XXI Century Announced Final Stage of Negotiations with DIY Operator
OREANDA-NEWS. November 19, 2012. The Company is pleased to announce that one of its wholly owned subsidiaries (Mriya-Invest LLC) is at the final stage of negotiations and anticipates signing in the near future an investment agreement (the "Investment Agreement") with a Ukrainian subsidiary of an international DIY operator, with its head office in France (the "DIY Operator").
The Investment Agreement will be in relation to the development of a DIY superstore near the Vyrlytsya lake on the Bazhana Avenue site in Kiev (the "Vyrlytsya Project").
A further announcement will be made in due course, it should be noted that there can be no certainty that the Investment Agreement will be entered into.
The size of the entire land plot which is leased by the Company from the Ukrainian authorities, including the land plot to potentially be developed for the DIY superstore (and all other potential related developments) is approximately 146,835 square meters (14.684 hectares). The size of the whole development area including the DIY superstore (and all other potential related developments) will be approximately 98,487 square meters (without parking). The size of the land plot for potential development of the DIY superstore upon completion is approximately 1.6354 hectares. The size of the premises of the DIY superstore will be approximately 15,058 square meters.
The Investment Agreement
Development costs
The development cost of the DIY superstore is anticipated to be approximately USD 28 865 884, which will be provided by the DIY Operator to the Company in stages dependent on completion of each phase of the development, namely: (i) the payment of 30% of the investment cost, payable as two prepayments; (ii) the payment of 70%, in tranches, of the investment cost following completion of the appropriate construction development stages according to the timetable set out in the Investment Agreement: completion of the construction of the DIY superstore; obtaining the ownership certificate in relation to the DIY superstore and transfer of it to the DIY Operator; opening of the shopping centre and solution of all land title and property management issues according to the Investment agreement and procurement of the bank guarantee of performance of warranties with respect to the ready property.
Bank Guarantees
The Company under the Investment Agreement will have an obligation to provide the DIY Operator with a bank guarantee of approximately 30 per cent of the value of the Investment Agreement. The DIY Operator will in turn also provide the Company with a bank guarantee of approximately 70 per cent of the value of the Investment Agreement. The Investment Agreement is conditional upon provision of these bank guarantees. The deadline for exchange with the bank guarantees will be set out in the Investment Agreement.
Company obligations under the Investment Agreement
The Company will be required to settle all land issues as required for the Vyrlytsya project, to complete construction of the DIY superstore, to register title to it on behalf of the DIY Operator and to open the DIY superstore and the shopping centre not later than 30 months after the first pre-payment by the DIY Operator which is expected following the delivery of bank guarantees as detailed above.
The Company will be also required to: i) obtain all necessary documentation, including permissions and consents for the construction of the DIY superstore (within 12 months of the of first prepayment), including a technical feasibility study confirming that the land plot can be developed (after which the second pre-payment is expected); ii) provide the full scope of services in relation to the construction of the DIY superstore; iii) obtain all necessary documentation in relation to the DIY superstore in order to transfer title of the property on completion to the DIY Operator; and iv) to ensure the servicing and management of the ready property and the common areas of the shopping centre
In the event that the Company is unable to comply with its obligations under the Investment Agreement as set out above and within stipulated time frames (other than as a result of public regulatory changes implemented by the Ukrainian authorities), the DIY Operator may terminate the Investment Agreement and reclaim any payments already made under the bank guarantee from the Company and penalties as provided by the Investment Agreement. Equally in the event of a breach by the DIY Operator, the Company will be entitled to claim payments under the DIY Operator bank guarantee and to claim penalties.
In the event of signing of the Investment Agreement the Company has also agreed to set up a separate SPV company together with the DIY Operator or to enter into another arrangement, as may be required pursuant to the Investment Agreement, i in order to re-execute (extend) land title from the Ukrainian authorities for the development of car parking facilities and engineering networks (including: sewer, water supply, electricity supply, gas supply, ventilation, etc.) for the DIY superstore and the shopping centre and in order to service and manage the ready property.
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