DDC acquires land plots for Romanian development

Dawnay, Day Carpathian (DDC) has acquired two land plots covering a total area of 24,500 m² in Arad, Romania for a multi-purpose development project.

The purchase of the Arad development site for EUR 11.8 mln is the second of four pipeline deals identified by DDC's asset manager, Dawnay Dan Pan Terra, at the time of the company’s second fund-raising completed in May 2007. It follows on the heels of the acquisition in August of a 20,000-m² plot in Cluj-Napoca, Romania for a mixed-used development by DDC, the UK-based retail property investment company focused on Central and Eastern Europe.

DDC said Arad Development, as the project is called, will have a gross lettable area of about 29,000 m2, comprising a state of the art retail and entertainment complex. Construction is expected to begin by the end of the year and the estimated total investment is EUR 72 mln. Completion is targeted for the end of 2008. Based on a capitalisation yield of 7%, DDC said this puts the estimated project value upon completion at EUR 87 mln.

The acquisition was structured as a share purchase transaction from an UK holding company in which members of the Dawnay Group have a controlling strength. Following the acquisition, members of the Dawnay Group have agreed to subscribe for an estimated EUR 3 mln of profits from the Arad transaction in new ordinary shares of DCC. The deal represents DDC’s third investment in Romania and the fifteenth overall.

DDC said the development is to be undertaken with a local partner who has been responsible for sourcing the project and securing planning consent. DDC and this partner will operate locally through a joint venture known as Atrium Developments, which will also encompass the Cluj-Najoca Development. DDC said the local partner would be entitled to a 25% interest in all joint venture projects once a rate of return has been achieved.

Separately, DCC reported that its net profit in the first half of 2007 rose 38% to £7.16 mln (EUR 10.2 mln) from £5.18 mln in the like, year-earlier period as net rental income soared to £11.1 mln from £4.42 mln. The company reported a net asset value of 112.41 pence as of end-June against 114.5 pence at end December and said it remained on track to delivering on its dividend targets of 10 pence for 2007 and 2008.