Regarding yesterday's fall in share price, BVIC's management would like to remind its shareholders and the broader investors' community the following:
NAV
BVIC's NAV per share before deferred tax in the 9 month 2008 financial accounts stood at Eur 20.42. This does not include the revaluation that will arise from the completion of the shopping mall in Votanikos, it only includes the land plot revaluation surplus of Eur 2.8 per share. Yesterday's share closing price of Eur 9.04 implies a 56% discount to the Group's NAV as at 30 September 2008. No significant changes to NAV are expected for the full year 2008.
Financial Position
The Company's financial position is very satisfactory. The Group's rental income in 2008 is estimated to reach approximately Eur 47 million. The Group's net debt at 30 September 2008 stood at Eur 690 million, out of which Eur 507 million or 74% is long-term debt, whose average maturity is 14 years. The debt is repaid using rental income from closed 12 year leases on average, from high profile corporate tenants. The Group's short-term debt stood at Eur 182 million out of which 61% or 111 million consist of secured financing for the construction of Votanikos by Greek banks, and will be repaid during 2009 if the shopping mall is sold, or alternatively will be refinanced with long-term debt (i.e. a sale and leaseback contract) if it is retained in BVIC's investment property portfolio.
Current Real Estate Market Conditions
It is very clear that the global real estate market was the first to enter into a gradual recession since August 2007. Specifically, Western European commercial real estate markets, especially the London and Paris markets, have already witnessed a significant fall in prices and a corresponding significant rise in yields.
We believe that the real estate market in Athens is highly differentiated from these markets for the following reasons:
1. Very limited supply of Class A office and retail space of significant size, compared to the strong demand created by a city of 5 million residents and in strong contrast to the oversupply created in Western European property markets.
2. In Western European core property markets commercial asset prices recorded a rapid increase over the last five years. Therefore yields dropped sharply from about 7% in 2002 to 4% and even 3.5% in 2007 creating big losses in value to the property investors, who following the recent international banking crisis became distressed sellers, pushing prices down and yields up to 7% and 8% in certain extreme cases. In contrast, the prices of commercial Class A assets in Athens recorded a rational increase during the same period, with yields falling from 8% in 2002 to 5.5% in 2007. As a result we are witnessing a much smoother depreciation of prices, and given the limited supply, yields on average currently stand between 6% and 6.5%.
3. The Greek banking system has till now shown greater immunity to the crisis and has not created turmoil to the Athenian real estate market, contrary to other European real estate markets where the bankruptcy of financial institutions has led to the forced sale of property assets.
Votanikos
We expect the Council of the State's decision any day now, and as we have repeatedly stressed over the past week, we firmly believe that the verdict will be positive for the Group. Our confidence stems from the legitimacy of our building permit as well as our pivotal role in the successful completion of the joint regeneration of Athens.
We remain very positive regarding the successful completion of the project, and we do not expect any changes to the time frame for the completion, given the fact that the construction so far is ahead of schedule.