Sistema Hals to focus on financed projects only

Sistema-Hals has said that it will concentrate solely on projects that have financing on place or can be carried out with co-investors. The Russian and London-listed developer announced the move as part of a strategic review to help it weather the global liquidity crisis.

The company is focusing on the first category of its project portfolio which consists of projects with financing either in place or expected to come, that can be carried out with co-investors and are either at or ready to move into construction stage. The second category of projects 'offering long-term prospects' or at an early stage of development have been put on the back burner.

These projects in the first category include the Leningradsky Towers business centre (39 Leningradsky Prospekt, Moscow), in which Siemens has a contract to acquire one of two towers being constructed. The completion deadline depends on the terms of financing arrangements to be negotiated, Sistema-Hals said.

Other category one projects include Emerald Valley residential complex; the Leto retail and entertainment centre. This scheme has secured project financing from Eurohypo and is being carried out jointly with French retailer Apsys. The completion deadline has been set for the third quarter of 2009.

Sistema-Hals said the financing required for these projects to the end of 2009 will be approximately $290 mln. Capital requirements for the second category of projects, which offer long-term prospects but are at an early stage of development, amounts to approximately USD 30 mln in 2008-2009 and will
be restricted to internal agreements which do not require material financial expenditure.

The most recent valuation of the Russian company's portfolio of projects and assets was carried out by Cushman & Wakefield Stiles & Riabokobylko on 1 July 2008. The broker valued Sistema-Hals portfolio at $3.8 mln, but Sistema-Hals said it does not think it remains accurate. 'Due to the rapidly deteriorating market conditions especially since October 2008, Sistema-Hals believes that this is not an accurate reflection of the current value of the portfolio. According to preliminary management assumptions and estimates, the primary projects in the Company's portfolio might have devalued by 15-20% to date compared to the latest valuation by C&WS&R.'

The company added: 'The rest of the portfolio is likely to have been affected to a significantly larger extent. However, these internal estimates carry a significant amount of uncertainty due to the unprecedented depth of the financial crisis and due to the current absence of transaction activity in Russia. A revised valuation by C&WS&R will be undertaken in early 2009 as part of the regular valuation reports accompanying semi-annual and annual results releases.'