GRIVALIA PROPERTIES R.E.I.C.
Lunch with the Press - Mr. A. Karytinos' Speech, Executive Member of BoD and member of the Investment Committee
Ladies and Gentlemen,
The period of the last 18 months represents a milestone period for Eurobank Properties REIC with the main event being the extremely successful initial public offering of the Company's shares in the Athens Stock Exchange. As you may recall, the total demand was for 60.7 million shares, i.e. an oversubscription ratio of approximately 8.3 times.. The demand from the international qualified investors was particularly significant, and as a result the 7,290,066 shares of the Company, were allocated by 50% to the domestic public offering and 50% to the international offering. The net proceeds of the Company amounted to Euro78.9 million, of which 80% have already been invested mainly in office buildings with attractive terms that exceed the current average market yields. The participation of foreign investors is also notably increasing: in 2006 it amounted to 22% and currently amounts to 23%, evidencing our management's belief that our Company's share has become an attractive real estate investment options on an international level. The inclusion of the Company's share in the FTSE EPRA/NAREIT Global Real Estate Index constitutes a significant recognition for the Company. This particular index, which is considered as benchmark by the international institutional real estate investment community, includes more than 300 companies and is calculated on a daily basis by Euronext Indices B.V. The FTSE EPRA/NAREIT Global Real Estate Index is categorized into six index groups, covering a total of 60 indices in Asia, Europe and North America. Eurobank Properties REIC is the only Greek Real Estate Investment Company which is included in the global stock exchange index; this important achievement increases not only the reputation and recognition of the Company, but also creates potential for further similar success in the near future. In addition, the Company is also included in the FTSE/ASE MidCap 40 of the Athens Stock Exchange. In 2006, the Company showed high profitability with an increase of 72.5% in profits before tax compared to 2005 (Euro32.4 million in 2006 compared to Euro18.8 million in 2005). The improvement of both our fundamentals and results during 2006 allowed the Company to distribute a total dividend of Euro 0.64 per share, corresponding to an increase of 77.8% as compared to the 2005 dividend, and to a dividend yield of 4.12%, on the basis of the average market price of the share in 2006 and a dividend yield of 4.10%, on the basis of the IPO offer price. It must be noted that after the IPO, i.e. during the last 16 months, the Company has distributed dividends amounting to a total of Euro1 per share for the fiscal years 2005 and 2006, cumulatively representing an aggregate (i.e. for 2005 and 2006) dividend yield of 6.41% on the basis of the IPO offer price. The improvement of the Company's results continues in 2007: the Company's Q1 2007 net profits have increased by 88% compared to those of Q1 2006. The Company's strategy for future growth is to continue to acquire high-quality office, retail and logistics spaces in prime locations in Greece and, thanks to the recent amendments to the regulatory framework about which I will talk to you later,in Central and Eastern Europe to the extent permitted by capital and real estate market conditions. The Company believes that its strategy and its substantial knowledge of the regional real estate markets offer a competitive advantage in the identification of trends in its relevant markets and in accessing and pursuing investment opportunities of prime real estate at favourable terms in Greece as well as Central and Eastern Europe. Recently, L. 3581/2007 amended L. 2778/1999 governing Greek REICs. This amendment is expected to enhance the materialization of our strategy as well as the growth of the REIC sector in Greece. The basic changes introduced by the amendment are the following: - REICs are allowed to invest with a minimum shareholding of 90% in special purpose vehicles (SPVs) the exclusive purpose of which is the acquisition and exploitation of real estateGreek SPVs which are subsidiaries of a Greek REIC enjoy the same favorable tax regime as the parent REIC. - REICs are allowed to borrow up to 50% on their total assets for the acquisition or completion / refurbishment of real estate assets. - Elimination of the requirement to maintain at least 10% of total assets in cash and cash equivalents. - REICs are allowed to enter into promissory contracts for the acquisition, upon completion, of properties under construction (under conditions that ensure that REICs either do not assume or minimize development risk). - It is noted that REICs are not subject to capital gains tax and enjoy certain tax privileges in the case of corporate restructurings and/or mergers with other real property companies. - Finally, REICs are allowed to acquire and sell real estate properties, interests in SPVs and rights arising from promissory contracts at a price that may, following the changes on law, deviate by 5% from the relevant valuation of SOE (Body of Sworn-In Valuers of Greece, i.e. the regulatory valuer of assets held by Greek REICs). These changes give Greek REICs access to investments that, prior to the abovementioned amendments, they could not make, despite the fact that these investment opportunities represented the majority of the supplied investment product in Greece and abroad. Our experience indicates that most deals are offered through SPVs, while it is also important to be able to close an agreement when a property is at an early stage of construction. The new possibilities offered by the law give REICs greater flexibility in the real estate sector than in the past, eliminating a disadvantage that existed in the past compared to other type of companies investing in real estate. In addition, the increased gearing thresholds as well as the abolition of the minimum cash or cash equivalent requirements gives REICs increased possibilities of financing their growth. An important part of the Company's development strategy is to expand its investment activities abroad, in Central and Eastern European countries, which currently represent a significant investment interest and constitute an attraction to international real estate investors. Our Company believes that it is in a favourable position, since Eurobank EFG Group is already well positioned in the above geographical area with a successful presence not only in the financial sector but also in the real estate services sector (through specialised subsidiaries). In combination with the aforementioned amendments to the law and especially the possibility of holding interests in SPVs, the Company evaluates the opportunities to expand its real estate portfolio in Romania, Bulgaria, Serbia and other Central and Eastern European countries in accordance with its investment criteria and the applicable law requirements. As we have already announced, the Company is under negotiations for the acquisition of an office property in Bucharest with companies of the Eurobank EFG Group as potential tenants, and will proceed to a detailed announcement as soon as the relevant negations are concluded. The expansion of the Company's investments in Central and Eastern European countries issupported by Eurobank EFG Group, which maintains a local presence and has in-depth knowledge of the commercial real estate market in Central and Eastern Europe, including Romania, Serbia and Bulgaria and the Company intends to utilize this specialized knowledge while it continues to evaluate investment opportunities abroad. The Company believes that the in-depth knowledge of its management team, its relationship with the real estate sector and its ability to exploit the local resources of Eurobank EFG provides the Company with a competitive advantage in capitalizing on existing potential of the real estate market in Greece and Central and Eastern Europe. Confident in the Company's strategy for future growth, we will continue to respond to the challenges of the real estate market and to the expectations of the Company''s shareholders. The information contained herein is not for publication or distribution into the United States. The material set forth herein is for informational purposes only and is not intended, and should not be construed, as an offer of securities for sale into the United States or any other jurisdiction. Securities may not be offered or sold within the United States, except pursuant to an exemption from the registration requirements of the U.S. Securities Act of 1933, as amended (the Securities Act) and applicable state laws. No security of the Company has been registered under the Securities Act, and there is no intention to conduct a public offering of securities in the United States.
The period of the last 18 months represents a milestone period for Eurobank Properties REIC with the main event being the extremely successful initial public offering of the Company's shares in the Athens Stock Exchange. As you may recall, the total demand was for 60.7 million shares, i.e. an oversubscription ratio of approximately 8.3 times.. The demand from the international qualified investors was particularly significant, and as a result the 7,290,066 shares of the Company, were allocated by 50% to the domestic public offering and 50% to the international offering. The net proceeds of the Company amounted to Euro78.9 million, of which 80% have already been invested mainly in office buildings with attractive terms that exceed the current average market yields. The participation of foreign investors is also notably increasing: in 2006 it amounted to 22% and currently amounts to 23%, evidencing our management's belief that our Company's share has become an attractive real estate investment options on an international level. The inclusion of the Company's share in the FTSE EPRA/NAREIT Global Real Estate Index constitutes a significant recognition for the Company. This particular index, which is considered as benchmark by the international institutional real estate investment community, includes more than 300 companies and is calculated on a daily basis by Euronext Indices B.V. The FTSE EPRA/NAREIT Global Real Estate Index is categorized into six index groups, covering a total of 60 indices in Asia, Europe and North America. Eurobank Properties REIC is the only Greek Real Estate Investment Company which is included in the global stock exchange index; this important achievement increases not only the reputation and recognition of the Company, but also creates potential for further similar success in the near future. In addition, the Company is also included in the FTSE/ASE MidCap 40 of the Athens Stock Exchange. In 2006, the Company showed high profitability with an increase of 72.5% in profits before tax compared to 2005 (Euro32.4 million in 2006 compared to Euro18.8 million in 2005). The improvement of both our fundamentals and results during 2006 allowed the Company to distribute a total dividend of Euro 0.64 per share, corresponding to an increase of 77.8% as compared to the 2005 dividend, and to a dividend yield of 4.12%, on the basis of the average market price of the share in 2006 and a dividend yield of 4.10%, on the basis of the IPO offer price. It must be noted that after the IPO, i.e. during the last 16 months, the Company has distributed dividends amounting to a total of Euro1 per share for the fiscal years 2005 and 2006, cumulatively representing an aggregate (i.e. for 2005 and 2006) dividend yield of 6.41% on the basis of the IPO offer price. The improvement of the Company's results continues in 2007: the Company's Q1 2007 net profits have increased by 88% compared to those of Q1 2006. The Company's strategy for future growth is to continue to acquire high-quality office, retail and logistics spaces in prime locations in Greece and, thanks to the recent amendments to the regulatory framework about which I will talk to you later,in Central and Eastern Europe to the extent permitted by capital and real estate market conditions. The Company believes that its strategy and its substantial knowledge of the regional real estate markets offer a competitive advantage in the identification of trends in its relevant markets and in accessing and pursuing investment opportunities of prime real estate at favourable terms in Greece as well as Central and Eastern Europe. Recently, L. 3581/2007 amended L. 2778/1999 governing Greek REICs. This amendment is expected to enhance the materialization of our strategy as well as the growth of the REIC sector in Greece. The basic changes introduced by the amendment are the following: - REICs are allowed to invest with a minimum shareholding of 90% in special purpose vehicles (SPVs) the exclusive purpose of which is the acquisition and exploitation of real estateGreek SPVs which are subsidiaries of a Greek REIC enjoy the same favorable tax regime as the parent REIC. - REICs are allowed to borrow up to 50% on their total assets for the acquisition or completion / refurbishment of real estate assets. - Elimination of the requirement to maintain at least 10% of total assets in cash and cash equivalents. - REICs are allowed to enter into promissory contracts for the acquisition, upon completion, of properties under construction (under conditions that ensure that REICs either do not assume or minimize development risk). - It is noted that REICs are not subject to capital gains tax and enjoy certain tax privileges in the case of corporate restructurings and/or mergers with other real property companies. - Finally, REICs are allowed to acquire and sell real estate properties, interests in SPVs and rights arising from promissory contracts at a price that may, following the changes on law, deviate by 5% from the relevant valuation of SOE (Body of Sworn-In Valuers of Greece, i.e. the regulatory valuer of assets held by Greek REICs). These changes give Greek REICs access to investments that, prior to the abovementioned amendments, they could not make, despite the fact that these investment opportunities represented the majority of the supplied investment product in Greece and abroad. Our experience indicates that most deals are offered through SPVs, while it is also important to be able to close an agreement when a property is at an early stage of construction. The new possibilities offered by the law give REICs greater flexibility in the real estate sector than in the past, eliminating a disadvantage that existed in the past compared to other type of companies investing in real estate. In addition, the increased gearing thresholds as well as the abolition of the minimum cash or cash equivalent requirements gives REICs increased possibilities of financing their growth. An important part of the Company's development strategy is to expand its investment activities abroad, in Central and Eastern European countries, which currently represent a significant investment interest and constitute an attraction to international real estate investors. Our Company believes that it is in a favourable position, since Eurobank EFG Group is already well positioned in the above geographical area with a successful presence not only in the financial sector but also in the real estate services sector (through specialised subsidiaries). In combination with the aforementioned amendments to the law and especially the possibility of holding interests in SPVs, the Company evaluates the opportunities to expand its real estate portfolio in Romania, Bulgaria, Serbia and other Central and Eastern European countries in accordance with its investment criteria and the applicable law requirements. As we have already announced, the Company is under negotiations for the acquisition of an office property in Bucharest with companies of the Eurobank EFG Group as potential tenants, and will proceed to a detailed announcement as soon as the relevant negations are concluded. The expansion of the Company's investments in Central and Eastern European countries issupported by Eurobank EFG Group, which maintains a local presence and has in-depth knowledge of the commercial real estate market in Central and Eastern Europe, including Romania, Serbia and Bulgaria and the Company intends to utilize this specialized knowledge while it continues to evaluate investment opportunities abroad. The Company believes that the in-depth knowledge of its management team, its relationship with the real estate sector and its ability to exploit the local resources of Eurobank EFG provides the Company with a competitive advantage in capitalizing on existing potential of the real estate market in Greece and Central and Eastern Europe. Confident in the Company's strategy for future growth, we will continue to respond to the challenges of the real estate market and to the expectations of the Company''s shareholders. The information contained herein is not for publication or distribution into the United States. The material set forth herein is for informational purposes only and is not intended, and should not be construed, as an offer of securities for sale into the United States or any other jurisdiction. Securities may not be offered or sold within the United States, except pursuant to an exemption from the registration requirements of the U.S. Securities Act of 1933, as amended (the Securities Act) and applicable state laws. No security of the Company has been registered under the Securities Act, and there is no intention to conduct a public offering of securities in the United States.