OUTLOOK AND STRATEGY
After many years of positive performance, 2008 was a turbulent year for the Group. World-wide financial markets and economies suffered as a result of the credit crunch, with very negative pressure on prices and valuations of most of the asset classes including investment properties. In light of current market conditions, BVIC's management has undertaken a more conservative strategy aiming at minimizing corporate risk. Management has set the following goals for the next two years:
1. The capital restructuring of the Group - in particular the refinancing of short-term bank borrowings. To this end, in the first quarter of 2009, management initiated negotiations with its lending banks in order to extend the repayment schedule of the bank loans, as well as restructure the respective loan contracts. So far, we have already completed the refinancing of euro 125 million of debt, associated to the Votanikos project , representing 58% of the total short-term loans, by extending the repayment schedule up to 31/3/2010.
2. The pursuit of new office development opportunities - an absolute pre-requisite for this is to have a secure mandate in place either from a corporate tenant and/or a property buyer or investor. This will enable the Group to use both equity and debt in order to finance the development and to continue generating profit and value for its shareholders, as well as maintaining its market leading position.
3. To avoid the sale of investment assets under the current negative market conditions, with the possible exception of the tourist development on Poros-Galatas that will be completed in the next few months.
4. To obtain a positive outcome on the Votanikos case and optimize the utilisation of the development. Legal advisors have confirmed that there are alternative ways of exploiting the existing construction- including that of exploiting the previous use of land and building coefficient of the entire original land plot purchased by BVIC.
5. To maintain the NAV at its current level and gradually increase it from next year onward, as sentiment in the sector turns positive again and asset prices recover. BVIC's NAV decreased by 23% year-on-year as lower valuations reflect current market conditions and given the negative impact of the suspension of the Votanikos development on the portfolio valuation.
NAV
Net Asset Value per share before deferred tax stood at euro 14.66 a 26.6% year-on-year decrease. NAV per share after deferred tax stood at euro12.06, a 22.8% decrease compared to 2007. The decrease in NAV was mainly due to a net loss from fair value adjustment on investment properties of ?83.4 million during the year.
During 2008, the Group recorded a net gain from fair value adjustment on investment property of euro76.3 million, from the completion of 340 Syggrou Avenue and euro1.9 million from the acquisition of the horizontal ownership at 1-3 Kifissias Avenue. These gains were offset at year-end by the impairment of the value of the land plot in Votanikos (Aghiou Polycarpou and Aghia Anna Str.) which represented a loss of euro52.5 million , as well as a decrease of euro109 million in the fair value of the investment property portfolio based on current market conditions.
EARNINGS
BVIC Group revenue stood at euro 52.9 million in 2008, a decrease of 47.8% compared to 2007. This was mainly due to the fact that property sales in 2008 were euro4.7 million, whereas property sales in 2007 were euro 55.9 million. More specifically, the sale of residential assets at Patmou and Agrafon Street, and Gymnastiriou Str. - N. Erythrea generated ?4 million in 2008, whereas in 2007 sales from the Hellenic Exchanges Complex generated euro53.5 million in revenue. The Group's rental revenue increased by 6.2% in 2008 to euro 46.8 million, as a result of new lease agreements that came into effect during the year, as well as rent adjustments on the existing lease agreements that include an annual upward revision based on Greek CPI plus 100 basis points.
BVIC Group's loss before interest, tax, depreciation and amortization (EBITDA) stood at euro 96.2 million in 2008, compared to earnings of euro 23.5 million in 2007. This was mainly driven by a net loss from fair value adjustment on investment properties of euro 83.4 million in 2008, compared to a euro 5.4 million net gain in 2007. The revaluation loss in 2008 stemmed mainly from a decrease in the value of the land plot in Votanikos, as well as the effect of the financial crisis on current market values of the property portfolio, that more than offset a revaluation gain from the completion of 340 Syggrou Avenue. The Group's net finance expenses stood at euro 75 million in 2008 compared to euro35 million in 2007, mainly due to a net loss from fair value adjustment of the interest rate swap agreements which amounted to euro 32.4 million. This negative variation to the fair value arises mainly from the variability of the interest rate curves and the uncertain conditions prevailing during the last months of 2008. The new borrowings amounting to euro 218.9 million with the intention of financing the under construction properties also led to an increase in net finance expense taking the increased interest rates into consideration. This led to a loss before tax of euro 171.8 million compared to euro 11.6 million in the previous fiscal year.
In September 2008 corporate tax legislation changes were announced and enacted. Corporate income tax rates will gradually decrease by 1% annually, from 25% in 2008 and 2009, to 20% in 2014 and beyond. As a result of these changes in corporate tax legislation, the Group's deferred tax liability was reduced by euro 23.6 million.
The Group's loss after tax for the year was euro 120.9 million, compared to a loss after tax of euro 7.8 million during 2007.
INVESTMENT PROPERTIES
BVIC's investment property portfolio stood at euro 1,212 million, as at 31 December 2008, a 1.6 % decrease from the 2007 value of euro 1,232 million. The decrease in investment properties stemmed mainly from fair value adjustments to the property portfolio based on current market conditions. The Group's investment property and property, plant, and equipment value increased by more than 100% according to the balance sheet figures from euro 456.5 million in 2003 to euro1,222.8 million in 2008 (an increase of approximately 167.9%) reflecting the Group's strategy during recent years to develop, retain and exploit its development properties rather than selling them.
DEBT
The Group's bank debt (current and non-current) increased by 20.7% to euro 263.0 million in 2008 mainly due to new loan facilities of euro 113.7 million to cover the development costs at Votanikos, Poros and Sounio, as well as to provide working capital.
BVIC Group's finance lease liabilities (current and non-current) increased by 20.1 % vs 2007 to euro 497.8 million. During 2008, the Group entered into two new sale agreements for a total of euro 88.3 million, for two new additions to its investment property portfolio. The first sale and leaseback agreement refers to the recently completed 340 Syggrou Avenue, and the second to the recently acquired horizontal ownership at 1-3 Kifissias Avenue. Additionally, the company proceeded with the refinancing of its sale and leaseback agreement for Delta Falirou Complex II, based on the rental growth that has occurred over the last few years from the lease agreement adjustment of Greek CPI and 100 bps. This resulted in an increase of the value of Delta Falirou Complex II, amounting to a total additional notional amount of euro 17 million for the asset.
DIVIDEND
The Company will not distribute a dividend to its shareholders for the fiscal year of 2008. This is a result of limited property sales in 2008, and a significant development pipeline under construction.