Annual report 2010 - plazacenters

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I am pleased to report that during the reporting period, Plaza has
continued to advance its targeted development program across
the CEE region and India, achieving a number of development
milestones, as well as progressing in its expansion plans in the US
by raising third-party capital and making strategic acquisitions.
As the CEE markets continue to recover from the financial turmoil
of 2008, Plaza has positioned its development program to ensure
that it can deliver shopping centers into markets with the highest
retail demand. We achieved a number of development milestones
throughout the year and most notably completed our 30th
shopping center in the region, in Suwałki Plaza, Poland, in a
country which has shown to be the most resilient market in
Europe during the recent downturn. We also continued our
geographical expansion, with the launch of Elbit Plaza USA, a real
estate investment venture jointly formed by Plaza and Elbit, which
subsequently secured a significant amount of third-party equity
commitments and made key acquisitions.
Despite 2010 being a year of ongoing economic crisis in many
areas of the world, Plaza has been able to use its financial strength
and business experience to consolidate its strong market presence
and build upon our foundations to establish a potentially highly
profitable pipeline of ventures for the next five years.
Our financial position remains robust, with the Company
delivering a net profit as a result of the increased income from
operating shopping centers and the Company’s US investment,
whilst an active balance sheet management program ensures
the Company retains a strong cash position and conservative
gearing levels.
Key events
Over the last year and since the period end, Plaza has completed
its first investment in the real estate market of the United States
and signed a sale and purchase agreement for a second portfolio
of assets.
The Company has invested a total of €66.7 million in cash across
its entire portfolio of projects under development since January
2010 and a further €20 million into its US portfolio.
Plaza also completed and opened to the public its shopping
centers in Zgorzelec and Suwałki in Poland in March and May 2010.
Suwałki is the Company’s 30th shopping mall in the CEE region.
Plaza raised gross proceeds of approximately €78 million from
the issue of debentures to Israeli and Polish institutional investors
during 2010 and a further €65 million in the beginning of 2011.
This was an exceptional achievement, given debt market
conditions, with significant support shown by debenture
investors for the Company’s highly rated bonds at interest rates
which were favorable to the Company. The bonds issued in
Israel are rated ilA/Negative by S&P Maalot and A2/Negative
by Midroog Ltd., the Israeli Credit Rating Agency and an affiliate
of Moody’s Investors Service.
Results
Plaza ended the 2010 financial year with a net profit attributable
to the owners of the Company of €10 million. This was mainly as
a result of the higher income derived from operating assets in the
Company’s portfolio and the accounting gain from the highly
accretive purchase of EDT in the US. The Company incurred only
minor losses from the impairment of its trading properties which
are carried at cost, representing less than 1% of the cost value of
the projects.
Plaza invested a total of €87 million during the year in new
acquisitions and in real estate inventories under construction.
The Company continues to have a strong cash position (including
restricted bank deposits, short-term deposits and available-forsale
financial assets) of approximately €195 million at the period
end (and circa €254 million as at today’s date following the recent
bond issuance). This ensures Plaza remains on a solid financial
footing to continue its development program and make
opportunistic investments or acquisitions where there is clear
potential to create shareholder value.
The Company’s debt position remains conservative, with gearing
of 56% at the year end. Given the strength of Plaza’s balance
sheet, it has been able to secure further financing during the
year from a wide range of sources, including bank development
finance totaling around €58 million and bond issuances, which
have raised total proceeds of €78 million from Israeli and Polish
institutional investors.
This strong financial position will ensure that the business can
continue its growth strategy through development activities and
strategic acquisitions.
Loan agreements signed for financing 70% (circa €33 million) of
the development costs for a new shopping center at Kragujevac,
Serbia and a development loan covering 70% (€52.5 million)
of the construction costs of a 39,000m 2 GLA shopping center
in Torun, Poland
Plaza Centers N.V. Annual report 201031