Metir Plc Regulatory News (MET)

8 May 2007 07:02

Metro Baltic Horizons PLC08 May 2007 8 May 2007 Metro Baltic Horizons Plc METRO BALTIC ANNOUNCES €38M INVESTMENT IN ST PETERSBURG OFFICE COMPLEX DEVELOPMENT Metro Baltic Horizons plc ('Metro Baltic' or the 'Company'), the propertyinvestment company focused on prime office and residential developmentopportunities in the Baltic State capitals and St Petersburg, Russia, is pleasedto announce that it has entered into an agreement to acquire a 16,000 sq mcomplex, currently principally comprising office accommodation, centrallylocated in St Petersburg. This acquisition represents the first transaction undertaken by the Companysince its Admission to AIM on 11 December 2006, raising circa €39 million gross.The Company's principal focus is on prime development opportunities in theoffice and residential sectors in the target region that can demonstrate anability to generate a minimum internal rate of return of 25%. The office complex being acquired is located on a prominent street in the centreof St Petersburg adjacent to Bolshoi Prospekt, one of St Petersburg's mainshopping and business streets, and only 2 kms from the Winter Palace. Currently,there are six buildings on the site of which it is intended that two of relativearchitectural merit will be maintained and refurbished and the others demolishedfor full redevelopment. A leading firm of local architects has been retained toredesign and plan the site and preliminary estimates indicate that theredeveloped complex could comprise 24,000 sq m of predominantly office space andon-site parking for 220 cars. The total investment by the Company in the redevelopment of the office complex(including its acquisition, construction and finance) is estimated to be circa€38m ($52m). The complex is expected, when fully let on completion, to generatea yield of 18% on total cost. The upfront acquisition cost is being equityfinanced and is expected to be part refinanced with local bank debt in thecoming months. Post-refinance, it is expected that the Company's equityinvestment in the development will utilise circa 20% of the net funds raised bythe Company in its IPO. Development costs are expected to be substantially bankfinanced from local sources on a non-recourse basis to the Company. At presentit is intended that the project will be constructed in two or three phases withcompletion scheduled to occur between Q3 in 2009 and Q3 2010. St Petersburg has a population of circa 4.6 million and ranks as the third mostpopulous city in Europe. It is the former capital of Russia and recognised as aleading financial, trading, transport, tourist and cultural centre in Russia. Inthe past five years, the city has undergone significant change and experiencedsignificant and consistent economic growth considerably above Russian average. Research has shown there has been significant underinvestment in the StPetersburg property market for a number of years, with the result that there arenow considerable shortages of stock in several sectors including offices (classA and B). According to Colliers, office vacancy rates in St Petersburg are verylow, at circa 3% and both class A and class B space remains very limited at only420,000 sq m at the end of 2006, which is significantly below both comparablemajor European city levels and less than 20% of Moscow levels. In 2006, therewas dramatic growth in foreign direct investment into St Petersburg whichincreased 90% to approximately $0.5bn and continued investment growth isanticipated. Metro Baltic has appointed Metro Frontier Limited as Investment Manager andMetro Capital Management AS as Investment Adviser. Commenting on the acquisition, Robin James, non-executive director, said: "Metro Baltic is the only UK listed property company targeting St Petersburg andthe Baltic States, the most rapidly developing economic regions in Europe whichare forecast for Eurozone entry within three years. Backed by the Metro team,with its well-established local presence in each of our target markets and ahighly successful track record of investment and development, we are confidentthat this will be the first of a number of attractive acquisitions meeting ourkey investment criteria." James Kenny, Chief Executive of Metro Frontier, added: "We are delighted to have completed this first acquisition in St Petersburg onbehalf of Metro Baltic. The site offers considerable potential, particularlysince it is located in a market which is currently short of good quality officespace. "We continue to make good progress in the negotiations for a number of othertransactions in the region and hope to be in a position to recommend these tothe Company's board for consideration in the near future." For further information, please contact: Metro FrontierJames KennyTel: +353 86 3977 850 or +372 683 0300 Financial DynamicsStephanie Highett/Dido LaurimoreTel: +44 (0)20 7831 3113 Notes to Editors Metro Baltic Horizons (ticker code: MET.L) is a property investment companytargeting the capital cities of the three Baltic States - Latvia, Estonia andLithuania - and St Petersburg, Russia. The Baltic States are amongst the fastest growing economies in Europe and StPetersburg is regarded as one of the top investment locations in Russia.Combined, this represents a strategically located region with developed andimproving business, trading and political links. The Investment Manager will source and recommend suitable property developmentopportunities to the Company principally in the office and residential sectorsand expects to target development projects which can demonstrate an ability togenerate a minimum internal rate of return to the Company of 25%. The Investment Adviser is an experienced and fast growing property asset managerand developer headquartered in Estonia with offices in Tallinn, Riga and StPetersburg. It has a team of 26 experienced professionals managing a portfolioof 20 projects across the region. This information is provided by RNS The company news service from the London Stock Exchange