City Mall shopping center falls in value by another 32 percent

The City Mall shopping center had lost EUR 28.5 million of its value at the end of last year, compared to the valuation mid-2008, while the drop is even greater compared to the purchase price of EUR 103.5 million paid in 2006.
“City Mall Romania has been written down by 32.3 percent due to a higher discount rate applied and higher non-recoverable costs from service charge shortfalls and property taxes as well as reductions in assumed market rental levels,” writes APN in its financial report.
The property produced EUR 2.5 million in income in the second half of last year, up on the EUR 1.9 million on H2 of 2007. The fund has secured construction permits for 5,000 sqm of offices at City Mall.
APN has a EUR 44.4 million debt facility from UniCredit Group to refinance the mall. “The current decline in valuation may become a potential materially adverse event under the loan agreement,” writes the fund. However, “a default event which would trigger the bank guarantee being recognised as a borrowing with the bank is not considered likely to occur,” it goes on.
For some of its loans, APN has reached the limit the of loan to valuation ratio, while for others the default potential is mentioned. The fund is in discussions with Deutsche Bank and RBS to restructure some of these loans.
Corina Saceanu