Secure Prop Regulatory News (SPDI)

21 May 2009 07:00



21 May 2009

Aisi Realty Public Limited 

 ("Aisi" or "the Company")

Latest Portfolio Valuation and Trading Update

Aisi, a property investment company focusing on development projects in Ukraine, today provides a trading update ahead of the announcement of its audited financial results for the year ended 31 December 2008 in mid-June 2009.

Following an updated valuation conducted by DTZ Kiev B.V., the independent chartered surveyors, the Company's property portfolio was valued at $64.9 million as at 31 December 2008, compared with $89.9 million as at 30 June 2008.

The revised portfolio valuation reflects the impact of the global credit crunch and an exceptionally challenging economic environment. The combination of a steep contraction in industrial production, and a shutdown in bank financing for commercial and residential developments, have all but halted Ukrainian real estate markets both in terms of construction and transactions.

As we expect operating conditions to remain difficult throughout 2009, the Company has shifted its strategy from aggressive growth to consolidation of existing assets. In particular, Aisi is focusing on:  

Tight management of cash flow and working capital  

Generation of cash from completed projects

Recovery of advances from the pipeline projects and asset sales

Key projects

The most imminent cash flow-generating asset for the Company is Terminal Brovary, a 49,180 sq.m. warehouse on the outskirts of Kiev that has been pre-leased for 10 years to a leading local logistics operator, and is due for completion and occupancy by the tenant in the third quarter of 2009. Delays in access to the first tranche of a $34.4 million debt facility approved by the European Bank of Reconstruction and Development in January 2009 have hampered progress with this project. The Company is currently working closely with potential syndicate banks and possible joint venture partners to resolve the funding bottleneck, and intends to complete the project in Q3 2009. 

The second project under construction, Bela Logistics Park, outside of Odessa, is to continue but will be phased. Discussions are underway aimed at converting the existing $65 million facility already approved but not disbursed by Marfin Bank into a phased facility. Construction of two residential projects in Kiev has been put on hold until a clearer picture of market demand emerges. 

The Company currently has no debt on its balance sheet.

These actions have enabled Aisi to withstand the widely-reported breakdown in the region's capital markets without damaging the Company's long-term prospects. The Ukrainian economy has also shown signs of stabilization with a recent uptick in monthly industrial production while the trade deficit is trending down. After some delay, the International Monetary Fund last week released the second tranche of its $16.4 billion loan to the country. Recapitalization of the banks by the Government has also allowed them to resume financing for construction. These developments have led to the stabilization in the Hryvnia, the local currency. 

As a result, the Company remains confident of delivering long-term value to shareholders once market conditions improve. 

Beso Sikharulidze, a director of Aisi, said, "Aisi has refocused its growth strategy in the light of tough market and economic conditions. We have no debt and are putting our best efforts to complete our first commercial project in the third quarter, which should start generating cash in Q1 2010. Despite the short-term uncertainty, the long-term prospects in the Ukrainian real estate market remain bright, underpinned by an acute and structural shortage of high quality assets. We remain well-placed to take advantage of these long-term drivers once the economic uncertainty dissipates and market fundamentals regain momentum."

Enquiries:

For further information please also visit the Company's website: www.aisicap.com