Secure Property Development & Invest : - Annual Report and Accounts 2018

ANNUAL REPORT

2018

Table of Contents

SECTION A- Annual Report

1.	Letter to Shareholders	3
2.	Management Report	4
2.1	Corporate Overview & Financial Performance	4
2.2	Property Holdings	5
2.3	Financial and Risk Management	8
2.4	2019 and beyond	9
3.	Regional Economic Developments	10
4.	Real Estate Market Developments	12
	∙ 4.1 Romania	12
	∙ 4.2 Bulgaria	13
	∙ 4.3 Greece	14
	∙ 4.4 Ukraine	14
5.	Property Assets	16
5.1	Victini Logistics (ex GED), Athens Greece	16
5.2	EOS Business Park - Danone headquarters, Romania	16
5.3	Delenco office building, Romania	17
5.5	Kindergarten, Romania	18
5.6	Residential portfolio	18
	∙ Romfelt Plaza (Doamna Ghica), Bucharest, Romania	18
	∙ Monaco Towers, Bucharest, Romania	18
	∙ Blooming House, Bucharest, Romania	19
	∙ GreenLake, Bucharest, Romania	19
	∙ Boyana Residence, Sofia, Bulgaria	19
5.7	Land Assets	20
	∙ Aisi Bela - Bela Logistic Park, Odessa, Ukraine	20
	∙ Kiyanovskiy Residence - Kiev, Ukraine	20
	∙ Tsymlyanskiy Residence - Kiev, Ukraine	20
	∙ Balabino Project - Zaporozhye, Ukraine	20
	∙ Rozny Lane - Kiev Oblast, Kiev, Ukraine	20

SECTION B- Financial Statements

SECURE PROPERTY DEVELOPMENT AND INVESTMENT PLC

KIRIAKOU MATSI 16, AG. OMOLOGITES,1082, NICOSIA,CYPRUS

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SECURE PROPERTY DEVELOPMENT & INVESTMENT PLC

	Key Figures	31 Dec 2018	31 Dec 2017	Change
	Total Assets (€million):	86	96	-11%
	Sold income producing	1	1	-
	commercial Properties:
	Number of income producing	5	6	-17%
	commercial Properties:
	Average occupancy rate of	87%	93%	-6%
	income producing assets:
	Operational Gearing:	39%	43%	-9%
	Average borrowing cost:	3,83%	4,67%	-18%
	Operating Income*(€million):	4,2	4,8	-13%
	EBITDA*(€million):	1,8	3,7	-51%
	Net Equity**(€million):	35,6	36,4	-2%
	Issued Shares:	127.270.481	103.589.550	23%
	NAV per share (€):	0,28	0,35	-20%

• Excluding fair value related impact (Table 1).
• Attributable to the shareholders.

This report may contain forward-looking statements about the Company. Such statements are predictive in nature and depend upon or refer to future events or conditions and may include such words as ''expects'', ''plans'', ''anticipates'', ''believes'', ''estimates'' or other similar expressions. In addition, any statement regarding future performances, strategies, prospects, actions or plans is also a forward-looking statement. Forward-looking statements are subject to known and unknown risks and uncertainties and other factors that may cause actual results, events, activities and achievements to differ materially from those expressed or implied by such statements. Such factors include general economic, political and market conditions, interest and foreign exchange rates, regulatory or judicial proceedings, technological change and catastrophic events. You should consider these and other factors carefully before making any investment decisions and before relying on forward-looking statements.

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1. Letter to Shareholders

28 June 2019

Dear Shareholders,

2018 has been a year when SPDI's vision, strategy and asset portfolio attracted a number of third parties interested in joining forces with our Company. In fact, our long standing diligent effort to establish SPDI as the regional property company of reference in South Eastern Europe, proved key to SPDI attracting such interest and most of the year was taken up evaluating various options in order to capitalize on such efforts and generate value for our shareholders. As the regional economies and related property markets SPDI is present in continued their respective growth trends, SPDI was not only able to sell one of its non-core assets in a substantial cash generating transaction in Q3, but was able to choose among the various options of value-add opportunities available to it. Specifically, as announced in December (with further updates being provided during 2019), we commenced a potential merger like transaction with the Amsterdam and Prague listed Arcona Property Fund N.V. (APF) with assets in Poland, Czech Republic and Slovakia. The closing of the transaction, should we be able to bring it to fruition and subject to the necessary approvals being obtained, as expected within 2019, will see our non-Greek assets moving under the corporate umbrella of APF and our shareholders gaining relative exposure to a much larger and broader East European regional property company, as per our original plan. The value that the Arcona transaction places on SPDI is its real Net Asset Value (NAV). Our shareholders will benefit from owning shares and warrants of APF equivalent to NAV, confirming our age old argument that the market has not reflected SPDI's true potential by applying a >50% discount to such value.

In 2018, Romania continued being the fastest growing economy of the European Union and saw property prices continue rising across all sectors, facilitating our residential sales and confirming our choice not to have gone all out on selling such assets the years before. At the same time Bulgarian property market prices, especially in the residential sector, saw a substantial increase allowing us to prepare the ground for the sale of further residential units in Boyana. Finally, Greece turned the corner and experienced for the first time in years increased output for the year, with its own property market showing signs of strengthening. This led to numerous expressions of interest for our Athens logistics terminal, a property not included in the APF potential deal.

The combination of higher values and sales prices, as well as increased interest in our assets and our platform as a whole, gives us the ability to generate more cash through the sale of non-core assets but also the confidence that one way or another we will be able to reach our objective of generating value for our shareholders through our well placed and efficiently run asset portfolio. The consolidation of our Board of Directors to an active, leaner unit and a strong advisory council we can tap on, offers management the necessary support to continue its all-out efforts and effect the moves needed to achieve SPDI's objectives and ensure that the exercises under way will result in transforming the Company.

Best regards,

Lambros G. Anagnostopoulos, Chief Executive Officer

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2. Management Report

2.1 Corporate Overview & Financial Performance

SPDI's core property asset portfolio consists of South Eastern European prime commercial and industrial real estate, the majority of which is let to blue chip tenants on long leases. During 2018, management continued to focus on its strategy to dispose of non-core assets, while at the same time continued to source partnerships which are able to effectively set the grounds for further value creation.

With this in mind, during the period the Company sold the BlueBigBox asset fully let to Praktiker, a regional DIY retailer in Craiova, Romania, generating more than €2,5m in cash.

Most importantly, in 2018 the Company, in line with its strategy to maximize value for shareholders, entered into a conditional implementation agreement for the sale of its property portfolio, excluding its Greek logistics property, in an all-share transaction to Arcona Property Fund N.V, an Amsterdam and Prague listed company that invests in commercial property in Central Europe. Arcona currently holds high yielding real estate investments in Czech Republic, Poland and Slovakia. The transaction values the SPDI assets at ~ €29m, or 225% higher than the current market value of the Company as a whole. If one takes into consideration and assumes the warrants that will be issued together with the ARCONA shares, the transaction values the SPDI assets at their Net Asset Value.

Such sale of the Company's non-Greek portfolio, together with existing debt, is to be settled through the issuance of new Arcona Property Fund N.V. shares which will be distributed eventually to existing SPDI shareholders pro-rata to their shareholding in the Company's shares.

The combination of the two complimentary asset portfolios is expected to create a significant European Property company, benefiting both the Company's and the buyer's respective shareholders.

Regarding the economic environment in which the Company operates, the Romanian economy continued to grow strongly with a 4,1% increase, whilst maintaining record low unemployment. Bucharest is bustling with property development and it is expected that the following year will set new records especially in Logistics and Office markets, backed by international and domestic investor interest.

Summary

Results

Romanian

economic

Development

s

Greece exited the financing and stabilization programme and experienced economic growth for the second consecutive year. It posted a 4%+ primary surplus, and in 2019 is expected to be able to go to the markets to support its development plans with a number of property investors knocking on its door. While a series of elections are

Greek Political and economic developments

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