RTM suspends newer schemes, plans sell-off

Moscow-based developer RTM Group has temporarily suspended investment in projects that are still at an early stage and plans to sell up to $300 mln (EUR 240 mln) of properties to reduce debt.

RTM, which was established in 2006, said that the package of measures is a response to the worsening economic climate. Announcing its half-year results, OJSC RTM, RTM's parent company, said the net debt of $482 mln (EUR 385 mln), amounts to 49% of the value of the investment portfolio, which, it said, was an 'acceptable ratio' for a development company active in the investment stage.

Fitch Ratings cautioned in October that debt-laden Russian property development companies are likely to be among the worst hit by the deteriorating financing environment.

RTM said this week that the new strategy is aimed at 'raising financial stability and reliability of the group' in the new economic environment.

The company's portfolio includes 56 projects in various cities of Russia with 376,154 m² of leasable space. Forty seven properties are investments that provide strong and predictable cash flow; six properties are in the course of development; and three properties held for development.

RTM has earmarked about 45% of properties held as investments in terms of total area, or 16% of the portfolio in terms of total area, for sale up to the end of the first quarter of 2009. The cumulative value would be between $92-300 mln (EUR 73-240 mln) and the proceeds will be used primarily to reduce debt.

The decision to halt newer developments affects the large shopping and entertainment schemes in Samara, Bryansk, Odintsovo in the Moscow region and the Kushlevka district of St Petersburg. The developer will focus instead on exploiting completed investment projects and completing projects which are in the final stages. These include the shopping and entertainment centre schemes near the Kuptchino district in St Petersburg and in the city of Lipetsk.

The development of the malls in Odintsovo and Kushelevka in St Petersburg will only be continued only if the company receives financing from co-investors.

In its filing of its IFSR-compliant interim statement, OJSC RTM reported pre-tax profit of $49.9 mln (EUR 40 mln) for the first six months of 2008. Net income came to $34.7 mln.

The company said it generated revenues from investment property of $36.3 mln in the first half of 2008, a 45.5% increase on the same period the year before.

Net financial debt grew by 59.3% as compared to the same period in 2007 and amounted to $482.3 mln. Cash and cash equivalents amounted to $41 mln.

The market value of the OJSC RTM investment portfolio as of end-June, as estimated by Colliers International, amounted to $983.4 mln, a 32.4% increase compared to the previous appraisal. Net asset value grew by 14.4% as compared to the same period in 2007 and amounted to $538.4 mln, or $3.8 per share.