DUPD.L Regulatory News (DUPD)

1 Jun 2007 08:00

Dragon-Ukrainian Prop. & Dev. PLC01 June 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, OR JAPAN Dragon Ukrainian Properties & Development Plc raises USD $208 million and lists on AIM 1 June, 2007 - Dragon Ukrainian Properties & Development Plc ("DUPD" or the "Company"), today announces the placing of its ordinary shares by way of anInitial Public Offering ('IPO'). DUPD is a real estate investment companyincorporated in the Isle of Man whose strategy is to invest in the developmentof new commercial properties as well as in the redevelopment of existingproperties in Ukraine. Highlights of the IPO are: • 104,000,000 million ordinary shares have been placed with certain institutional investors at a price of $2.00 (the 'Offer Price') per ordinary share raising gross proceeds of $208 million (the 'Placing'). • Admission to trading on AIM is expected to become effective and unconditional dealings on AIM under the ticker symbol DUPD are expected to begin at 8:00 am on 1 June 2007 • The Company's strategy is to be an active investor in the development of new commercial properties as well as in the redevelopment of existing properties in Ukraine, and expects to invest the net proceeds of the Placing within 24 to 30 months after Admission. • Once the proceeds of the Placing have been fully invested, the Directors intend to work towards a target dividend yield of 7 to 10% per annum at the Placing Price and also currently intend that in due course the dividends paid by the Company will represent not less than 85% of annual net profits. • Zimmerman Adams International is the Company's Nominated Adviser and Broker. Commenting on the Placing and Admission Aloysius van der Heijden, Chairman of DUPD said "We are delighted with theresponse from investors to DUPD, a company focussing on investing in property inUkraine. Through our management agreement with Dragon Capital Partners Limited,the private equity division of Dragon Capital, we will receive advice from amanager with expertise across a wide spectrum of industry sectors in theUkrainian investment market." Mr. Tomas Fiala, a Non Executive Director of DUPD and Director of the InvestmentManager, Dragon Capital Partners Limited, said "Our track record in the sectorand ability to deliver a solid pipeline of projects allowed us to complete theplacing within a very short timeframe, while securing several of the world'slargest investment banks and asset managers among our shareholders. From nowon, Dragon Capital is committed to pursue all of its real estate investments inUkraine through DUPD. It has also subscribed for $10 million worth of shares ofthe Company at admission." --- ends --- For further information, please contact: Dragon Ukrainian Properties & Development PlcTomas Fiala+380 44 490 7120 Zimmerman Adams InternationalRay Zimmerman/Jonathan Evans+44 20 7060 1760 M:CommunicationsEdward Orlebar/Maria Souvorov+4420 71531523/1527 About Dragon Ukrainian Properties & Development Plc Dragon-Ukrainian Properties & Development plc has been formed to invest in thedevelopment of new commercial properties and redevelopment of existingproperties in Ukraine which offer the prospect of attractive returns to itsShareholders. The Company will utilise the property investment and development expertise ofDragon Capital Partners Limited ("DCP"). The Company expects to implement itsstrategy in partnership with one or more property development experts. It mayacquire properties from such partners and may make investments in or form jointventures with them. The senior management of DCP possess expertise in the Ukrainian investment andreal estate markets. In addition, DCP has access to the additional resources ofDragon Development Limited, a Ukrainian company specialising in the provision ofreal estate development services with particular expertise in the retail sector. The Company has entered into a Management Agreement with DCP for an initial fiveyear term. Once the proceeds of the Placing have been fully invested, the Directors intendto work towards a target dividend yield of 7 to 10% per annum at the PlacingPrice and also currently intend that in due course dividends paid by the Companywill represent not less than 85% of annual net profits. The Investment Manager Dragon Capital Partners Ltd, an affiliate of Dragon Capital, has been appointedto provide advisory, investment management and monitoring services to theCompany. DCP is an affiliate of Dragon Capital, a leading Ukrainian financialinstitution specialising in the provision of investment banking, securitiestrading, asset management and private equity services. Investment Strategy of DUPD The company aims to: • invest in the Ukrainian commercial property market and, in particular, the development of new and re-development of existing properties in the retail, office and warehousing sectors, as the Directors believe this presents a solid investment opportunity mainly due to the following: o in the short and medium term, demand for high-quality retail, office and warehouse space should continue to exceed supply as the country's economy develops, which, coupled with limited availability of high quality property stock, is expected to exert strong upward pressure on rent levels; and o over the foreseeable future, the Ukrainian real estate market is expected to experience capital growth as confirmed by expectations of further yield compression, mirroring the trend in other central and eastern European countries. The Board of DUPD Aloysius Wilhelmus Johannes van der Heijden - aged 58, Non Executive Chairman Mr. van der Heijden has worked in the real estate industry for 29 years, a largepart of which he spent as a General Director of Beheer Brouwershoff AmsterdamB.V., a private investment company of Drs. C. van Zadelhoff with a core businessin capital investment, predominantly in real estate and also commercial realestate brokerage and advisory services. Currently, he is a director of CorvanProperties Limited, a non-executive partner of DTZ Zadelhoff (The Netherlands)and a Supervisory Board member of DTZ Zadelhoff Tie Leung Central & EasternEurope and N.V. "Het Havengebouw". Fredrik Svinhufvud - aged 52, Non Executive Director Fredrik Svinhufvud is currently managing director of Malka Oil AB, a Swedish oilcompany concentrating on oil and gas production in western Siberia in Russia.Previously he was managing director of Tetra Pak Ukraine for six years untilFebruary 2007. Fredrik started in Ukraine as Tetra Pak factory manager in 1995and was then appointed managing director in 2001. Additionally, he has heldseveral international positions within the oil field services industry,initially with Schlumberger Ltd in South America, Atlas Copco in North Americaand the Geco Well Services in the North Sea. Later he held positions withinsales and marketing in the agriculture supply industry (Trelleborg AB). In March2006 Fredrik was elected President of the European Business Association inUkraine. Tomas Fiala - aged 33, Non Executive Director Mr. Fiala has been the principal shareholder and managing director of DragonCapital Group, a Kyiv-based investment bank, since April 2000. Mr. Fialaestablished Dragon Capital as a brokerage and has since grown it into a leadingUkrainian investment house specialising in brokerage, investment banking,securities trading, asset management and private equity investments. Prior toestablishing Dragon Capital, Mr. Fiala served as senior executive for five yearsat Wood & Company, a leading investment bank in the Central Eastern Europeregion. Mr. Fiala is currently serving as chairman of the supervisory board ofKarlivka Machine-building Plant, Ukraine's leading agricultural equipmentproducer. He is also a member of the Supervisory Board of Nova Liniya, thelargest DIY supermarket chain in Ukraine, Cantik Enterprises Limited, aUkrainian retail real estate development company, Retail Group, one of thelargest food retailers in Ukraine, Ukrinbank as well as KP Media, a leadingUkrainian media holding. Ukrainian market opportunity The Directors believe that the Ukrainian commercial property market and, inparticular, thedevelopment of new and re-development of existing properties in the retail,office and warehousing sectors, presents a solid investment opportunity mainlydue to the following: - high rental yields are available in the Ukrainian property market relative to other European markets; - in the short and medium term, demand for high-quality retail, office and warehouse space should continue to exceed supply as the country's economy develops, which, coupled with limited availability of high quality property stock, is expected to exert strong upward pressure on rent levels; and - over the foreseeable future, the Ukrainian real estate market is likely to experience further yield compression, mirroring the trend in other central and eastern European countries. Ukraine is the second-largest country in Europe with total land area of 603,700km2. It has a strategic position in Eastern Europe, bordering the Black Sea inthe south, Poland, Slovakia and Hungary in the west, Belarus in the north,Moldova and Romania in the south-west and Russia in the east. Ukraine ranks among the thirty largest economies worldwide. In the Soviet era,Ukraine was the second most important republic in terms of its economiccontribution, producing approximately 4 times the output of the next-rankingrepublic. Following, the collapse of Soviet Union, the country progressedtowards a market economy albeit at a gradual pace. The country was also slow inthe implementation of structural reforms. From the early 2000's the economy started to show strong export based growth of5% to 10%, with industrial production growing more than 10% per year. Investment - Foreign Direct Investment FDI has grown strongly during the two years ending 31 December 2006, more thandoubling from 2004. During 2006, net FDI reached $4.5 billion. The main driverof FDI growth is the continuing trend of increased government transparency andrelaxation of entry barriers in various sectors as Ukraine is currentlymodifying its legislation to meet WTO requirements. Ukraine is seeking entry tothe WTO and this is anticipated in 2007. Traditionally, the main interest offoreign investors has been directed to the banking sector following thepurchases of several large banks that constituted one third of the whole FDIinflow in 2006. Moreover, a substantial increase in FDI was recorded in both themanufacturing and commercial services sectors of the economy. The Kyiv regionattracts the largest proportion of foreign capital with 25%, or $1.125 billionof the aggregate FDI. Overview of the Ukrainian Property market Ukraine offers significant investment opportunities for foreign propertyinvestors mainly due to its large geographic scale, strategic location withinEurope and scope for economic development from its current position. This,coupled with higher rental yields available in the Ukrainian real estate market,in comparison to most central and western European markets, has attracted astrong inflow of foreign investment into the sector. Phase of Market Development During the last five years, the Kyiv property market has gone through a numberof positive changes such as expansion of the market size and the generalimprovement of product quality. However, despite the progress made within thelast few years, Kyiv remains a relatively immature market characterised bystrong demand across all the property classes and sluggish delivery of qualitysupply by developers. Sources estimate that the office market will continue to grow with the volume ofannual new supply increasing gradually in 2007-2008. However, given thepresently large deficit and solid foundations for growth in demand, all the newstock is expected to be immediately absorbed by the market with market powerresting fully with the landlords for at least a couple of years. In the short-to-medium term, the prices in the commercial property market areexpected to remain high due to strong demand and slow delivery of new propertiesto the market. Therefore, it is anticipated that the market will continue toprovide current landlords and/or sellers with a strong opportunity to dictateprices. The development of additional quality western standard commercialproperty is expected no sooner than 2008-2009. If the current pipeline of transactions announced during 2006 to 2007 were tomaterialise across all property classes Kyiv would still continue to lag behindits neighbouring capitals which, given the fact that the population of Kyiv (2.6million) is significantly higher than Warsaw (1.7 million), Budapest (1.7million) and Prague (1.2 million), clearly indicates the sectors' significantgrowth prospects. The availability of high rental yields in Ukraine, in comparison to otherEuropean countries where yields have been compressed due to the mature status oftheir property markets, is likely to continue attracting investors into the realestate sector. Currently, there is significant interest from foreign investorsin purchasing income-generating property assets. Following the example of central European countries, yields are expected tocompress further and eventually, over the long term, approach the current yieldlevels of neighbouring countries in central and eastern Europe. The Directorsbelieve that this will result in a gradual increase of property values, which,coupled with significant under-supply of quality real estate assets is providinga serious incentive to proactive real estate developers. This information is provided by RNS The company news service from the London Stock Exchange