NEPR Nthn. Euro.

RNS Number:3828X
Northern European Properties Ltd
30 May 2007


Northern European Properties Limited

30 May 2007


Northern European Properties Limited ("NEPR" or the "Company") announces today
six acquisitions in Baltic Russia for a total consideration of Euro231m, the
disposal of 11 properties in Sweden and Finland for a total consideration of
Euro232.7m and a broadening of the Company's geographic focus in Russia. NEPR's
existing portfolio is performing in line with expectations.


Acquisitions


NEPR announces the purchase of six properties for a total consideration of
Euro231m. The purchases reflect the successful execution of part of NEPR's
identified pipeline of investment opportunities in Baltic Russia. Legally
binding purchase agreements have been signed for the deals, and the transactions
are to be closed during the period up to end of August.


Two of the properties are office properties in very good locations in St
Petersburg, one being located at the embankment and the other one being located
in the CBD. The properties have a total lettable area of 25,639 sqm and are
fully leased. The average stabilised yield on the purchase price is 10%.


Two of the properties are shopping centres in Kaliningrad and Murmansk. Both
shopping centres are of very good quality, being newly built and fully
operational. The shopping centres are both anchored by well-known tenants on
long lease contracts. The Company is also acquiring an office building connected
to the shopping centre in Kaliningrad. The two properties have a total lettable
area of 37,793 sqm. The average stabilised yield on the purchase price is 10.5%.


The other two properties acquired are a hotel property and a retail DIY store in
St Petersburg. These have been acquired from London & Regional Group for a
combined purchase price of approximately Euro82m. The definitive purchase price is
to be determined by a market valuation currently being performed by an external
valuation company. The hotel has 278 rooms and gross lettable area of 28,810
sqm, while the retail DIY store has a lettable area of 12,000 sqm. Both
properties are leased to strong western tenants, Sokos and Kesco, on long leases
of 15 years and 10 years respectively. The average stabilised yield on the
purchase price is 9%.


Disposals


NEPR announces the disposal of Euro232.7m of properties consisting of a portfolio
of seven office and industrial properties located in Finland, the largest
property being an office building leased to Nokia, and four office properties
located in Stockholm. The sale price of the Finnish office and industrial
portfolio is Euro186.5m, representing a yield of 5.7%. The sale price of the
Swedish office properties is Euro46.2m, representing a yield of 4.9%. The total
sale price reflects a 13% uplift on the external valuation by DTZ, as at 30 June
2006, contained in the initial public offering ("IPO") prospectus published in
November 2006.


The first half of 2007 has continued to see a tightening of yields in the Nordic
region reflecting continued investor demand and strong rental growth
expectations. Whilst the Investment Manager believes that there remain
attractive opportunities in the Nordic region, further yield compression may be
difficult to achieve in some areas. The disposals reflect the Company's
objective of optimising the value of its existing portfolio where significant
uplift has been achieved and recycling the capital in areas where it believes
more significant value can be created.


Broadening of geographic focus in Russia


At the time of its IPO, NEPR outlined its intention to acquire investment assets
in the Nordic, Baltic and Baltic Russia (St Petersburg and environs) regions.
With the acquisitions announced today, the Company is making good progress in
delivering on this strategy of building a high yielding portfolio with secure,
long lease tenants in the St Petersburg region.


However, a significant increase in investor demand has not been matched by an
increase in supply of real estate investment opportunities in the region. Whilst
there remains a pipeline of further opportunities in St Petersburg, the
increasingly competitive investment environment is reducing the attractiveness
of the region versus other parts of Russia. The St Petersburg real estate market
has been fuelled by a large inflow of foreign capital as the city has been a
first gate to Russia for many investors. This has led to increased competition
for many of the deals, and as a consequence a more rapid shift in the investment
market than for other parts of Russia.


The Board believes that it would be in the interests of NEPR's shareholders to
broaden the geographic scope of the Company's investment strategy to target
other large cities in Russia, where there remain significant investment
opportunities at attractive prices. The Russian regional cities have been
lagging behind those of St Petersburg and Moscow in terms of foreign investment
and real estate prices. Many of these cities are of considerable size, e.g.
there are 13 cities with a population above 1 million people in Russia, and have
been favoured by the strong economic growth of Russia. The investment climate in
these cities are in general very healthy and with the combination of an
undersupply of quality properties and less competition for assets, the NEPR
Board anticipates this will be a very attractive investment opportunity for the
Company.


NEPR's strategy in Russia will continue principally to be the building of a
stable, cash generative portfolio with opportunities for value uplift through
active management. However, given the nature of real estate investment
opportunities in Russia, NEPR anticipates that it will increase its exposure to
development projects. At no time would development assets represent more than
25% of the gross asset value of the Company.


NEPR intends to leverage London & Regional Group's strong presence across
western Russia by extending the scope of its existing asset management agreement
with LR Real Estate Asset Management. L&R Russia currently employs 15 full time
staff in Moscow and the regions (ex Baltic Russia) which will allow the
Investment Manager to effectively carry out its duties. The Moscow based team is
led by David Geovanis and Victoria Krivosheya, both of whom have worked in the
Russian markets for over 15 years.


Since it set up its Moscow office 15 months ago the team has acquired 7
stabilised assets and undertaken 7 development projects both in Moscow but also
in other cities, including Novosibirsk, Naberejnye Chelny, Penza, and Kaluga.
Total equity invested to date (ex Baltic Russia) is in excess of $400m. While
ensuring the acquisition of quality assets with significant upside potential, L&
R Russia has acquired more properties over the last 12 months than the next
three most active participants combined demonstrating its ability to move fast
in a dynamic market place. The Board believes that the high quality platform
within L&R Russia will work well with the existing Baltic Russian platform set
up under LR Real Estate Asset Management.


Market of listing


At the time of the IPO, the Directors stated that they proposed to keep the
Company's listing under review, and to consider the possibility (subject, inter
alia, to receipt of all necessary regulatory approvals) of moving to Euronext or
the main market of the London Stock Exchange in the short to medium term as the
Company grows in size. The Directors continue to consider whether such a move is
appropriate and will update shareholders in due course.



ENQUIRIES


Jens Engwall, Chairman

Tel: +46 70 690 65 50


Thomas Lindeborg, CEO

Tel: +46 8 456 32 51






                      This information is provided by RNS
            The company news service from the London Stock Exchange

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