Corinthia Group’s North Africa real estate investor Mediterranean Investments Holding plc has reported a loss of €0.79 million for the year ended December 31, 2010, which is €19.4 million lower than projected results published in the company’s prospectus last June.
In a note in the financial results for the year, MIH warned that events unfolding in Libya may adversely affect its future performance and financial position. The company however stressed that “given the nature of the leases (of Palm City) and the fact that the company’s clientele have significant vested interests in Libya, the directors consider that the company is still a going concern”.
In the report, MIH said directors last year decided to temporarily postpone Palm City’s initial public offering in the best interest of the offering. The associated issue costs of €4.6 million have not been incurred.
MIH’s projected results had included a property uplift, net of tax of €19.1 million based on the valuation of the Palm City Residences in Janzour, on a 99-year lease.
The transfer of the lease to Palm City was not yet concluded at reporting date and the underlying valuation of Palm City Residences was based on the existing 65-year build-operate-transfer agreement.
Due to the shorter tenure of use, and the higher discount rate applied in arriving at the fair value of the project at the reporting date, the projected uplift in value did not materialise.
Turnover for the year was shy of the projected turnover by €4.3 million as although leases have been signed, tenants had not yet moved in and therefore income from these tenancies could not be accrued.
The financial results report echoed a company announcement issued in recent days. It said MIH was fully engaged in monitoring the situation on the ground in Libya and was taking immediate and appropriate action in the best interest of the tenants at Palm City, the staff, the company and its stakeholders. Palm City Residences was still operational with a reduced number of personnel as some tenants had temporarily relocated.
MIH stressed no contracts had been terminated and the directors confirmed the existing 282 signed contracts were still in full effect, most of which were paid for 12 months in advance.
Last year, MIH successfully issued its third bond, equivalent to €40 million redeemable in 2017 or earlier. The proceeds raised were mainly intended for the investment in Medina Tower and for general corporate funding.
According to the report, works on the 40-storey, €303 million Medina Tower in Tripoli “are expected to commence during the first quarter of 2011 and are expected to be completed by 2014”.
Medina Tower will comprise 238 luxury apartments, 10,400 square metres of retail space, 22,600 square metres of office space and more than 8,400 square metres of conference and health and leisure facilities, besides 900 underground parking bays.
Established in 2006 as a joint venture between the Corinthia Palace Hotel Company Ltd and the National Real Estate Company of Kuwait, MIH was converted to a public company in 2007. It was set up to become a leading real estate investor and developer through the acquisition, development and operations of projects in North Africa.