Adams Regulatory News (ADA)

Carpathian PLC

Investment Update

The Board of Carpathian Plc (AIM: CPT), the commercial property investment company focused on retail properties within Central and Eastern Europe, wishes to provide an update on the progress of investment property disposals.

Blue Knight Portfolio, Poland

The Company is pleased to announce the signing of an unconditional Preliminary Sale Agreement for the disposal of three assets in Poland, having a likely completion date during January 2011. The buyer is IntReal International Real Estate Kapitalanlagegesellschaft mbH, on behalf of the Pradera Open-Ended Retail Fund.

The shopping centres of the Tulipan Centre in Lodz, the Kometa Centre in Torun and the Sosnowiec Centre are being sold for a total consideration of €40.2 million payable in cash at completion (subject to the retention provisions referred to below).

These properties form part of the Blue Knight portfolio acquired by the Company in September 2005, which also included the Osowa Centre in Gdansk which is not part of this transaction.

The apportioned consideration at the time of purchase for the properties now agreed to be sold was €32.4 million and the apportioned independent valuation was €38.9 million as at 31 December 2009. The consideration is subject to minor retention provisions relating to finalisation of certain property title and property management issues. 

These three properties are subject to a loan from Deutsche Pfandbriefbank AG ('DPB') which is cross-collateralised with the Gdansk property and the Promenada Shopping Centre in Warsaw and subject to a pre-agreed partial repayment mechanism (as announced on 2 July 2009). The overall DPB loan also has an additional commitment for debt reduction attached to DPB's separate loan against the Company's non-core asset of Babilonas, in Panevezys, Lithuania in the sum of €3 million after all of the properties of the Blue Knight portfolio and the Promenada Shopping Centre are sold.

The effect of these debt provisions will be a requirement to repay debt (including fees) in the approximate sum of €23.2 million following receipt of the sale proceeds. This will result in realisation of equity value from the above sale of approximately €14 million to the Company after transaction costs but before any corporate taxation.

The Company intends to review the extent of the cash proceeds required to meet its current working capital requirements, and then to distribute as much as possible of these net proceeds to shareholders as soon as practicable in accordance with the previously declared intentions of the Board.

The apportioned debt remaining on the Gdansk property is circa €21 million and the loan on the non-core asset in Lithuania will be reduced to €22.1 million.

Following the sale, the annualised net operating income within the Company will reduce by approximately €3.5 million.

Meanwhile the company's Property Investment Advisors, Carpathian Asset Management Ltd, are also continuing discussions with a preferred buyer relating to the disposal of the Gdansk property. A remaining due diligence item awaits resolution after which the parties intend to re-engage and establish whether final terms may be agreed reflecting that outcome.

Promenada, Poland

In respect of the Company's major prime asset, the Promenada retail, leisure and business centre in Warsaw, the selected buyer's due diligence is materially complete. Discussions are now in hand on the results of this due diligence and on contract provisions.

It should be noted that in respect of both the Gdansk asset and Promenada, no completion of these sales should be anticipated before the end of February 2011 at the earliest.

Croatian Portfolio

The negotiations relating to the Croatian portfolio are proceeding positively without major issues arising at this stage. A commitment and closing of the transaction is anticipated in the near future assuming no unforeseen problems arise.

Galleria, Riga

The remaining major core asset - the development of Galleria Riga - opened its doors for retail operations on 22 October. It is anticipated that an establishment period will be required before this asset can achieve a stabilised trading position at which time the company will be better placed to assess its appeal to potential investment buyers.

Other Core assets

Meanwhile, initial discussions are occurring on most of the remaining core assets but it is too early at this stage to assess whether these might lead to successful transactions.

Rory Macnamara, Non-executive Chairman of Carpathian, commented:

"Despite continued marco economic challenges in Eastern Europe and the negative overall impact on property valuation, we are very pleased to have reached agreement to sell these assets above book value and also at a premium to their purchase price in September 2005. The Board will continue its policy of selling assets at appropriate levels and look to distribute excess cash to shareholders, in line with its stated strategy."

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