CRETAN GROUP PLC
28 April 2010
TYPE OF ISSUE: INTRODUCTION
APPLICATION FOR ADMISSION TO PLUS
The Directors of CRETAN GROUP PLC ("the Company") are pleased to announce that
the Company has applied for admission for its securities to be traded on the
PLUS – quoted market.
LISTING DETAILS
SECTOR CLASSIFICATION: Real Estate
PRINCIPAL ACTIVITIES: Real Estate Development and Investment
CORPORATE ADVISER: Axiom Capital Limited
ISSUE
Securities 199,999,869 Ordinary Shares
OVERVIEW
1. INTRODUCTION
The Company is an investor in real estate on the island of Crete through its
subsidiaries. The Company will monitor the local real estate market and may
undertake development activity within its portfolio if appropriate. The
Company is a holding company for Cretan Paradise Gardens Ltd, Elios of Itanos
Cyprus Ltd and Cretan Nature Cyprus Ltd, their UK and ultimately their Greek
subsidiaries. The Company was established in 2009 and acquired three companies
incorporated in Greece: Paradeisenia Perivolia SA, Helios Itanou SA and
Kritiki Fisi SA. The three Greek subsidiaries own real estate assets. All the
subsidiaries have wide range of objects, including the carrying on the buying,
development and sale of real estate and hotel property development. It is the
intention of the Directors that all commercial activities undertaken by the
Company will be carried out by its Greek subsidiaries.
2. CURRENT AND FUTURE DEVELOPMENTS
To date the Group has invested in and owns developable land in three different
areas in Crete: Itanos, the Makris Yialos and Ano Perivolakia area and
Elafonisi.
The Itanos Properties
The Group's largest real estate holding is located in Palaikastron within
the Itanos municipality. The first plot is located in the Skoinias area. The
plot has a total area of 796,030 sqm and the second plot is located in the
Plako area and has a total surface of 880,653 sqm.
Plot in Skoinias
The plot falls outside the town's demarcated planning area, however according
to the final proposition of the local authorities the whole area of the plot
is indented to be categorised as PERPO area, i.e. Area of Specific Planning
Regulations. The areas around plots owned by the Group are categorised as
Natura or archaeological areas that may not be developed. There are views to
the sea from the plot. Danos AtisReal valued the property at 80,000,000 Euros
in June 2009.
Plot in Plako
This plot falls outside the town's demarcated planning area, however it
may be developed according to the planning regulations regarding plots outside
the town planning zone. Danos AtisReal valued the property at 34,200,000 Euros
in June 2009.
Lasithi and Sitia area
Lasithi is the easternmost prefecture on the island of Crete, to the east of
the prefecture of Heraklion. Its capital is Agios Nikolaos, the other major
towns being Ierapetra, Sitia and Neapoli. The Sea of Crete lies to the north
and the Libyan Sea to the south. To the east of the village of Elounda lies
the island of Spinalonga, formerly a Venetian fortress and a leper colony. At
the foot of Mount Dikti lies the Lasithi Plateau, famous for its windmills.
Vai is well-known for its palm forest and attracts visitors from all over the
world. Due to its attractive beaches and its mild climate year-long, Lasithi
attracts many tourists. Mass tourism is served by places like Vai, Agios
Nikolaos and the island of Chrissi. More off-beat tourism can be found in
villages on the south coast such as Myrtos, Makrys Yialos, Xerokambos and
Koutsouras. The prefecture is home to a number of ancient remains. Vasiliki,
Fournu Korfi, Pyrgos, Zakros and Gournia are Minoan ruins, Lato and Itanos
were Doric towns.
Sitia lies to the east of Agios Nikolaos and to the northeast of Ierapetra.
The town is one of the economic centers of the Lasithi region. European route
E75, which ends in Vardo, starts in Sitia. The local airport is under
regeneration and the road infrastructure in the prefecture is being improved.
Due to the infrastructure works in Sitia and the regeneration of the local
airport, Sitia has attracted many investors. Accordingly, the Directors
believe that the land adjacent to the sea has good development potential.
Attracted by its natural beauty, a number of local and foreign investors have
purchased land there.
Makris Yialos and Ano Perivolakia properties
Makris Yialos
The total area of the plot is 558,125 sqm and was valued by Danos AtisReal at
9,100,000 Euros in June 2009.
Ano Perivolakia village
The Group owns an old village called Perivolakia in the Perivolakia
municipality, which has been uninhabited for more than 20 years. The village
has a total area of 60,000 sqm. The Group plans to develop 300 high-end
residential houses of 100 sqm each by grading planning permission. The village
and the land were valued by Danos AtisReal at 6,000,000 Euros in June 2009.
Plot of Ano Perivolakia
The land is contiguous to the old village of Perivolakia. The total area of
the land is 804,716 sqm. The plot consists primarily of a plateau, surrounded
by mountains. According to the Roger Jones Golf Design Company's report,
supplied in August 2008, the land is ideal for golf development. Roger Jones
is a professional golf course design, project management and consultancy firm
from Ireland. The Company plans to develop a golf club in Crete on this plot.
The land was valued by Danos AtisReal at 32,200,000 Euros in June 2009.
Elafonisi property
Chania prefecture covers the westernmost quarter of the island. Its capital is
the city of Chania. The western part of Crete is bounded to the north by the
Cretan Sea and to the west and south by the Mediterranean Sea. The prefecture
also includes the southernmost island in Europe, Gavdos .
Elafonisi is an area located at a distance of about 80 km from Chania.
Elafonisi has a sandy beach with blue and green sea with a small islet
fronting the beach. The wider district of Elafonisi is of special
environmental interest and it is categorised as a "Natura" area. Some
endangered species of flora are found here. The wider area of Elafonisi is
well known for its natural beauty.
The Group's property is a plot situated adjacent to the sea. The total area of
the plot is 330,000 sqm and the length of the property's seashore is
approximately 5,000 metres with two natural shaped beaches. There are sea
views, including the islet of Elafonisi from the plot. The land was valued by
Danos AtisReal at 40,450,000 Euros in June 2009.
The following table summarises the properties mentioned above:
m2 Market Value (EUR)
Owned by Helios Itanou SA
Itanos Properties Skoinias plot 796,030 80,000,000
Plako plot 880,653 34,200,000
Owned by Paradeisenia
Perivolia SA
Makris Yialos properties Makrygialos 558,125 9,100,000
Ano Perivolakia 60,000 6,000,000
village
Ano Perivolakia 804,716 32,200,000
plot
Owned by Kritiki Fisi SA
Elafonisi property Elafonisi plot 330,000 40,450,000
TOTAL 3,429,524 201,950,000
The market values referred to in the table above were calculated by Danos
AtisReal in June 2009 using a sales comparison approach that involves
comparing the land to be valued against similar properties recently sold or
offered for sale with appropriate adjustments being made to account for
differences such as time of sale, location, type, age, condition of
improvements and prospective use. All valuations are also based on various
assumptions including, for example, in relation to some plots, that planning
regulations are in force.
Note that some properties are jointly owned by the Group and third parties.
The valuation only reflect the land and parts of land fully owned by the Group.
Investment strategy
In essence the Company is a "land bank", an entity investing in and holding
land. Management views land investments as a stable, long term strategy and
expects a high increase to its properties' value. The Group is planning to
acquire additional properties nearby the existing ones. The Group has a low
debt ratio and management plans to use this and its excellent relationships
with local banks to finance new acquisitions.
Management is confident that within the next 6 months, the Group could acquire
additional properties at very attractive prices, by purchasing multiple
adjacent units and are currently examining a number of properties nearby its
other properties in the Itanos municipality. By building larger contiguous
holdings from the acquisition of small plots, the Directors believe that value
is substantially increased because development choice and thus, potential, is
enhanced. These new properties all have a large coastal area and are adjacent
to the Group's property. Management expects the new additions to increase the
value of existing land as well.
In addition the Company appointed a European firm for the design of a golf
course and plans to apply for a yacht marina nearby its Itanos property.
Finally management expects an increase to the value of its main property
because of the completion of the new Sitia International Airport within the
next 8 months.
Although a land bank, Cretan Group has a commercial approach and is constantly
exploring opportunities for joint ventures both with investors and hotel
operators. Currently the Group is negotiating with a number of investors and
strategic partners from the Middle East.
Future developments
Due to the current economic crisis, the Group will not start the development
of its properties at least for the next six months. However management expects
a high increase in its properties' value.
The Company intends to develop parts of the land on a project-by-project
basis, with most of the projects being developed on phases over time as the
market and demand dictates. Currently, the projects under planning are those
mentioned above: the village in Perivolakia and a golf course adjacent to it.
The project will be done in phases and in total will consist of 1700 villas
(luxury houses), a 5-star hotel, consisting of 600 beds and a golf course
designed by Roger Jones. Management intends to develop other parts of the real
estate of the Group at a later stage. The expected terminal cost of the
combined project is 400 million Euros and is expected to yield a return on
investment of around 80%. The development cost is expected to be:
* Stage 1: Villas: Euro 170,000 sqm, cost/sqm Euro 1500. Total development
costs: Euro 255 million
* Stage 2: Golf course: Euro 20 million
* Stage 3: Hotel: Euro 40 million
* Stage 4 Marina: Euro 10 million
* Infrastructure cost: Euro 40 million
* Theme park and recreation facilities: Euro 35 million
Permission to develop is as per zoning by the Greek Government and local
municipalities. Each specific project's plan is approved by the municipalities
as the specific plans (designs) are submitted. Plans are only submitted once
funds are raised to cover the cost of drafting and approval. As for the
development in Perivolakia, part of the plans and designs are complete.
Funding for the project is anticipated to be obtained from a combination of
funding from management, bank financing and share issues on PLUS as indicated
below.
Funds for development of projects
The Company has several sources which it intends to rely on for project
financing. These are, inter alia:
* Financing
Although current market conditions, including that of the Greek economy may
not be favourable, management expect that sufficient funds would be made
available to the Group for development. Such financing would be discussed with
banks and other lending institutions and would be done project by project.
* Funding from the founders and directors
The directors may, if they so choose, utilise funds available from other
investments and businesses to fund the development projects of the Group.
* PLUS markets
Management intends to raise funds on PLUS by issuing shares. Investment
interest has been expressed by a Cretan bank.
3. DIRECTORS
The Board currently comprises of five Directors whose brief biographies are
set out below. Details of their letters of appointment are set out in
paragraph 7 of Part V of this document. Further details of the Directors'
directorships both current and in the past five years are set out in paragraph
6 of Part V of this document.
Georgios Vlamakis, age 62, Chief Executive and Chairman
Georgios Vlamakis is Chief Executive and Chairman of the Board of Directors
and the principal shareholder of the Company. He graduated from Architects
Engineering Department Torino's University, Italy, in 1979 and has since been
involved with the development and construction of hotels, villas, and
residences. Mr Vlamakis owns large lots of land in Greece, including coastal
plots on Crete and is also director and shareholder of several other Greek
companies. He speaks Greek, Italian, French and English.
Paraschos Koufos, 52, Finance Director
Mr Koufos graduated from University of Thessaloniki, Greece with a BA (Hons)
in Economics. Mr Koufos is a Chartered Accountant in Greece and Senior Partner
for a major accountancy firm in Chania Crete. For 15 years he served as a
Finance Director for a major retailer in Crete with annual turnover of
40,000,000 Euros. In October he joined the Group as Finance Director. Mr
Koufos is fluent in Greek and has moderate understanding of English.
Nikolaos Dialynas, 35, Non - Executive Director
Mr Dialynas graduated from Univeristy of Paris, Sorbonne with a Bachelor and
Masters Degree in Geography and Management. Since 2003 he worked on various
projects for the Council of Istria in Crete. From 2007 and until September
2009 he served as Director at the Political office of the Minister of Defence
of Greece. In October 2009 he joined the Group as Non Executive Director. Mr
Dialynas is fluent in Greek, French and English.
Georgios Athanasiades (George Attens), 61, Non-Executive Director
Born in Cyprus in 1948, he moved to London permanently in 1972. He originally
worked in a confirming house in the City of London before joining Local
Government and progressing to Chief Executive Officer in a North London
Municipality. In 1988, George joined Lazari Investments Ltd as a General
Manager and has seen the company grow from a small property investment
portfolio to a substantial London property player with a portfolio of GBP1.5
billion. In 2002, he set up his own property venture as Mayfair London
Properties, specialising in the sale of London and overseas properties with
emphasis on Crete and Cyprus and focusing on international sales of hotels and
development sites. In 2002, George returned to Lazari Investments while
continuing to deal with international investments. George has an in-depth
knowledge of all aspects of the UK and Greek property markets from
acquisitions to sales, to day-to-day management, development, insurance and
maintenance. He studied journalism and linguistics and speaks English, French
and Greek and passable German and Italian.
Stavros Stavrinides, 30, Non-Executive Director
Born in Nicosia, Cyprus in 1979 he studied Law at University of East Anglia
(UEA), and he has a Master in Commercial Law from Cardiff University. In 2003,
he moved to Cyprus, where he completed his law training and was then admitted
to the Cyprus Bar Association. Since then, he has practiced law, handling
high-profile corporate cases in Cyprus. He is director (as nominee) in certain
international (non-resident) companies and deals with formation, management
and administration of companies. He has clients from Russia, Ukraine, Latvia,
Panama, Greece, Baltic Countries and the United Kingdom. He also deals with
mergers & acquisitions of companies. In 2006, he was elected a member of
the Strovolos Municipality, which is located in Nicosia and is the second
biggest Municipality in Cyprus. In 2006, he has been appointed Member of the
Strovolos School Supervisory Council. He is a Prosecutor of the Cyprus
Football Association before the Football Judicial Committee, a Member of the
FUTSAL Judicial Committee of Cyprus Football Association, and a Member of the
Board of Justice of European Table Tennis Union. He speaks fluent Greek and
English.
The directorships of the Directors currently held and held over the 5 years
preceding the date of this document (other than of the Company and its
subsidiaries) are as follows:
Director Current Directorships Past Directorships
Georgios Vlamakis Paradosiaki Kpiti SA None
George Vlamakis SA
Moysagores SA
Kpitiki Filoxenia SA
G. Vlamaki Minoiici
Katikia Ltd
George Attens GAV Com-Traders Mayfair London Properties
International Ltd Ltd
GAV Com-Traders
International Ltd - Cyprus
Paraschos Koufos None None
Nikolaos Dialynas None None
Stavros Stavrinides GE European Financial None
Holdings Ltd
None of the Directors have any unspent convictions, have been declared
bankrupt or have been the subject of an individual voluntary arrangement. None
of the Directors were directors of any company at the time of, or within the
12 months preceding, its bankruptcy, receivership, administration,
liquidation, company voluntary arrangement or composition or arrangement with
its creditors generally. There have been no public criticisms of any of the
Directors by any statutory or regulatory authority and no Director has ever
been disqualified by a Court from acting as a Director of a Company or from
acting in the management or conduct of the affairs of any company. No Director
was partner in any partnership at the time or within 12 months preceding its
compulsory liquidation, dissolution, administration or partnership or
voluntary arrangement. None of the Directors has been contacted by the
Department for Business, Enterprise and Regulatory Reform or equivalent
regulation in connection with their conduct with respect to any of the
companies set out above.
4. REASONS FOR THE ADMISSION TO PLUS
The Directors believe that the benefits of the PLUS trading facility include:
* Raising the Company's profile in its industry sector;
* The ability to raise capital in the future;
* The ability to attract potential merger and acquisition interest;
* Enhancing profile with contractors, local authorities and customers.
5. LOCK IN ARRANGEMENTS
On the start of trading on PLUS, the Locked-In Persons will be interested in
190,000,001 Ordinary Shares which together represents 95% of the Issued Share
Capital.
The Locked-in Persons have each undertaken that, save in limited circumstances
or otherwise with the prior written consent of Axiom and PLUS, they and their
Connected Persons will not during a period of twelve months from the start of
trading on PLUS, dispose of any interest in the Ordinary Shares held by them,
other than shares released for liquidity purposes.
The locked-in persons have agreed to make available shares with the consent of
PLUS and Axiom at market prices to meet market liquidity.
6. SIGNIFICANT RISKS
On 10 February 2010 Axiom received an anonymous email communication from an
individual in Greece who has subsequently refused to identify himself or
respond to emails from Axiom. The anonymous writer suggested that the land at
Itanos, independently professionally valued by Danos at Euro 80 million on the
basis of PERPRO [general planning permissions] may be less valuable because
the Itanos Municipality had decided to appeal against the planning. The
Directors and the Company's Greek solicitors have made enquiry of the
Municipality which confirmed that the planning status is not subject to appeal
and therefore the Directors consider that no change in valuation is required.
Property Risk
Land valuations contained in this document are based on information derived
from valuation reports dated 22 June 2009. Valuations may have changed from
that date.
Property and property related assets are inherently difficult to value due to
the individual nature of each property and the fact that there is not
necessarily a liquid market or price mechanism. As a result, valuations may
be subject to substantial uncertainty. There is no assurance that the
estimates resulting from the valuation process will reflect the actual sales
price even where such sales occur shortly after the valuation date. The
performance of the Group would be adversely affected by a downturn in the
relevant property market in terms of capital value.
Market values for properties owned by the Group will be generally affected by
supply and demand for properties, which in turn may be affected by overall
conditions in the Greek and Cretan economies such as growth in gross domestic
product, employment trends, inflation and changes in interest rates. Changes
in gross domestic product may also impact employee levels, which in turn may
impact the demand for properties.
Both property values and rental income may also be affected by other factors
specific to the real estate market, such as competition from other property
owners, or the perceptions of prospective buyers or tenants of the
attractiveness, convenience and safety of the properties.
In circumstances where the Group provides a deposit in respect of a property
purchase (or an option to purchase property), the Group may be liable to
forfeit such deposit to the extent that it is not able to pay the outstanding
balance in relation to the purchase. Any such forfeiture may adversely affect
the Group's net asset value ("NAV") and therefore the value of Ordinary Shares.
Investments in properties are relatively illiquid and more difficult to
realise than equities or bonds. The price of the Company's shares may not
accurately reflect the value of its underlying assets at or between valuations.
Financing risk
The Group will require substantial funds to develop its land. The Group will
not be able to start or complete its plans if it cannot raise sufficient funds
on acceptable terms.
Unsuccessful transaction costs
There is a risk that the Group may incur substantial legal financial and other
advisory expenses arising from unsuccessful transactions which may include
expenses incurred in dealing with transaction documentation and legal,
accounting and other due diligence.
Land property ownership rights
Whilst the Group will use all reasonable endeavours to operate property owning
structures that comply with relevant laws and regulations (as well as tax
provisions) relating to land and property ownership by foreign companies as
well as with a view to mitigating the tax effect of local tax regulations,
there can be no guarantee in the future the countries in which the Group
operates and/or invests will not adopt laws and regulations which may
adversely impact on the Group's ability to own and operate land and property
and the returns thereon. Accordingly, in such circumstances, the returns to
the Group may be materially and adversely affected.
Regulatory regime and permits
The profitability of the Group will be in part dependent upon the continuation
of a favourable regulatory climate with respect to its land ownership. The
failure to obtain or to continue to comply with all necessary approvals,
licences or permits, including renewals thereof or modifications thereto, may
adversely affect the Group's performance, as could delays caused in obtaining
such consents due to objections from third parties.
Potential environmental liability
Under various laws and regulations, an owner of property may be liable for the
costs of removal or remediation of certain hazardous or toxic substances on or
in such property. Such laws often impose such liability without regard to
whether the owner knew of, or was responsible for the presence or removal of,
these substances. The owner's liability as to any property is generally not
limited under such laws and could exceed the value of the property and/or the
aggregate assets of the owner. The presence of such substances, or the
failure to properly remediate contamination from such substances, may
adversely affect the owner's ability to sell the real estate or to borrow
funds using such property as collateral, which could have an adverse effect on
any return from such investment.
Corruption in the Group's target market
Corruption or any distortion of official process within territories where the
Group make investments may negatively affect those economies and therefore
could have an adverse impact on the Group's performance.
Joint venture risk
The Group may establish joint ventures with other entities in order to
purchase or develop any property. To the extent that this is the case, the
Group's position may be compromised by circumstances affecting the joint
venture partner, such as insolvency or litigation, or in the event of
disagreement with the joint venture partner on investment strategy.
Illiquidity of the property market
The property market is affected by many factors, such as general economic
conditions, availability of financing, interest rates and other factors,
including investor/buyer supply and demand, that are beyond the Group's
control. The Group cannot predict whether it will be able to develop and/or
sell its properties and land for the price or on the terms set by it, or
whether the price or other terms offered by a prospective purchaser would be
acceptable to it. Nor can the Group predict the length of time needed to find
a willing purchaser and to complete the sale of a property.
Impact on law and governmental regulation
The Group and developers with whom it deals will need to comply with laws and
regulations relating to planning, land use and development standards. The
institution and enforcement of such laws and regulations could have the effect
of increasing the expense and lowering the income or rate of return from, as
well as adversely affecting the value of, the Group's property portfolio.
Changes in laws relating to ownership of land could have an adverse effect on
the value of Ordinary Shares. New laws may be introduced which may be
retrospective and affect environmental planning, land use and development
regulations.
The Group could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for any particular investment, as well as by
the application to the Group of any legal or administrative restriction on
making investments.
Construction and development risks
The Group intends to develop and manage real estate, which will subject it to
the general risks associated with construction and development projects. The
Group's development and construction activities may involve the following
risks:
* the Group may be unable to proceed with the development of properties
because it cannot obtain financing on favourable terms;
* the Group may incur construction costs for a project which exceed
original estimates due to increased material, labour or other costs, which
could make completion of the project uneconomical because the Group may not
be able to increase rents to compensate for the increase in construction
costs;
* the Group may be unable to obtain, or face delays in obtaining required
land-use, building occupancy and other governmental and local authority
permits and authorizations, which could result in increased costs and could
require the Company to abandon its activities entirely with respect to a
project;
* the Group may be unable to complete construction and leasing of a
property on schedule, resulting in increased debt service expense and
construction or renovation costs and may result in termination of existing
investment agreements, resulting in claims by third parties for damages and
termination of the respective land leases;
* the Group may not be able to pre-sell the expected quantity of
residential space, where relevant, or may only be able to pre-sell units at
a lower than expected price level;
* the Group may lease developed properties at below expected rental rates;
and
* occupancy rates and rents at newly completed properties may fluctuate
depending on a number of factors, including market and economic conditions,
and may result in the Group's investment not being profitable.
Any negative change in one or more of these factors listed above could
adversely affect the business, financial condition and results of operations
of the Group.
Legal and regulation risks
Various laws and regulations, including fire and safety requirements,
environmental regulations, land use restrictions and taxes may affect the
Group's properties. If the properties do not comply with these requirements,
the Group may incur governmental fines or private damage awards. New or
amended laws, rules, regulations or ordinances could require significant
unanticipated expenditures or impose restrictions on the development,
construction or sale of properties. Such laws, rules, regulations or
ordinances may also adversely affect the Group's ability to operate or resell
properties.
7. SHAREHOLDING
The Company has the following substantial shareholders:
Number of Percentage of Issued
Ordinary Shares Ordinary Shares
Georgios Vlamakis 180,000,001 90.00%
Nikolaos Giannakakis 10,000,000 5.00%
8. SECURITIES
The Company is admitting its issued Ordinary Shares, each conferring one vote
to the owner thereof, to PLUS.
9. ADVISER WARRANTS
Company has granted Warrants to Axiom Nominees Limited and Plus Investments
Limited which grants each the right to subscribe for 5,000,000 Ordinary
Shares, representing 2.4% of the fully diluted share capital of the Company,
at a price equal to the lower of 72 pence per share and the midmarket
Admission Price on the Company's first day of trading on PLUS for a period up
to five years from the date of Admission.
ANTICIPATED ADMISSION DATE: 14 May 2010
For further information, please contact:
Cretan Group plc: Stavros Stavrinides +357 9960 9829
Axiom Capital Ltd: David Sinclair or Kobus Huisamen +44 20 8455 0011
A copy of the Admission Document is available from Axiom Capital Ltd, Roman
House, 296 Golders Green Road, London, NW11 9PT, or at
enquiries@axiomcapital.co.uk
The Directors of Cretan Group plc take responsibility for the content of this
announcement.
|