The project in Ploiesti, called Zenith and developed by its local subsidiary Magnolia, was in an advanced stage of planning, the fund says, and has short-term debt of EUR 4 million, repayable on 20 July 2009. It also owes EUR 2.7 million to a group of creditors for planning and design.
“The board is currently negotiating a standstill agreement with these creditors so that the company can suspend the project until the economic climate improves, and will seek to re-finance Magnolia's short term debt,” the AIM-listed fund has announced. The company has so far invested EUR 21.4 million in the Ploiesti project, which should be built on a 99,000-sqm site.
The fund's other project in Romania, a residential compound in Mogosoaia, north-west of Bucharest, will start its sales and marketing campaign in February this year.
The project, called Evergreen Residences, is a joint venture (JV) between the fund and the developer Alchemy Development Management, headed by Ali Chemais.
The property fund had bought 50 percent of the project from Alchemy Development in 2007, for some EUR 13 million. The project was then expected to comprise over 1,000 apartments in 14 blocks plus associated retail and leisure facilities, and phased over four years, with a start date in 2008. The JV partners now intend to start construction works on the first phase in March this year, and to build 278 apartments in total.
To reduce the risks involved, the first phase will be broken down into three sub phases, each of which could be stand-alone. The first would consist of 64 apartments, the second of 60 and the third of 154, according to Lewis Charles.
The average target sales price for the first 64 apartments is EUR 1,200 per sqm, while the construction price target for this phase is EUR 600 per sqm, says the fund. It has already secured a EUR 10 million loan from Unicredit bank.
“Given the planned phasing of construction and sales, it is expected that this facility will be sufficient to cover all construction costs
and professional fees for the whole of the first phase,” say fund representatives.