Sale of Romanian Assets (8480Y)

TIDMEBP

RNS Number : 8480Y

East Balkan Properties PLC

04 January 2011

4 January 2011

East Balkan Properties PLC ("EBP" or the "Company")

Sale of Romanian Assets

The Board of EBP announces the sale on 31 December 2010 to Denesol Limited of a 51% controlling interest (the "Interest") in Balkan Properties Cooperatief U.A., which, through its subsidiaries Union Properties SRL and Vitantis SRL ("Vitantis") is the owner of the Vitantis Shopping Centre and through another subsidiary Rivium Galeria Mall SRL ("Rivium") is the owner of Moldova Mall (together, the "Assets"). The sale price for the Interest is a nominal 5 Euros, in cash.

The Board of EBP believe that due to excess related indebtedness, the Assets, which are both located in Romania, have no meaningful probability of delivering value to shareholders in EBP and represent a significant cash burden to the EBP Group, primaily due to the cost of retaining the required asset management services. The structure of the transaction is such, however, that EBP will eliminate the cash cost associated with the Assets whilst retaining a 49% interest in Balkan Properties Cooperatief U.A..

The Vitantis Shopping Centre is located in southeast Bucharest and is anchored by Carrefour, Techno-market and Praktiker. It hosts 11,362 square meters of retail shop space with tenants including Inter Sport and DOMO. The shops are currently 82% occupied. Moldova Mall is located in the central business district of Iasi and is anchored by Technomarket. The mall has 9,024 square meters of rentable area which is currently 71% occupied. In the first nine months of 2010, principally due to declining retail sales activity throughout Romania, the Vitantis Shopping Centre recorded a net operating loss of Euro 1.5 million, and the Moldova Mall recorded a net operating loss of Euro 0.5 million (both before group interest and property valuation adjustments). Market conditions have continued to adversely impact the operating results of the Assets despite the best efforts of the property managers, who the Board believes to be very competent. The Board does not expect market conditions for these Assets to improve in the near term.

Net assets before inter-company funding of Vitantis and Rivium as at 30 June 2010 were negative Euro 0.5 million. Within this amount, in aggregate, the property assets were valued at Euro 56.8 million with a combined Euro 58.4m in debt at book value attached. The debt relating specifically to Rivium , which is under a cross collateral with Vitantis was carried at 30 June 2010 at Euro 15.5m, which reflected the agreed reduced repayment the lending bank would accept if the loan were to be refinanced externally. The outstanding actual principal balance of Rivium's bank borrowings is Euro 20.5m. This Board believes that such a refinancing is unrealistic as the property may now be worth less than Euro 15.5m.

The Board has no reason to believe that rental growth of the magnitude needed to generate the potential of a positive equity contribution from the Assets for EBP is achievable. The Board believes that the Assets are excessively over leveraged and EBP is unable to provide the required funds to support asset management fees and the capital expenditure requirements for the Assets.

The sale of the Interest will enable EBP (i) to eliminate certain direct costs, including asset management fees of approximately Euro 350,000 pa, (ii) to retain some influence for the recovery of intercompany loans of approximately Euro 450,000, and (iii) to participate in the long term recovery economics should the situation in Romania improve.

The property values in the EBP's June 2010 interim accounts were Directors' valuations whereas the December 2010 year end valuations will be undertaken by CB Richard Ellis. The Company believes that the 2010 year-end valuation of the Assets will, as result of the continuing adverse market conditions referred to above, be significantly lower than the Directors' interim valuations. In the unlikely event that the December 2010 year end Asset valuations are higher than expected, to the extent that they exceed the attached bank debt, Denesol Limited will be obliged to pay additional consideration which reflects the surplus value.

Related Party Transaction

Denesol Limited is a Cyprus entity wholly owned by George Teleman. Pursuant to the provisions of Rule 13 of the AIM Rules, the sale is deemed to be a related party transaction as Mr Teleman is the director of various subsidiaries of EBP, including Vitantis and Rivium. Mr Teleman is also a director of another Romanian company which holds the property management contracts of all the commercial properties owned by EBP in the region.

The Directors consider, having consulted with the Company's nominated adviser, Arbuthnot Securities Limited, that the terms of the sale of the Interest are fair and reasonable, insofar as the Company's shareholders are concerned.

For further information please contact:

Michael Uhler

michael.uhler@ebp-plc.com

Tel: +49 172 183 3194

Arbuthnot Securities

Nomad and Broker

Tel: +44 20 7012 2000

Hugh Field

IOMA Fund and Investment Management Ltd

Graham Smith

grahams@iomagroup.co.im

Tel: +44 1624 681 250