LONDON (Alliance News) - Mirland Development Corporation PLC Wednesday said revenue rose 42% in the first quarter of 2015 as it earned more from the sale of residential units, but it swung to a net loss as the woes in the Russian economy meant it had to offer rental concessions to maintain high occupancy rates at its income producing properties.
The residential and commercial property developer in Russia posted a loss of USD12 million for the three months to March 31, compared with a profit of USD10.9 million a year earlier, as it booked a USD17 million negative fair value of investment properties due to a decrease in projected net operating income, partly offset by a USD16.6 million fair value adjustment gain thanks to a roughly 4% rise in the US dollar against the rouble. Still, that appreciation also meant it had to book book foreign exchange losses of USD6.4 million.
Its revenue rose to USD39.1 million from USD27.6 million, but its net operating income fell to USD6.0 million from USD10.5 million due to the fall in Russian property prices.
Mirland said sales rates remained high and selling prices increased ahead of inflation in the later phases of its Triumph Park development in St Petersburg, while it has completed sales of a further six houses since the start of the year at Western Residence, Perkhushkovo in Moscow.
It said net operating income at its Vernissage and Triumph retail malls fell to USD3.5 million from USD6.5 million due to pressure on rents and occupancy rates, which remained at about 98%. It signed a deal to sell land for the construction of a 15,000 square metre extension of the Vernissage Mall to house an unnamed international DIY retailer, which it thinks will increase the attractiveness of the mall as a retail destination.
Mirland added that occupancy rates slightly decreased at the MirLand Business Centre, and stand at 82%. Net operating income fell to USD2.5 million.
"The company continued to face significant challenges during the first quarter due to testing macro-economic conditions in the Russian market beyond our control. Against the extremely difficult backdrop, our core business has proved resilient. The significant increase in total revenues, mainly due to the continuing success of our St. Petersburg residential project as buyers seek refuge from a falling Rouble in bricks and mortar, is particularly pleasing to note," Chairman Nigel Wright said.
"We did, however, suffer a significant fall in net operating income during the period, largely as a result of our strategy to seek to maintain high occupancy rates at our income producing properties through offering rental concessions to key occupiers. We believe that offering such support to tenants caught in the pincer of falling Rouble incomes and high US dollar denominated rents will pay dividends in the long term," he added.
Mirland added that talks with its bondholders are continuing in "a positive vein" and it's hopeful of a "satisfactory outcome for all parties".
"I do not underestimate the continuing challenges faced by the company but feel we are taking all available steps to mitigate identified risk factors and maintain our cash resources," Wright said. "Longer term, we remain positive about both our business and Russia as a whole and I am hopeful that MirLand will be well placed to capitalise on any upturn when it arrives due to the prudent measures we have taken to date."
Mirland Development Corp shares were untraded Wednesday. The stock last traded at 53.00 pence.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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