,
provide an international retail experience for both tenants and
consumers. Many of the Group's competitors' projects across the
country are relatively dated, stand-alone projects and potentially
suffer from a lack of flexibility with regard to expansion and
upgrades. South Gallery is being expanded and Sky Mall has
potential for further expansion.
The Group's retail tenants represent many of the international
brands that are present in the Ukrainian market, whether through
direct ownership or regional franchises, as well as leading
national brands. International retailers include LPP (a.o.
Reserved), Inditex Group, Fiba (Marks and Spencer), New Yorker,
Benetton and Topshop. Leading national brand tenants include
Brocard, Comfy, Intertop and Sportmaster. A key driver in each of
the Group's projects has been securing strong anchor tenants. At
present Auchan, a leading international hypermarket brand, is the
anchor tenant in three out of the Group's five projects. Furshet, a
leading Ukrainian supermarket chain of which Auchan is a
shareholder, is the anchor tenant at the fourth project and the
RayON shopping centre in Kyiv is anchored by a supermarket, Silpo,
the main brand of leading Ukrainian retailer Fozzy Group.
The Company's ability to obtain debt financing
Since 2008, it has been difficult to obtain financing due to the
global economic crisis especially due to the freezing of credit
markets and the unavailability of financing to support
transactions. However, the Company has been successful in
attracting the necessary debt financing to progress its
development. For example, the Group recently secured a US$28.8
million term loan facility.
Strategic and geographically diverse network of shopping
centres
Arricano is one of the few developers of shopping and
entertainment centres in Ukraine that operates a network of
projects. The Company anticipates that its expanding network of
shopping centres will help secure its long-term profitability as
the Ukrainian retail market matures. This network will allow the
Company to act as a platform for international retailers entering
the market who wish to gain a wide geographical exposure in Ukraine
in key, well populated areas.
Established network of core international and domestic
tenants
Ukraine has a large population, which is concentrated in urban
centres and certain regions. The tenant market is not exclusively
dominated by any one player in any given sector. As a result, the
Company has some scope to select the most appropriate mix of
tenants for each of its projects. The Group attempts to use this to
optimise its tenant mix, relative to its catchment area. For
instance, Sky Mall offers a premium retail experience to the
relatively affluent citizens of Kyiv, whereas Sun Gallery aims to
provide a more economical offering.
Experienced management team
The Group's senior management team combines extensive industry
and market experience (of both private and publicly listed
companies) with financial and management expertise, and its members
have been involved with the real estate industry for, on average,
more than 10 years. The Group's experienced in-house management
team is dedicated to managing all of the internal processes of the
Group and the whole process of setting up and running a centre from
the initial selection and acquisition of sites to the operation of
completed projects. The Group has developed, and continues to
refine, a management structure that is focused on enhancing
accountability and decision making processes. The team consists of
local Ukrainian and international managers, all with significant
experience and familiarity with Ukrainian and international real
estate markets.
Strong corporate governance
The Group intends to maintain high standards of corporate
governance and transparency throughout all of its activities and
communications. The Company has assembled a strong Board comprised
of individuals who together have relevant sector experience as well
as prior experience on boards of publicly listed companies. The
Board is responsible for key decisions relating to the Group's
activities, including approval of the Group's long-term business
strategy and annual business plans. The Board comprises of seven
Directors details of whom are set out below.
Strong relationships in the real estate sector
Given the relationship driven nature of business in the
commercial real estate market, the Group makes efforts to maintain
positive relationships with all the relevant key players in this
market, including planning authorities, architects and engineers,
contractors, commercial brokerage and consultancy agencies, banks,
financial institutions and retailers. This is important in helping
the Group to obtain all relevant permits and approvals promptly and
to complete projects within budget, on time, with a good tenant mix
and with high rates of occupancy.
Portfolio of Operating Properties
Sun Gallery (Kryvyi Rih)
One of the biggest shopping malls in Kryvyi Rih, with a total
GLA of approximately 35,000 sq. m., spanning two levels with
approximately 80 gallery tenants, a children's entertainment zone,
a food court with restaurants and cafes, the electronics store
Comfy and the hypermarket Auchan as anchor tenants.
City Mall (Zaporizhzhia)
One of the biggest shopping centres in Zaporizhzhia, with a
total GLA of approximately 21,400 sq. m. on a single level,
comprising a gallery with approximately 80 international and local
tenants, a food court with 10 restaurants, a children's
entertainment zone, and parking (which is shared with DIY
superstore Epicenter).
South Gallery (Simferopol)
The property consists of the South Gallery shopping centre
(Phases I and II) with a total estimated GLA of approximately
32,800 sq. m. (after completion of Phase II) which stands on a land
plot with a total area of 10.2 ha. Phase I (with a GLA of
approximately 13,000 sq. m) of the shopping centre has been
completed and is currently in operation. The completion of Phase II
is designed to turn the mall into a regional destination shopping
centre.
M26/RayON (Kyiv)
Opened to the public in August 2012, with a GLA of approximately
24,100 sq. m. on two levels. The concept for RayON is a district
shopping centre, which focuses on food, clothing and convenience
products.
Investment Property
Sky Mall (Kyiv)
One of the largest shopping centres in Kyiv with a total GLA
(Phases I and II) of approximately 68,000 sq. m., spanning three
levels with a cinema, children's and entertainment zone, food
court, hypermarket and gallery shops. The Company currently owns
only 49.97 per cent. of the holding company of the asset and
continues to investigate the possibility of acquiring the remaining
interests from the current co-owner. It is anticipated that a third
phase, which may be developed provided such development will be
feasible at the time, would add a further GLA of approximately
46,000 sq. m.
Portfolio of Development Properties
The Company has acquired the following Development
Properties:
-- Prospect/Krasnotkatska (Kyiv);
-- Petrivka (Kyiv);
-- Rozumovska (Odesa) and;
-- Lukianivka (Kyiv).
The Directors believe that the acquisition of these Development
Properties is crucial to the Company's expansion plans. The
Development Properties are in various stages of development, with
the Prospect/Krasnotkatska development property project being the
most advanced (the framework of this project has reached the first
floor).
Board of Directors
Rupert Cottrell (68), Independent Non-executive Chairman
Rupert has developed an extensive network of relationships in
CEE as a result of a number of board positions that he has held.
Rupert is the former chairman of the supervisory board of A.S.
Magnum Medical, a pan- Baltic pharmaceutical group; a former
director of New European Investments Limited, a closed private
investment fund targeting Eastern European companies; and was a
former Chairman of Carpathian plc, an AIM listed Eastern European
commercial property fund, a subsidiary of which built The Galleria
Shopping Mall in Riga. He was previously a non-executive director
of The PFI Infrastructure Company plc, an AIM listed infrastructure
fund that was taken private in 2007, and was non-executive chairman
of Infrastructure India plc, an AIM-listed infrastructure fund
focused on India (before Guggenheim acquired a majority stake) and
Diamond Circle Capital plc, listed on the Main Market of the London
Stock Exchange. Rupert's background in financial services includes
executive director positions at a number of London investment
management firms and four years as a director of the Financial
Intermediaries, Managers and Brokers Regulatory Association
(FIMBRA), a financial regulator that is now part of the FCA. Rupert
is a Fellow of the Chartered Securities Institute.
Emil Budilovsky (44), Chief Executive Officer
Emil joined Arricano as Chief Financial Officer in August 2012
and was appointed acting Chief Executive Officer in October 2012.
He has an established track record in the real estate industry in
the United States and CIS, with significant experience in deal
creation and real estate transactions. He was previously Chief
Financial Officer and executive director of AIM-listed MirLand
Development Corporation plc, one of Russia's leading residential
and commercial property developers. Prior to that, he was Chief
Financial Officer at Adama Ukraine Limited, a subsidiary of Adama
Public Holding Ltd, an international real estate developer. In
addition, Emil has extensive experience in real estate investing
and lending in two private equity funds operating in the US market.
Emil also has experience of corporate finance and M&A with an
Israeli investment boutique and Deloitte & Touche. Emil has a
BA in economics and accounting, as well as an MBA from Tel Aviv
University and an LL.B from the College of Management Studies (Tel
Aviv). He is a member of the New York Bar.
Philip Scales (63), Independent Non-executive Director
Philip is managing director of IOMA Fund and Investment
Management Limited ("IOMA"), part of the IOMA Group. IOMA
specialises in the provision of third-party fund administration and
investment management services. Prior to this, Philip spent 18
years as managing director of Northern Trust International Fund
Administration Services (Isle of Man) Limited (formerly Barings
(Isle of Man) Limited). He has over 35 years' experience working
offshore, primarily in corporate and mutual fund administration,
and currently holds a number of directorships of listed companies.
IOMA provides secretarial and administrative services to 13 listed
companies, including East Balkan Properties Plc, Metro Baltic
Horizons Plc and Unitech Corporate Parks Plc. Philip is a Fellow of
the Institute of Chartered Secretaries and Administrators.
Michael Zampelas (75), Independent Non-executive Director
Michael, together with his associates, established Coopers &
Lybrand in Cyprus and Athens in 1970. He served the firm as its
Chairman and Chief Executive Officer from its establishment in 1970
until 2001 (latterly as PricewaterhouseCoopers) and as a
Non-executive Chairman from 2002 until 2005. He also served as an
elected member of the board of the European Organisation of Coopers
& Lybrand Europe from 1991 to 1999. Michael served as chairman
of the board of a number of local government authorities and
companies. Currently, he is the independent non-executive Vice
Chairman of Eurobank Cyprus Limited and the independent
Non-Executive Chairman of the Russian transport company,
Globaltrans Investment Plc, listed on the Main Market of the London
Stock Exchange. He was Mayor of Nicosia from 2002 to 2006.
Since 1997, he has been the Honorary Consul General of Estonia
in Cyprus, contributing to the development of the commercial and
cultural relations between the two countries. He has played a
significant role in the promotion of education, culture, community
affairs and business in Cyprus. He is a Fellow of the Institute of
Chartered Accountants in England and Wales.
Hillar Teder (50), Non-executive Director
Arricano was founded by Estonian entrepreneur Hillar Teder.
Hillar has an extensive track record in building successful
businesses. In 1995, he co-founded the Russian juice producer
Multon that was sold to Coca-Cola in 2005. In 1997, he developed
the Rocca Al Mare shopping centre in Tallinn, Estonia (32,000 sq.
m) and which he sold to Citycon (Finland) in 2005. In 2000, he
co-founded the Russian hypermarket operator and retail real estate
developer, O'Key Group SA, which was listed on the Main Market of
the London Stock Exchange in 2010. Since 2006 he has been active in
real estate development in Ukraine.
Volodymyr Tymochko (32), Non-executive Director
Volodymyr is a director at Dragon Asset Management ("Dragon
AM"), an investment managing company for DUPD, and his
responsibilities include deal sourcing and the management of DUPD's
real estate projects. Prior to joining Dragon AM, Volodymyr was an
Associate Director for Consulting and Investment Services at
Colliers International. He is also a director at J Comfort
Neruhomist, a developer of Green Hills gated community and Korona
Development.
This announcement does not constitute an offer to buy or to
subscribe for, or the solicitation of an offer to buy or subscribe
for, Ordinary Shares to any person in any jurisdiction in which
such an offer or solicitation is unlawful. In particular, the
Ordinary Shares have not been, and will not be, registered under
the US Securities Act of 1933, as amended (the "Securities Act") or
with any securities regulatory authority of any state or other
jurisdiction of the United States or under the applicable laws of
the United States, Australia, Canada, Japan and South Africa (the
"Restricted Territories") and, may not be offered or sold within
the United States or to, or for the account or benefit of, US
persons (as such term is defined in Regulation S under the
Securities Act ("Regulation S")) except pursuant to an exemption
from, or in a transaction not subject to, the registration
requirements of the Securities Act, or to any national, resident or
citizen of other Restricted Territories. The Ordinary Shares are
being offered and sold outside the United States in accordance with
Regulation S. Neither this press release nor any copy of it may be
distributed directly or indirectly to any persons with addresses in
the United States (or any of its territories or possessions), other
Restricted Territories, or to any corporation, partnership or other
entity created or organised under the laws thereof, or in any other
country outside the United Kingdom where such distribution may lead
to a breach of any legal or regulatory requirement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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