Cinema City sells two malls in Bulgaria for EUR 85m

CEE multiplex cinema operator Cinema City International (CCI) has agreed the sale of its Bulgarian real estate business to Israeli investor Israel Theatres for around EUR 85 mln. In a statement on Wednesday, the company said that the portfolio includes the Mall of Ruse which is expected to open later this year and the Mall of Stara Zagora which is at planning stage. Both assets are managed by the Resb unit, which is also part of the sale.

'Shopping mall development provided Cinema City with an important early strategic advantage as part of our original entry into the Polish and Bulgarian markets,' said Moshe Greidinger, CEO of Cinema City and shareholder in Israel Theatre. 'Today, shopping mall development has become less important. In addition, difficult conditions in the real estate market are also making quick exits on such properties more difficult'. According to Greidinger, the transaction will allow Cinema City to focus on growing its cinema business and reduce its outstanding debt.

Under the term of the agreements, Israel Theatres will assume all of CCI's outstanding debt obligations in Bulgaria, including completing CCI's commitments relating to the sale of Mall of Plovdiv, which was divested last year. Israel Theatres will pay EUR 70 mln at the closing of the transaction, with the remainder to be esboursed within nine months after the opening of the Ruse mall. In addition, Israel Theatres will give CCI a percentage of any gains it realises from selling the Bulgarian real estate assets at any time within three years of the closing date.

CCI said it is booking a gain of approximately EUR 3.5 mln from the sale. The proceed of the transaction will be used to reduce its debt, while the excess cash will help fund the expansion of its movie theatre activities. The closing of the transaction is expected by the end of March 2010.

'Naturally, because Israel Theatres and Cinema City are related parties, we are relying on an independent third party valuation to determine the fair market purchase price and we are asking that the final decision on the transaction be made by a special independent committee of the supervisory board of Cinema City,' concluded Greidinger.

Cinema City International is the largest multiplex cinema operator in Central and Eastern Europe and in Israel. The company operates 69 multiplexes with 668 screens, in six countries - Poland, the Czech Republic, Hungary, Romania, Bulgaria and Israel.