Shares of both IMMOEAST and IMMOFINANZ have both suffered heavy losses in recent days. This development was accompanied by speculations, especially on the liquidity of the companies, financing for development projects and potential risks for the financial assets of the companies. Currency translation effects in the IMMOEAST Q1 results published yesterday, although financially irrelevant, have contributed to insecurity, too.

Liquidity

The boards of both companies have already reacted on the ongoing and now extremely heavy turbulences on the global financial markets and commenced an action programme to secure the liquidity position of both companies on a sustained basis.

Part of these programme are significant reductions in the development pipeline and the sale of several properties.

As far as it concerns IMMOEAST, the development pipeline consists of projects with outstanding construction costs of approx. 4.4 billion Euro. This has been comprehensively cut by at least 2.0 billion Euro. This can be entirely made by delaying or cancelling further building stages and delaying or cancelling the delaying projects still in the planning stage. Projects already under construction will certainly be continued.

These measures will be set in all regions, especially in Romania, too. In Russia, the portfolio of standing investments consists mainly of three shopping centres in Moscow, all fully-let, mainly for the long-term to international chains. From today’s perspective, both, rental income and fair value of theses properties are fully sustainable.

Parallel, the property sales programme is to be continued, too. At the moment the sale of properties worth approx. 400 million Euro is under concrete negotiation.

Similar measures are prepared for IMMOFINANZ as well. Planned development projects are under review to evaluate, if they should be realised, given the deeply chanced financial markets environment. Delays and cancellations are possible. In the scope of the optimisation of the portfolio, several properties have been sold in recent months. This will be continued. As far as it concerns regional holdings IMMOAUSTRIA and IMMOWEST, negotiations are underway for properties worth approx. 400 million Euro.

With this, all measures have been made or commences, which, from today’s perspective, are necessary to secure the liquidity position of both companies. Additionally, other measures like the internalisation of the management and the purchase of Constantia Privatbank’s real estate division should have substantial positive effects on profitability and key corporate figures. Thanks to the realisation of these measures, the intercompany loan of IMMOEAST to parent company IMMOFINANZ can be repaid as planned. 400 million Euro redemptions are scheduled within the next twelve months.

Currency translation effects

Currency translation effects have had a large impact on IMMOEAST’s first quarter results. These effects occurred as most Eastern European currencies rose by between 5% and 9% against the EURO over the first quarter of the business year. However, these effects are of purely technical nature, influencing the balance sheet but without any influence on the financial status of the company or its liquidity. There is no real depreciation as rental rates are entirely tagged to Euro (or US dollars in Russia) and prices for purchases and sales of properties are agreed in Euro (or dollars, resp.), too.

Lehman Brothers