Overleveraged Vitantis Shopping Center and Moldova Mall, sold for EUR 5 to fund director

Investment fund East Balkan Properties (EBP – formerly Equest Balkan Properties) has sold a 51 percent stake in its Romanian properties Vitantis Shopping Center in Bucharest and Moldova Mall in Iasi to Denesol Limited, a Cyprus – based company owned by George Teleman, for a symbolic value of EUR 5. Teleman is director of various EBP subsidiaries, among which Vitantis and Rivium, owner of Moldova Mall. Teleman is also a director of another Romanian company which holds the property management contracts of all the commercial properties owned by EBP in the region. “The sale price for the interest is a nominal EUR 5, in cash,” writes the fund in a note to the London Stock Exchange, where its shares are listed. Both properties are indebted and “have no meaningful probability of delivering value to shareholders in EBP and represent a significant cash burden to the EBP Group, primarily due to the cost of retaining the required asset management services,” writes the statement. Both properties posted loss in the first nine months of 2010. Vitantis posted a loss of EUR 1.5 million, while Moldova Mall, of EUR 0.5 million. “Market conditions have continued to adversely impact the operating results of the assets despite the best efforts of the property managers, who the board believes to be very competent. The board does not expect market conditions for these Assets to improve in the near term,” according to EBP. The property assets were valued at EUR 56.8 million with a combined EUR 58.4 million in debt at book value attached. “The board believes that the sssets are excessively over leveraged and EBP is unable to provide the required funds to support asset management fees and the capital expenditure requirements for the assets,” it went on. EBP will eliminate the cash cost associated with the assets whilst retaining a 49 percent interest in Balkan Properties Cooperatief U.A, the company which indirectly holds the two assets. The Vitantis Shopping Centre is located in southeast Bucharest and is anchored by Carrefour, Techno-market and Praktiker. It hosts 11,362 square meters of retail shop space with tenants including Inter Sport and Domo. The shops are currently 82 percent occupied. Moldova Mall is located in the central business district of Iasi and is anchored by Technomarket. The mall has 9,024 square meters of rentable area which is currently 71 percent occupied. Moldova Mall was acquired in 2006, while Vitantis Shopping Center, also in 2006, for EUR 31.2 million. The fund also owns Equest Logistics Center, Jules Michelet and Domenii offices, Casa Mosilor, Otopeni Airport Office and a retail site in Ploiesti, according to data on its website. Corina Saceanu, corina@romania-insider.com