Joint stock company “Baltic RE Group”
Registration No:
40103716434
Legal Address:
19 Šķūņu Street, Riga, Latvia
Phone:
+371 67227205
Prospectus of the Bond Issue
BREG FXD EUR 121220
Issuer:
Joint stock company “Baltic RE Group”
Securities:
Bonds
ISIN:
LV0000802197
Number of Securities:
4,000
(four thousand)
Face Value:
EUR 1,000.00
(one thousand euros)
Total Face Value of the Issue:
EUR 4,000,000.00
(four million euros)
Initial Placement Price:
100% of the face value
Annual Interest Rate:
Fixed rate: 6.15% with coupon payment
twice a year
Maturity Date:
12 December 2020
The Issuer shall be entitled to redeem the
Bonds prematurely in accordance with the
provisions of the Prospectus
Arranger of the Issue:
ABLV Bank, AS
Registration No: 50003149401
Legal address: 23 Elizabetes Street, Riga,
Latvia
1 November 2016
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Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
TABLE OF CONTENTS
1.
2.
3.
4.
5.
6.
6.1.
6.2.
6.3.
6.4.
6.5.
6.6.
6.7.
6.8.
6.9.
6.10.
7.
7.1.
7.2.
7.3.
8.
8.1.
8.2.
8.3.
9.
9.1.
9.2.
9.3.
9.4.
9.5.
9.6.
9.7.
10.
10.1.
10.2.
11.
11.1.
11.2.
11.3.
12.
12.1.
12.2.
12.3.
12.4.
12.5.
12.5.1.
12.5.2.
12.5.3.
12.5.4.
12.5.5.
12.6.
12.7.
12.8.
12.9.
12.10.
12.11.
12.12.
12.13.
12.14.
12.15.
12.16.
Explanation of the terms and abbreviations used ...................................................................................................... 4
General provisions......................................................................................................................................................... 6
Representations of the Issuer’s responsible persons ................................................................................................ 7
Summary......................................................................................................................................................................... 8
Risk factors .................................................................................................................................................................. 13
Information on offered securities ............................................................................................................................... 17
Objective of the Bond issue ............................................................................................................................................ 17
Regulatory enactments regulating the issue ................................................................................................................... 17
Securities details, type and form..................................................................................................................................... 17
Collateral for the Bonds .................................................................................................................................................. 17
Conditions of the interest income payment..................................................................................................................... 17
Method of calculating the accrued interest income ......................................................................................................... 18
Redemption of the Bonds ............................................................................................................................................... 18
Decisions on the Bond issue .......................................................................................................................................... 19
Restrictions on free transferability of the Bonds ............................................................................................................. 19
Representation of the Investors ...................................................................................................................................... 19
Special provisions ....................................................................................................................................................... 20
Disclosure of information ................................................................................................................................................ 20
Insolvency event ............................................................................................................................................................. 20
Application for the waiver ............................................................................................................................................... 20
Taxation of income derived from the Bonds ............................................................................................................. 22
Determination of the Investor’s residence for tax purposes ............................................................................................ 22
Tax amount .................................................................................................................................................................... 22
Responsibility of the Issuer............................................................................................................................................. 22
Terms and conditions of the offer .............................................................................................................................. 24
Issue volume .................................................................................................................................................................. 24
Determination of the price for initial placement transactions .......................................................................................... 24
Term of the public offer and application procedure......................................................................................................... 24
Decision on concluding the transactions ........................................................................................................................ 25
Settlement procedure ..................................................................................................................................................... 25
Information on the initial placement results .................................................................................................................... 25
Depository ...................................................................................................................................................................... 25
Admission to the regulated market and trading procedure ..................................................................................... 26
Application for admitting the Bonds to the regulated market .......................................................................................... 26
Previous issues performed by the Issuer and admitted to the regulated market ............................................................ 26
Additional information ................................................................................................................................................. 27
Advisers relating to the Bond issue ................................................................................................................................ 27
Information on the Bond issue provided by third persons ............................................................................................... 27
Credit ratings assigned to the Bonds .............................................................................................................................. 27
Information about the Issuer ....................................................................................................................................... 28
Basic information about the Issuer ................................................................................................................................. 28
Certified auditor .............................................................................................................................................................. 28
Issuer’s principal activities .............................................................................................................................................. 29
Issuer’s history and development ................................................................................................................................... 29
Issuer’s organisational structure ..................................................................................................................................... 30
Issuer’s management bodies .......................................................................................................................................... 31
Issuer’s management ..................................................................................................................................................... 31
Other key executive personnel ....................................................................................................................................... 32
Issuer’s Audit Committee................................................................................................................................................ 32
Issuer’s shareholding structure ....................................................................................................................................... 32
Main operational principles ............................................................................................................................................. 33
Major markets where the Issuer operates and its client base ......................................................................................... 33
Portfolio of properties ..................................................................................................................................................... 34
Key competitors .............................................................................................................................................................. 37
Long-term financial investments in subsidiaries ............................................................................................................. 37
Information about trends in operation development ....................................................................................................... 37
Significant changes in the Issuer’s financial position ...................................................................................................... 37
Legal and arbitration proceedings .................................................................................................................................. 38
Material contracts ........................................................................................................................................................... 38
Credit ratings assigned to the Issuer .............................................................................................................................. 38
Information about trends................................................................................................................................................. 38
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Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
12.17.
12.18.
12.19.
13.
13.1.
13.2.
13.3.
Membership in associations or organisations ................................................................................................................. 38
Profit forecasts................................................................................................................................................................ 38
Available documents of the Issuer .................................................................................................................................. 38
Issuer’s financial information ..................................................................................................................................... 39
Report of the audit of financial information ..................................................................................................................... 39
Joint stock company “Baltic Re Group” financial reports for 2014 and 2015 .................................................................. 39
Joint stock company “Baltic Re Group” interim financial report for H1 2016................................................................... 43
Annex 1: Joint stock company “Baltic RE Group” consolidated annual report for the period from 2 October 2013 to
31 December 2014 (in accordance with the requirements of Latvian legislation).
Annex 2: Joint stock company “Baltic RE Group” consolidated and parent company’s annual report for the year ended
31 December 2015 (in accordance with International Financial Reporting Standards (IFRS)).
Annex 3: Joint stock company “Baltic RE Group” consolidated interim statement for period from 1 January 2016 to
30 June 2016 (in accordance with the requirements of Latvian legislation).
Annex 4: “Financial Instruments’ Trade Order” form.
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Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
1.
Explanation of the terms and abbreviations used
Stock Exchange or Nasdaq Riga – joint stock company “Nasdaq Riga”, registration No 40003167049, legal address:
1 Vaļņu Street, Riga, Latvia.
DVP – settlement principle Delivery vs Payment.
Arranger of the Issue – a person that, in accordance with the Issuer’s order, fulfils the functions of organising the Bond
issue, coordinates cooperation between the parties involved in the Bond issue, as well as ensures placement of the
Bonds under a public offer. For the purposes of this Prospectus – ABLV Bank, AS, registration No 50003149401, legal
address: 23 Elizabetes Street, Riga, Latvia, or also ABLV Bank.
Issuer – for the purposes of the Financial Instrument Market Law, a person transferrable securities of which are admitted
to the regulated market, as well as a person which, in this person’s own name, issues transferrable securities or other
financial instruments or has applied for their admission to trading on the regulated market. For the purposes of this
Prospectus – joint stock company “Baltic RE Group”, registration No 40103716434, legal address: 19 Šķūņu Street, Riga,
Latvia, or also Baltic RE Group.
Financial Reports – joint stock company “Baltic RE Group” consolidated annual report for the period from 2 October
2013 to 31 December 2014 (in accordance with the requirements of Latvian legislation), joint stock company
“Baltic RE Group” consolidated and parent company’s annual report for the year ended 31 December 2015
(in accordance with International Financial Reporting Standards (IFRS)) and joint stock company “Baltic RE Group”
consolidated interim statement for period from 1 January 2016 to 30 June 2016 (H1 2016, in accordance with the
requirements of Latvian legislation). Financial reports are available in Annex 1, Annex 2 and Annex 3.
FCMC – the Financial and Capital Market Commission, registration No 40003167049, legal address: 1 Kungu Street,
Riga, Latvia. Pursuant to the Law on the Financial and Capital Market Commission, the FCMC shall enjoy full rights of an
independent autonomous public institution and, in compliance with its goals and objectives, shall regulate and monitor the
functioning of the financial and capital market and its participants.
Annual Interest Rate – annual rate of the Bonds’ yield (coupon) in percentage terms as stated herein.
Investment Company – a credit institution or investment brokerage company that is duly licensed to render investment
services and related services, and where the Investor has a financial instruments account opened.
Investor (also – Bondholder) – a person that, in accordance with the procedure set herein, has expressed a wish or
plans to acquire the Bonds or has acquired the Bonds.
ISIN – International Securities Identification Number assigned to the Bonds issued hereunder by the LCD as a member of
the Association of National Numbering Agencies.
LCD – joint stock company “Latvijas Centrālais depozitārijs”, registration No 40003242879, legal address: 1 Vaļņu Street,
Riga, Latvia.
Face Value – value of a single Bond set by the Issuer and stated herein. In case the part of face value of the Bonds is
prematurely redeemed, the residual face value is used in the calculations.
Bond – a debt security issued by Baltic RE Group, which enables its holder to receive interest income and face value in
accordance with the procedure and within the term set herein, such security being issued in accordance with the
provisions hereof. For the purposes of this Prospectus – BREG FXD EUR 121220.
ORICGS – the Official System for Central Storage of Regulated Information where the companies whose financial
instruments are admitted to trading on the regulated market publish mandatory information under the Financial
Instrument Market Law.
Applicable Regulatory Enactments – legal enactments of the European Union, legal enactments of
the Republic of Latvia, regulations published by the stock exchange and the LCD.
Order for Purchase – an irrevocable application for the Bonds purchase submitted by the Investor under a public offer.
Interest Income – interest income under the Bonds, or a coupon, which the Issuer agrees to pay to the Bondholder on
the dates and in accordance with the procedure set herein.
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Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
Prospectus – this prospectus, which contains detailed information on the Issuer and the Bonds. This Prospectus has
been produced to make a public offer and to admit the Bonds to trading on the regulated market.
Public Offer – a period set herein when the Investors may apply for the Bonds purchase in accordance with the
provisions of the Prospectus.
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Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
2.
General provisions
This Prospectus has been produced in accordance with the applicable regulatory enactments, including the requirements
of the Financial Instrument Market Law, Commission delegated Regulation No 809/2004 and Commission delegated
Regulation No 486/2012.
Baltic RE Group Bond issue is public. This Prospectus is registered with the FCMC.
Notice
Before making a decision on investing in the Bonds, any Investor should, independently and, if necessary, engaging an
advisor, make an overall assessment of the information provided herein.
In cases of any discrepancies between the Latvian text of the Prospectus and the text of the Prospectus in another
language the Prospectus in Latvian shall be applicable.
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3.
Representations of the Issuer’s responsible persons
We,
First name, surname
Position held
Giovanni Dalla Zonca
Chairman of the Board of
Baltic RE Group
Marco Chioatto
Member of the Board of
Baltic RE Group
Dina Abaja
Member of the Board of
Baltic RE Group
Signature
hereby confirm the information provided herein and represent that, according to the data available to us, the information
provided herein is true and there are no concealed facts that might affect the meaning of the information provided herein.
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Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
4.
Summary
Section A. Introduction and warnings
A.1
The summary shall be deemed the introduction to this Prospectus.
Any decision on investing in the Bonds shall be based on the Investor’s judgement on the whole Prospectus.
Should any claim be lodged with the court regarding the information provided herein, if necessary, the Investor lodging the
claim with the court in accordance with regulatory enactments of the respective member state shall cover the costs of
translating this Prospectus before the proceedings are initiated.
The persons responsible for the information provided herein, including the persons that translated the same and applied for
its notification, may be held civilly liable only where the summary is misleading, inaccurate, or inconsistent with other
sections of the Prospectus, or fails to provide the most essential information that would aid the Investors when considering
whether to invest in the Bonds.
A.2
Not applicable
Section B. Issuer
B.1
Legal and commercial
name of the Issuer
Joint stock company “Baltic RE Group”.
B.2
The domicile and legal
form of the Issuer, the
legislation under which
the Issuer operates
and its country of
incorporation
Baltic RE Group is a joint stock company incorporated and registered in the Republic of Latvia,
which carries out its operations in accordance with the Republic of Latvia legal enactments.
B.3 – B.4.a
Not applicable
The main lines of Baltic RE Group business are purchase and sale of real estate, its lease and
management.
Description of any
known trends
B.4b affecting the Issuer
and the industries in
which it operates
Baltic RE Group owns buildings with high quality commercial areas with state-of-the-art facilities in
Old Riga, the historical centre of Riga. With improvement of the economic situation in Latvia, its
commercial rental market is developing as well. In recent years, the demand for premium-class
office premises and commercial premises has increased significantly, which has a positive impact
on the Issuer’s business.
The Issuer has no information on any trends in the industry that might have a negative impact on
the Issuer’s financial position.
The information provided in the table below is consistent in full with that presented in
Baltic RE Group consolidated annual financial report for 2015:
Interest of the
group (%)
B.5
Issuer’s position
within the group
No
Company
1.
BALTIC RE
S.P.A.
2.
Country of
incorRegistration
poration number
Company’s line of business
Direct
interest
(%)
Indirect
interest
(%)
100.00
-
04277380285
Management of related
companies, strategic
development and study and
development of properties
Limited liability
company
LV
“KEY 1”
40103212372
Rental / lease, management of
real estate
25.00
75.00
3.
Limited liability
company
LV
“Key 2”
40103451102
Rental / lease, management of
real estate
-
100.00
4.
Limited liability
company
LV
“KEY 6”
40103285982
Rental / lease, management of
real estate
51.66
48.34
5.
Limited liability
company
LV
“Key 15”
40103568148
Rental / lease, management of
real estate
33.00
67.00
6.
Limited liability
company
LV
“Skunu 19”
40003993617
Rental / lease, management of
real estate
-
100.00
IT
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Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
B.6 – B.8
B.9
Profit forecast and
assessment
Not applicable
Baltic RE Group made no profit forecasts for the following periods of operations.
Qualifications in the
B.10 audit report on the
financial information
There are no qualifications in the Baltic RE Group consolidated financial reports for 2014, 2015
and H1 2016.
B.11
Not applicable
Key financial information, EUR:
Baltic RE Group
(consolidated financial data)
Baltic RE Group
Selected historical key
financial information
and any changes to it
B.12
since the date of the
last published audited
financial reports
31.12.20151
31.12.20141
30.06.20162
31.12.20151
31.12.20141
Total assets
53,451,968
27,208,808
51,615,913
52,492,246
47,977,363
Total non-current assets
50,711,079
26,285,813
310,936
49,298,565
46,149,519
Share capital
24,853,452
5,200,000
25,000,000
24,853,452
5,200,000
Baltic RE Group
(consolidated financial data)
Baltic RE Group
Revenue
Profit or loss
for the year
01.01.2015 31.12.20151
02.10.2013 31.12.20141
01.01.2016 30.06.20162
01.01.2015 31.12.20151
02.10.2013 31.12.20141
645,325
61,014
2,024,952
3,241,121
262,807
74 104
(215 529)
118,227
1 182 182
(79 082)
1
Information is provided under Baltic RE Group consolidated annual financial report for 2015 prepared in accordance with
International Financial Reporting Standards (IFRS).
2
Information is provided under Baltic RE Group consolidated interim financial report for H1 2016 prepared in accordance with
the requirements of Latvian legislation.
The Issuer’s forecasts contain no adverse changes since the date of its last published audited
financial report.
No significant changes were detected in the Issuer’s financial or trading position subsequent to the
period covered by the historical financial information.
Events particular to
the Issuer which are to
a material extent
B.13
relevant to the
evaluation of the
Issuer’s solvency
Recently no events particular to the Issuer have been detected which are to a material extent
relevant to the evaluation of the Issuer’s solvency.
Issuer’s dependence
B.14 on other entities within
the group
The Issuer is not dependent upon other entities within the Issuer’s group.
B.15
Issuer’s principal
activities
Baltic RE Group principal activity is purchase and sale of real estate, its lease and management.
B.16 Control over the Issuer
As at the moment when this Prospectus is signed, no shareholder controls the Issuer.
B.17 Credit ratings
Currently, the Issuer is not assigned any credit ratings.
B.18 – B.50
Not applicable
Section C. Securities
C.1
Bond details
The Bonds are bearer debt securities, issued in dematerialized form and recorded by LCD.
The Bonds are registered under ISIN code: LV0000802197.
The Bonds are freely transferrable and encumberable.
C.2
Currency of the Bond
issue
The currency of the Bond issue is EUR (euro).
C.3 – C.4
C.5
Restrictions on the
free transferability of
the Bonds
Not applicable
The Bonds are freely transferrable securities that represent the Issuer’s debt to the Bondholder
without additional collateral. The Bonds are dematerialized bearer securities without restraint on
alienation.
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Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
C.6 – C.7
Not applicable
The Bonds are freely transferrable securities without restraint on their alienation.
The Bonds are not convertible into the Issuer’s shares.
The Bondholders shall be entitled to receive the Bond coupon and Bond face value payments in
accordance with the procedure under the Prospectus.
The annual interest rate shall be fixed and shall amount to 6.15% (per annum).
The interest income shall be calculated from 12 December 2016. The interest income shall be paid
twice a year: on 12 December and 12 June, starting from 12 June 2017, ending on
12 December 2020.
The Investor shall receive the face value of the Bonds as a lump-sum payment at the Bond
maturity date – on 12 December 2020.
C.8,
C.9
Rights attached to the
Bonds
The Issuer shall be entitled to redeem the Bonds prematurely:
•
The Issuer shall be entitled to redeem prematurely (redemption price equals to 100.0% of the
face value of the Bonds) such Bonds that have been acquired by the Issuer on the secondary
market or otherwise acquired thereby in accordance with regulatory enactments, unless their
redemption is restricted by the provisions of regulatory enactments.
•
The Issuer shall be entitled to redeem any part (by partial redemption of the face value of the
Bonds) or all of the Bond issue at any time:
•
starting from the second year after the date of issue – the Issuer shall be entitled to
redeem the Bonds at the price amounting to 102.5% of the part of the face value of the
Bonds to be redeemed, as well as the Investors shall be paid accrued interest that is
outstanding as at the date of such premature redemption, if any;
•
starting from the third year after the date of issue – the Issuer shall be entitled to redeem
the Bonds at the price amounting to 101.5% of the part of the face value of the Bonds to
be redeemed, as well as the Investors shall be paid accrued interest that is outstanding
as at the date of such premature redemption, if any;
•
starting from the fourth year after the date of issue – the Issuer shall be entitled to
redeem the Bonds at the price amounting to 100.0% of the part of the face value of the
Bonds to be redeemed, as well as the Investors shall be paid accrued interest that is
outstanding as at the date of such premature redemption, if any;
•
in any case, the value of the Bonds being redeemed prematurely may not be less than
25% of the total face value of the issue as stated in the Prospectus (i.e. not less that
EUR 1,000,000.00 per a premature redemption event), and premature redemption may
not take place more than once a year.
The Issuer shall be entitled to redeem by cancelling such part of Bonds that has not been initially
placed. In such case the total amount of the issue shall be equal to the actually placed Bonds.
The Bonds shall not be secured by any collateral, and no guarantees of any third persons have
been provided for the Bonds or any related interest income payments.
This issue has no provisions for, or restrictions on, the Bondholders’ rights to appoint
representatives for exercising the rights attached to the Bonds.
C.10
Not applicable
Admission of the
C.11 Bonds to the regulated
market
The Bonds are proposed to be included on Nasdaq Riga Baltic Bond List.
Minimum face value of
the issue
The face value of a single Bond is EUR 1,000.00 (one thousand euros).
The total face value of the issue is EUR 4,000,000.00 (four million euros).
The total number of the Bonds is 4,000 (four thousand).
C.12
C.13 – C.22
Not applicable
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Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
Section D. Risks
D.1
Not applicable
In carrying out its operating activities, the Issuer is subject to various risks. The main financial risks
relating to the Issuer are credit risk, interest rate risk and liquidity risk. The Issuer’s operations are
also affected by such non-financial risks as operational risk, legal risk (incl. tax), competition risk,
macroeconomic and political risk.
D.2
Key risks that are
specific to the Issuer
•
Credit risk
Risk that the Issuer may incur losses in case the Issuer or the Issuer’s counterparty will be
unable or will, due to specific circumstances, refuse to fulfil his / its liabilities in accordance
with provisions of the contract. Credit risk may be divided further into:
•
risk of the Issuer’s default,
•
risk of the Issuer’s counterparty default.
•
Interest rate risk
Risk that the Issuer may incur losses relating to adverse interest rate fluctuations.
•
Liquidity risk
Liquidity is the Issuer’s ability to maintain or ensure sufficient cash flow to meet the expected
(everyday) or sudden (critical) discharge of its liabilities in due time. This means the Issuer’s
ability to turn assets into cash with minimal loss or ensure, if required, reasonably priced credit
facilities.
•
Operational risk
Risk that the Issuer will incur losses as a result of insufficient, inadequate or failed internal
processes, due to errors of people or systems, or due to the impact of other external events.
•
Legal risk (incl. tax)
Risk of losses relating to amendments in effective regulatory enactments (laws, regulations
and other legal enactments) or resulting from the implementation of new legal enactments,
which may require a change in or reorientation of the Issuer’s activities, thus causing
additional expenses, or abandonment of particular lines of the Issuer’s activities. Legal risk
also covers possible losses that may result from higher tax rates or new taxes applied.
•
Competition risk
Risk that the Issuer may incur losses as a result of higher competition in the market segment
where the Issuer operates. With the growing supply on the market of rented office and
commercial premises, rental rates and / or occupancy may decrease, which might have a
negative impact on the Issuer’s financial position.
•
Macroeconomic and political risk
External risk depending on the rate of economic growth and the political stability of this
country. Risk of such considerable economic, political or other changes in the country or
region where the Issuer operates that may result in the Issuer losing all or part of its
investments in this country or region, or investments made by the Issuer in this country or
region losing all or part of their value.
Making an investment in the Bonds, the Investor undertakes risks relating to debt securities. The
most significant of them are financial market liquidity risk, price risk, risk of premature
redemption, collateral risk and legal risk (incl. tax).
D.3
•
Financial market liquidity risk
Inclusion of the Bonds on the stock exchange Nasdaq Riga Baltic Bond List, which is a
regulated market, does not guarantee liquidity of the Bonds. The Investor should assess
potential risk of limited possibilities of selling the Bonds on the secondary market due to
insufficient interest of other market players. If there is no sufficient interest on the secondary
market (liquidity shortfall), it may be difficult for the Investor to sell the Bonds at adequate
market price within a specified period.
•
Price risk
Price of the Bonds on the secondary market may fluctuate and can be affected by both
Key risks that are
specific to the Bonds
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Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
macroeconomic processes and events concerning the Investor. The Investor’s opportunities
of gaining profit may vary accordingly from time to time.
D.4 – D.6
•
Risk of premature redemption
Risk that the return on the Bonds, should the Issuer’s right to premature redemption of the
Bonds be exercised, may be lower than that on the Bonds held until the proposed maturity
date.
•
Risk of collateral
The Bonds shall be issued without collateral, they shall not be covered by any specific
asset. Should the Issuer be unable to fulfil its liabilities to the Investor due to specific
circumstances, the Investors will become the Issuer’s unsecured creditors. In case of the
Issuer’s insolvency, the Investors have the same rights as other creditors of the relevant
group in accordance with the applicable regulatory enactments.
•
Legal risk (incl. tax)
Risk relating to amendments in effective regulatory enactments (laws, regulations and other
legal enactments) or resulting from the implementation of new legal enactments, which may
cause additional expenses for the Investor or reduce return on investment. This risk also
covers possible changes in applicable tax assessment and withholding procedures.
Not applicable
Section E. Offer
E.1 – E.2a
E.2b
Reasons for the Bond
offer
Not applicable
The Bond issue shall be performed to raise additional capital for financing of the Issuer’s
development plans:
•
for the purchase of commercial real estate in central Riga, incl. Old Riga, except vacant land
plots,
•
for financing of reconstruction and repair works in the properties owned currently and to be
owned by the Issuer in order to let them further to tenants, as well as
•
for the purchase of capital shares of companies that own the properties.
The total value of the issue is EUR 4,000,000.00 (four million euros).
The Bond issue shall be deemed performed to the amount of the placed Bonds. The Issuer will
inform about the total amount of actually placed Bonds by publishing information on the Issuer’s
website (www.balticregroup.com).
The public offer start date is 15 November 2016.
E.3
Terms and conditions
of the offer
To apply for the Bonds purchase under the public offer, the Investor or the investment company to
be engaged by the Investor in concluding the Bonds’ purchase transaction as an intermediary
shall, on business days from 8:30 a.m. to 6:30 p.m. (Riga time), submit its / his order to ABLV Bank
using a form in accordance with the template “Financial Instruments’ Trade Order" attached as
Annex 4 hereto. The order may also be submitted electronically, using the relevant order form via
ABLV Bank internetbank or other means of communication, upon agreement with ABLV Bank.
The public offer end date is 2 December 2016. ABLV Bank shall accept orders until the end of the
business day – 6:30 p.m. (Riga time) or electronically until the end of the day – 11:59 p.m. (Riga
time).
E.4
Possible conflicts of
interests
E.5 – E.6
E.7
Investor’s estimated
costs and expenses
ABLV Bank is the arranger of the Bond issue, and it has other transactions with the Issuer.
Not applicable
All expenses relating to the Bonds purchase and custody shall be covered by the Investor in
accordance with the pricelist of the investment company whose services are used for the Bonds
purchase, custody and the relevant settlements. The Issuer shall not be obliged to reimburse the
Investor for its expenses.
The Investors may incur additional expenses due to the tax payment obligation in the Investor’s
residence country. The Issuer shall withhold tax payments from the interest (coupon) payments in
accordance with the provisions hereof.
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5.
Risk factors
Notice
The Investor shall thoroughly assess risks listed in this section of the Prospectus. Those may decrease the Issuer’s ability
to perform its obligations or affect the possibility of executing transactions in the Bonds. The Prospectus may contain an
incomplete list of all possible risks that may affect the Issuer’s operations or trading of the Bonds. Before making a
decision on the Bonds purchase, any Investor should, independently and, if necessary, engaging an advisor, assess risks
relating to the Bonds purchase.
5.1.
Risk factors associated with the Issuer
In carrying out its operating activities, the Issuer is subject to various risks. The main financial risks relating to the Issuer
are credit risk, interest rate risk and liquidity risk. The Issuer’s operations are also affected by such non-financial risks as
operational risk, legal risk (incl. tax), competition risk, macroeconomic and political risk. The Prospectus does not list all of
those, but mentions the most significant of the risks that may affect the Issuer’s operations.
•
Credit risk
Risk that the Issuer may incur losses in case the Issuer or the Issuer’s counterparty will be unable or will, due to
specific circumstances, refuse to fulfil his / its liabilities in accordance with provisions of the contract. Credit risk may
be divided further into:
•
Risk of the Issuer’s default
Risk that the Issuer’s financial position will be impacted by negative factors and as a result the Issuer will fail to
fulfil its contractual liabilities appropriately or will default them.
Measures taken by the Issuer to manage and to mitigate risk of the Issuer’s default:
The Issuer controls its business cash flow being the main source of repayment of the Issuer’s debt liabilities, as
well as pays special attention to timely payment of its debt liabilities. The Issuer has both impeccable reputation
in the management of its business and credit history.
•
Risk of the Issuer’s counterparty default
Risk that the Issuer’s counterparty or debtor will fail to fulfil its / his contractual liabilities appropriately or will
default them, which may result in negative circumstances for the Issuer’s financial position. Risk of the Issuer’s
counterparty default also covers exposure to the Issuer’s losses, should the Issuer’s clients (tenants) fail to
make lease payments.
Measures taken by the Issuer to manage and to mitigate risk of the Issuer’s counterparty default:
The Issuer has entered into long-term lease agreements with regard to each property, such agreements being
valid until 2026 or for an indefinite period of time. The provisions of such agreements, incl. the notice period for
early termination, the amount of security deposit, the rent payment procedure, indemnity for losses, are set forth
per individual tenant. In accordance with the provisions of such lease agreements, the security deposit paid by
the tenants may be retained by the Issuer partially or in full, should the tenant’s debt be outstanding or should
other provisions of the agreement take effect.
The Issuer monitors risk of its counterparty default by making continuous assessment of the client credit history.
In addition, in order to reduce potential bad debts, the Issuer monitors outstanding debts of its tenants on a
continuous basis and checks the number of late days of payments and interest on arrears for default. As a result
of continuous and regular monitoring, the Issuer’s tenants have almost no debts. The Issuer mitigates the risk by
highly diversified structure of tenants. As of the date of the Prospectus, the properties are leased to 45 tenants
and in none of the buildings a solo tenancy is established. Such income structure significantly reduces the
potential impact of counterparty’s default.
•
Interest rate risk
Risk that the Issuer may incur losses relating to adverse interest rate fluctuations. Interest rate risk with regard to the
Issuer’s financial position may arise mostly in connection with its short-term and long-term loans providing that the
credit interest rate depends on interbank credit rates (3M and 6M Euribor). Should the relevant Euribor rates grow,
the Issuer’s credit interest payments will increase as well.
Measures taken by the Issuer to manage and to mitigate interest rate risk:
The Issuer uses different types of financing to attract the required resources for its operations, making use of both its
own capital (increasing its fixed capital) and borrowed capital (loans from credit institutions, issue of debt securities).
Should Euribor rates and hence credit interest rates grow considerably, the Issuer proposes possible early
repayment of all or part of its credit liabilities, or else their restructuring, changing the structure of the relevant type of
financing accordingly.
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•
Liquidity risk
Liquidity is the Issuer’s ability to maintain or ensure sufficient cash flow to meet the expected (everyday) or sudden
(critical) discharge of its liabilities in due time. This means the Issuer’s ability to turn assets into cash with minimal
loss or ensure, if required, reasonably priced credit facilities.
Measures taken by the Issuer to manage and to mitigate liquidity risk:
The Issuer monitors its liquidity risk, maintaining an adequate amount of funds or attracting, if required, adequate
short-term financing. To attract short-term financing, the Issuer uses mostly loans from credit institutions.
•
Operational risk
Risk that the Issuer will incur losses as a result of insufficient, inadequate or failed internal processes, due to errors
of people or systems, or due to the impact of other external events.
Measures taken by the Issuer to manage and to mitigate operational risk:
Internal processes of the Issuer’s business take place on the basis of many years’ experience of the Issuer’s
executives in the real estate industry and business in Latvia and Italy. The company involves highly qualified
specialists experienced in real estate lease and management in its everyday operational processes. The Issuer
attracts potential tenants and maintains relations with current tenants independently. In order to maintain its
properties, the Issuer involves a specialised undertaking that provides professional and high quality services.
To ensure the management of its operational risk, the Issuer applies its internal control policy developed by certified
auditors. The policy is aimed at the identification of operational risks and development of measures for protection of
the Issuer against losses that may be caused by operational risk events, as well as at controlling and preventing, as
far as possible, the negative impact of operational risk events on its business. The Issuer holds internal monthly
meetings to monitor the control of, to mitigate and to prevent actual and potential operational losses. As a further
substantial control procedure and for internal decision making purposes, the Issuer each year assigns an
independent valuation of the owned properties’ portfolio to leading international real estate advisors.
•
Legal risk (incl. tax)
Risk of losses relating to amendments in effective regulatory enactments (laws, regulations and other legal
enactments) or resulting from the implementation of new legal enactments, which may require a change in or
reorientation of the Issuer’s activities, thus causing additional expenses or abandonment of particular lines of the
Issuer’s activities. Legal risk also covers possible losses that may result from higher tax rates or new taxes applied,
for example, higher rate of real estate tax, higher cadastral value of properties.
Measures taken by the Issuer to manage and to mitigate legal risk (incl. tax):
To be aware of the requirements of regulatory enactments with regard to the Issuer’s operations, as well as to
ensure compliance of the Issuer’s agreements with the requirements of such regulatory enactments, the Issuer uses
the services of leading consultants in legal matters. As far as possible amendments in the tax legislation are
concerned, the Issuer cannot control this risk independently, however the Issuer’s cash flow is sufficient to bear a
higher tax load burden. As to the unforeseeable risk of increase of the real estate tax, the Issuer normally rebates
the relevant costs to the tenants under corresponding triple net lease agreements, which allows to significantly
reduce this risk.
•
Competition risk
Risk that the Issuer may incur losses as a result of higher competition in the market segment where the Issuer
operates. With the growing supply on the market of rented office and commercial premises, rental rates and / or
occupancy may decrease, which might have a negative impact on the Issuer’s financial position.
Measures taken by the Issuer to manage and to mitigate competition risk:
The Issuer owns buildings with high quality commercial areas with state-of-the-art facilities in Old Riga, the historical
centre of Riga, and plans to extend its operations within central Riga in the future. The Issuer operates in a unique
market segment – the market of rented premium-class office and commercial premises. Many years’ experience of
the Issuer’s executives, the location of properties, the quality of services provided and the client (tenant) base
ensure undeniable competitive advantages for the Issuer. Therefore, in the current circumstances the Issuer does
not deem competition risk to be very material. In order to preserve a competitive market, the Issuer ensures
maintenance of its properties in excellent technical state, and involves a professional real estate management
company in their maintenance. To maintain long-term relations with tenants, the Issuer pays special attention to
studying its clients’ needs and tailoring the leased properties in accordance with the tenants’ plans.
The Issuer regularly invests in the properties in order to keep them at the highest quality level and to improve the
portfolio value and rentability, as well as creates, wherever possible, new leasable premises (interfloor archives,
recovered mansards, etc.) and amenities (terraces, improved common areas and entrances, etc.). Such strategy
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allows to avoid a pretty typical risk in the real estate office market, which is the downgrade of the building class with
the consequential dropping of the property to the marginal market (with higher competition, higher risk of vacancy
and marginal quality of tenants, which would lead to related financial risks, and lower rent level).
•
Macroeconomic and political risk
External risk depending on the rate of economic growth and the political stability of this country. Risk of such
considerable economic, political or other changes in the country or region where the Issuer operates that may result
in the Issuer losing all or part of its investments in this country or region, or investments made by the Issuer in this
country or region losing all or part of their value. Under this risk, one should consider dramatic changes in economic
or legal environment (for example, nationalisation of particular properties), crises in the social or internal policy (for
example, strikes), etc.
The Republic of Latvia is a unitary multiparty republic, placing high value on democracy principles. It has been a
member of the European Union since May 2004 and joined NATO in March 2004. Following elections, parties
present in the parliament may change, as well as composition of the government, though it has no significant effect
on the rented real estate market.
Currently, macroeconomic risks relating to the economic growth of Latvia may be evaluated as well-balanced. This
statement is confirmed by such macroeconomic indicators as GDP, employment rate and the level of inflation. The
credit rating assigned to Latvia by international rating agencies prove positive development in Latvia’s state
economy as well. However, in view of the weaker-than-forecast economic growth of Latvia's main trade partners
(except Lithuania, Poland and Sweden), pronounced uncertainty caused by the geopolitical situation and the slow
domestic investment dynamics, the Bank of Latvia revised Latvia’s GDP forecast downwards from 2.3% to 2% in
2016.1
Measures taken by the Issuer to manage and to mitigate macroeconomic and political risk:
Substantial impact of slower rates of economic growth on the Issuer in the future is unlikely because the leased
properties have excellent locations in Old Riga, where the supply of commercial and office premises is limited. In the
future, the national economy may be affected by reducing population, which for its part may have a negative impact
on the income of the Issuer’s tenants, in particular retailers. However, in view of the location of the leased
commercial premises, i. e., in Old Riga with high traffic of foreign tourists, such impact on the Issuer and the Issuer’s
counterparties is unlikely to be significant.
The Issuer believes that risk management is among the key elements of strategic management and internal control. The
main purpose of the Issuer’s risk management is to anticipate all potential risks, to take measures for the relevant risk
management on time and, if required, to respond to the risk event. From the point of view of inflation risk assessment, the
lease agreements in force state the right to increase the tenants’ rent correspondingly to the occurred inflation.
5.2.
1
Risk factors associated with the type of securities being issued
Making an investment in the Bonds, the Investor undertakes risks relating to debt securities. The most significant of them
are financial market liquidity risk, price risk, risk of premature redemption, collateral risk and legal risk (incl. tax).
•
Financial market liquidity risk
Inclusion of the Bonds on the stock exchange Nasdaq Riga Baltic Bond List, which is a regulated market, does not
guarantee liquidity of the Bonds. The Investor should assess potential risk of limited possibilities of selling the
Bonds on the secondary market due to insufficient interest of other market players. If there is no sufficient interest
on the secondary market (liquidity shortfall), it may be difficult for the Investor to sell the Bonds at adequate
market price within a specified period.
•
Price risk
Price of the Bonds on the secondary market may fluctuate and can be affected by both macroeconomic processes
and events concerning the Investor. The Investor’s opportunities of gaining profit may vary accordingly from time
to time.
•
Risk of premature redemption
Risk that the return on the Bonds, should the Issuer’s right to premature redemption of the Bonds be exercised,
may be lower than that on the Bonds held until the proposed maturity date.
•
Risk of collateral
The Bonds shall be issued without collateral, they shall not be covered by any specific asset. Should the Issuer be
unable to fulfil its liabilities to the Investor due to specific circumstances, the Investors will become the Issuer’s
Information prepared on the basis of the “Macroeconomic Developments Report. June 2016” of the Bank of Latvia available on the website of the Bank of Latvia www.bank.lv
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unsecured creditors. In case of the Issuer’s insolvency, the Investors have the same rights as other creditors of
the relevant group in accordance with the applicable regulatory enactments.
In case of the Issuer’s insolvency, the Investors’ claims against the Issuer under the Bonds shall be satisfied
simultaneously with the claims of other unsecured creditors in accordance with the procedure under the
Insolvency Law and the Credit Institution Law. The Investors’ investments in the Bonds shall not be protected or
guaranteed under the Deposit Guarantee Law.
•
Legal risk (incl. tax)
Risk relating to amendments in effective regulatory enactments (laws, regulations and other legal enactments) or
resulting from the implementation of new legal enactments, which may cause additional expenses for the Investor
or reduce return on investment. This risk also covers possible changes in applicable tax assessment and
withholding procedures.
In addition, the Bonds may not be suitable for all Investors. Therefore, each potential Investor should evaluate the
suitability of this type of investment, taking into account all circumstances, including the impact on the Bonds value and
what impact this investment will have on the overall investment portfolio.
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6.
Information on offered securities
This section of the Prospectus contains information on the Bonds that will be issued hereunder.
6.1.
Objective of the Bond issue
The Bond issue shall be performed to raise additional capital for financing of the Issuer’s development plans:
•
for the purchase of commercial real estate in central Riga, incl. Old Riga, except vacant land plots,
•
for financing of reconstruction and repair works in the properties owned currently and to be owned by the Issuer in
order to let them further to tenants, as well as
•
for the purchase of capital shares of companies that own the properties.
6.2.
Regulatory enactments regulating the issue
The Bond issue shall be performed in accordance with the following:
• the Commercial Law,
• the Financial Instrument Market Law,
• the stock exchange and LCD rules,
as well as other effective applicable regulatory enactments.
6.3.
Securities details, type and form
Under this Prospectus, the Issuer will issue Bonds that are dematerialized bearer securities without restraint on alienation
– freely transferrable securities. The Bonds represent the Issuer’s debt to the Bondholder without additional collateral. All
Bonds issued hereunder are proposed to be admitted to trading on the regulated market, ensuring their public trading.
In accordance with the Financial Instrument Market Law, in the Republic of Latvia posting and accounting of
dematerialized securities admitted to trading on the regulated market shall be ensured by the LCD. The Bonds are
registered under ISIN code LV0000802197.
In accordance with the Financial Instrument Market Law, the Bonds are held by credit institutions and investment
brokerage companies. The LCD performs accounting of financial instruments, including the Bonds, owned by a credit
institution or an investment brokerage company, as well as overall accounting of financial instruments owned by
customers of the respective credit institution or investment brokerage company and held thereby.
6.4.
Collateral for the Bonds
The Bonds have no collateral. In case of the Issuer’s insolvency, the Investor shall have the same rights as other
creditors of the relevant group in accordance with the applicable regulatory enactments.
6.5.
Conditions of the interest income payment
The Investor shall be entitled to receive the interest income.
The list of Bondholders, eligible for interest payments, will be established on the 5 (fifth) business day before the interest
payment date by listing them in the Bondholders’ list compiled by the LCD.
The annual interest rate shall be fixed and shall amount to 6.15% (per annum).
The interest income shall be calculated from 12 December 2016. The interest income shall be paid twice a year:
on 12 December and 12 June, starting from 12 June 2017, ending on 12 December 2020.
The Issuer shall pay the interest income, with the LCD acting as an intermediary, in accordance with the effective LCD
rules No 8 “On Payment of Dividends, Coupons, Principal, and Other Cash Proceeds”. The Issuer shall pay the interest
income by transferring the entire payable amount to the LCD cash account. The LCD shall transfer the funds to the
account holders on the interest income payment date in accordance with the number of the Bonds present in
correspondent accounts on the interest income calculation date and taking into account information on taxes to be
withheld, if applicable, provided by the Issuer. The interest income amount shall be credited to the cash account of the
Bondholder by the account holder (the securities account of the Bondholder is opened with). Should the interest income
payment date appear to be a day off, the Issuer shall pay the interest income on the next business day following the day
off.
Should the Issuer fail to make settlement for the interest income on the date stated forth herein, the Investors shall be
entitled to lodge claims to the Issuer demanding payment of the interest income not earlier than in 5 (five) business days
after the relevant interest income payment date.
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6.6.
Method of calculating the accrued interest income
Interest income per Bond for each interest income period is calculated considering the following:
•
the face value of the Bond,
•
the annual interest rate for the relevant interest income period,
•
number of days in the interest income period.
It is assumed that a single interest income period consists of 180 (one hundred and eighty) days, and one year consists
of 360 (three hundred and sixty) days (30E / 360 principle, where E – number of full months).
The interest income amount shall be calculated as follows:
CPN = F * C / 2, where
CPN – amount of accrued interest income payable in the issue currency per Bond,
F – face value of a single Bond (in case the part of face value of the Bonds is prematurely redeemed, the residual face
value is used in the calculations),
C – annual interest rate.
Between the payment dates, the interest income amount shall be calculated as follows:
AI = F x C / 360 x D, where
AI – accrued interest,
F – face value of a single Bond (in case the part of face value of the Bonds is prematurely redeemed, the residual face
value is used in the calculations),
C – annual interest rate,
D – number of days since the beginning of the interest accrual period (30E / 360 principle, where E – number of full
months).
6.7.
Redemption of the Bonds
The Investor shall be entitled to receive the face value of the Bonds. The face value of the Bonds shall be repaid at the
Bond maturity date, December 2020, by making a lump-sum payment. The Bondholders, eligible for redemption
payments, will be indicated on the last business day before the Bond maturity date by listing them in the Bondholders’ list
compiled by the LCD.
The Issuer shall pay the face value on the Bonds maturity date in accordance with the LCD rules No 8 “On Payment of
Dividends, Coupons, Principal, and Other Cash Proceeds”. The Issuer shall pay the face value by transferring the entire
payable amount to the LCD cash account. The LCD shall transfer the funds to the account holders on the face value
payment date in accordance with the number of the Bonds present in correspondent accounts on the face value
calculation date and taking into account information on the taxes to be withheld, if applicable, provided by the Issuer. The
interest income amount shall be credited to the cash account of the Bondholder by the account holder (the securities
account of the Bondholder is opened with).
Should the Bonds maturity date appear to be a day off, the Issuer shall pay the face value of the Bonds on the next
business day following the day off.
Should the Issuer fail to make settlement under redemption of the Bonds on the date stated herein, the Investors shall be
entitled to lodge claims to the Issuer demanding payment of the face value not earlier than in 5 (five) business days after
the relevant Bonds maturity date.
6.7.1. Premature redemption of the Bonds on the Issuer’s initiative (call option)
The Issuer shall be entitled to premature redemption of the Bonds in the following cases:
•
the Issuer shall be entitled to redeem prematurely (redemption price equals to 100.0% of the face value of the Bonds)
such Bonds that have been acquired by the Issuer on the secondary securities market or otherwise acquired thereby
in accordance with regulatory enactments, unless their redemption is restricted by the provisions of regulatory
enactments;
•
the Issuer shall be entitled to redeem any part (by partial redemption of the face value of the Bonds) or all of the Bond
issue at any time, starting from the second year after the date of issue:
•
starting from the second year after the date of issue – the Issuer shall be entitled to redeem the Bonds at the
price amounting to 102.5% of the part of the face value of the Bonds to be redeemed, as well as the Investors
shall be paid accrued interest that is outstanding as at the date of such premature redemption, if any;
•
starting from the third year after the date of issue – the Issuer shall be entitled to redeem the Bonds at the price
amounting to 101.5% of the part of the face value of the Bonds to be redeemed, as well as the Investors shall be
paid accrued interest that is outstanding as at the date of such premature redemption, if any;
•
starting from the fourth year after the date of issue – the Issuer shall be entitled to redeem the Bonds at the price
amounting to 100.0% of the part of the face value of the Bonds to be redeemed, as well as the Investors shall be
paid accrued interest that is outstanding as at the date of such premature redemption, if any;
•
in such cases the Issuer shall be entitled to redeem the Bonds prematurely not more than once a year, and the
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amount of the Bonds being redeemed may not be less than 25% of the total face value of the issue as stated in
the Prospectus (i.e. not less than EUR 1,000,000.00 per a premature redemption event).
Maturity of the Bonds
Premature redemption of the Bonds
(call option)
First year
(from 12 December 2016 to 11 December 2017)
No premature redemption provided
Second year
(from 12 December 2017 to 11 December 2018)
102.5% of the part of the face value
of the Bonds to be redeemed
Third year
(from 12 December 2018 to 11 December 2019)
101.5% of the part of the face value
of the Bonds to be redeemed
Fourth year
(from 12 December 2019 to 11 December 2020)
100.0% of the part of the face value
of the Bonds to be redeemed
Should the Bonds, or any part of those, be redeemed prematurely, the Issuer shall make a corresponding notice in
accordance with the disclosure procedure under paragraph 7.1 hereof at least 8 (eight) business days in advance, stating
the number of the Bonds being redeemed, their amount at face value, the date of premature redemption and the amount
of the issue that remains outstanding on the secondary market.
The list of Bondholders, eligible for premature redemption, will be established at the end of the 5 (fifth) business day
before the premature redemption date by listing them in the Bondholders’ list compiled by the LCD. The Bondholder shall
be entitled to receive the amount, that equals to the part of the face value of the Bonds to be redeemed multipled by the
price of premature redemption, in accordance with the number of bonds owned by the Bondholder on the premature
redemption calculation date.
Should the premature redemption date appear to be a day off, the Issuer shall pay the part of the face value of the Bonds
to be redeemed on the next business day following the day off.
The Issuer shall be entitled to redeem by cancelling such part of Bonds that has not been initially placed. In such case
the total value of the issue shall be equal to the actually placed Bonds.
Other rights and obligations of the investors arising out of the Bonds and not mentioned herein shall be exercised in
accordance with effective legal enactments of the Republic of Latvia.
6.7.2. The Investor requesting premature redemption of the Bonds (put option)
The Investor shall not be entitled to request the Issuer to repay the face value and accrued interest prematurely.
6.8.
Decisions on the Bond issue
The Bonds are issued and public offering is performed pursuant to the following decisions of Baltic RE Group:
•
the decision of the Issuer’s regular meeting of shareholders on the Bond issue and on authorising the Chairman of
the Board to carry out all actions relating to the Bond issue, dated 11 April 2016 (Minutes No 2016-04/11,
paragraph 4);
•
the decision of the Issuer’s Board on approving the Bond Prospectus dated 7 October 2016
(Minutes No 07-10-2016);
•
the decision of the Issuer’s Board on approving the Bond Prospectus with amendments that were made on the basis
of the Financial and Capital Market Commission instructions dated 1 November 2016 (Minutes No 01-11-2016).
6.9.
Restrictions on free transferability of the Bonds
The Bonds are freely transferrable securities, therefore there are no restrictions on alienation of the Bonds on the
secondary market securities.
6.10. Representation of the Investors
This Prospectus has no provisions for, or restrictions on, the rights to establish an organisation of the Investors’
authorised representatives. In case of the Issuer’s insolvency, each Investor shall be entitled to represent its / his
interests at the meetings of creditors. In case of the Issuer’s insolvency, any Investors’ right to get back their investment
shall be equal to that of other similar creditors.
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7.
Special provisions
7.1.
Disclosure of information
Until the Bonds are redeemed in full, the Issuer shall make public all information required under this Prospectus,
regulatory enactments, incl. the stock exchange rules, relating to mandatory disclosure of the Issuer’s information:
•
before the Bonds are admitted to trading on the regulated market, the Issuer shall provide information to the
Investors by publishing information on the Issuer’s website (www.balticregroup.com), as well as provide the
necessary information to the LCD according to LCD rules and provisions of the agreement concluded between the
Issuer and LCD;
•
after the Bonds are admitted to trading on the regulated market, the Issuer shall provide information to the Investors
by publishing all material information on the Issuer’s website (www.balticregroup.com), the stock exchange
website and ORICGS. Such information shall be provided according to the provisions of the Financial Instrument
Market Law, FCMC rules and Nasdaq Riga rules. The Issuer shall also provide the necessary information to the LCD
according to LCD rules and provisions of the agreement concluded between the Issuer and LCD.
7.2.
Insolvency event
In case the Issuer’s insolvency proceedings have been declared by a court decision, this shall be treated as the Issuer’s
insolvency event. In case of the Issuer’s insolvency, the Investors’ claims against the Issuer under the Bonds shall be
satisfied simultaneously with the claims of other unsecured creditors in accordance with the procedure under the
Insolvency Law.
7.3.
Application for the waiver
The Issuer shall request the Investors’ consent for changes in the parameters stated in the Prospectus (apply for the
waiver):
•
Bond interest rate;
•
Frequency of the interest income payments;
•
Bond maturity date;
•
Conditions of premature redemption (call option);
•
Conditions of early repayment (put option).
The Issuer shall not require the Investors’ consent (waiver) for amendments in any other provisions of this Prospectus.
In cases where, in order to make amendments in the provisions hereof, the Issuer needs to request the Investors’
consent in accordance with the provisions hereof, the Issuer or the Issuer’s authorised person shall submit to the Investor
an application for the waiver by publishing it in accordance with the disclosure procedure under paragraph 7.1 hereof,
stating at least the following information:
•
description of the amendments proposed;
•
justification of the description of the amendments proposed;
•
date when the list of the Investors entitled to give permission is fixed;
•
deadline by which the Investor may support or decline the waiver proposed;
•
instructions relating to supporting or declining the waivers proposed and the procedure for completing the voting
form;
•
notice that the Investor willing to support the waiver proposed by the Issuer should notify the Issuer accordingly by
the deadline stated in the application, and, unless the Investor notifies the Issuer about its / his confirmation to
support the waiver by the specified deadline, the Investor shall be deemed not to have given its / his consent to the
waiver;
•
the Issuer’s contact information used for notices (telephone for enquiries, address for sending / submitting completed
and signed forms and address of the Issuer or the Issuer’s authorised person where the Investor may submit its / his
form in person);
•
or other relevant information.
The Issuer or the Issuer’s authorised person shall request a list of Investors from the LCD as at the date being the 5 (fifth)
business day after the relevant notice is published. The term for the Investors to decide on whether the Issuer should
support or decline the waiver may not be shorter than 10 (ten) calendar days from the date when the application is
published.
The Investors shall submit their signed forms with their decision to the Issuer or the Issuer’s authorised person by the
date stated in the application for the waiver. The forms shall be sent by registered mail, submitted in person or by a
courier to the Issuer or the Issuer’s authorised person. The postal stamp, the responsible officer’s signature to
acknowledge receipt in the office shall be treated as the date of submitting the form. The waiver shall be deemed
accepted, provided the Investors that own at least 75% of the remaining Bonds (except for the Bonds owned by the
Issuer and / or its related persons (the Issuer’s subsidiaries, the Issuer’s shareholders, members of the Council and the
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Board)) have voted to support the waiver. The Bonds owned by the Issuer and / or its related persons may not be used to
participate for support of the waiver.
The Issuer or the Issuer’s authorised person shall determine the number of votes received and make a public
announcement of the voting results within 2 (two) business days after the term of submitting the forms expires, by
publishing the relevant notice in accordance with the disclosure procedure under paragraph 7.1 hereof.
Should the waiver be received from the Investors, amendments shall take effect after they are submitted to the FCMC.
Should the amendments refer to the Bond details and / or the method of calculating the coupon, or the procedure for the
coupon or the face value payment, the Issuer shall, immediately after the amendments take effect, notify the LCD about
the relevant amendments.
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8.
Taxation of income derived from the Bonds
Notice
•
This section contains general information about taxes of the Republic of Latvia payable in connection with
investment in the Bonds, and it shall not be treated as legal or tax advice.
•
This section does not contain exhaustive or complete information on all taxes applicable to the Investor and
investment in the Bonds and reflects the material provisions only. The information provided is based on the
regulatory enactments of the Republic of Latvia effective as at the moment of approving this Prospectus. Tax rates
and payment conditions may change during the period from approval of this Prospectus until the moment of gaining
the income. The Issuer has no obligation to inform the Investors on changes in the tax rates and payment conditions.
•
Before making a decision on investing in the Bonds, the Investor should, independently and, if necessary, engaging
a tax advisor, estimate taxes relating to the investment, pursuant to the provisions of both the Republic of Latvia and
foreign legal acts, in case the Investor is a non-resident of the Republic of Latvia.
8.1.
Determination of the Investor’s residence for tax purposes
In accordance with the Law of the Republic of Latvia “On Taxes and Duties”, an individual shall be considered a resident
of the Republic of Latvia where:
•
the declared place of residence of this person is the Republic of Latvia, or
•
he / she stays in the Republic of Latvia for 183 days or longer during any 12 month period beginning or ending in a
tax year, or
•
he / she is a national of the Republic of Latvia employed abroad by the Republic of Latvia government.
Unless an individual meets the above criteria, he / she shall not be considered a resident of the Republic of Latvia for tax
purposes.
In accordance with the Law of the Republic of Latvia “On Taxes and Duties”, a legal entity shall be considered a resident
of the Republic of Latvia for tax purposes where it is or should have been established and registered in the Republic of
Latvia pursuant to laws of the Republic of Latvia. Other legal entities shall be considered non-residents of the Republic of
Latvia for tax purposes.
If there is a tax treaty entered into with the residence country of a non-resident of the Republic of Latvia, the tax reliefs
stated in the treaty shall be complied with. The procedure for application of tax reliefs is stated in the Republic of Latvia
Cabinet Regulation No 178 of 30 April 2001 “Procedure for Application of Tax Relief Determined in International
Agreements for Prevention of Double Taxation and Tax Evasion”.
8.2.
Tax amount
In accordance with the regulatory enactments effective as at the moment of approving this Prospectus, the Issuer shall
ensure withholding the tax under the regulatory enactments of the Republic of Latvia on the interest income (incl. income
from premature redemption of the Bonds) to be paid to:
•
an individual – a resident of the Republic of Latvia – at the moment when the interest income is paid, the Issuer
shall withhold the tax of 10% of the interest income amount;
•
an individual – a non-resident of the Republic of Latvia – no tax shall be withheld at source, except where this
individual is registered or located in a country recognised as a low-tax or tax-free country or territory, in accordance
with the Republic of Latvia Cabinet Regulation No 276 of 26 June 2001 (“Regulation on Low-Tax or Tax-Free
Countries and Territories”) or international agreements that are binding on the Republic of Latvia. This being the
case, at the moment when the interest income is paid the Issuer shall withhold the tax of 15% of the interest income
amount;
•
a legal entity – no tax shall be withheld at source, except where this legal entity is registered in a country recognised
as a low-tax or tax-free country or territory, in accordance with the Republic of Latvia Cabinet Regulation No 276 of
26 June 2001 (“Regulation on Low-Tax or Tax-Free Countries and Territories”) or international agreements that are
binding on the Republic of Latvia. This being the case, at the moment when the interest income is paid the Issuer
shall withhold the tax of 15% of the interest income amount. A non-resident legal entity that receives interest income
payments shall make tax payments in accordance with the effective legislation of its country.
Before making a decision on investing in the Bonds, the Investor should, independently and, if necessary, engaging a tax
advisor, estimate application of the tax relating to the investment (incl. cases where the Investor must declare and pay
the tax independently), pursuant to the provisions of both the Republic of Latvia and foreign legal acts, in case the client
is a non-resident of the Republic of Latvia.
8.3.
Responsibility of the Issuer
The Issuer shall be responsible for withholding and paying taxes in accordance with the procedure and amount under the
regulatory enactments of the Republic of Latvia.
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The Issuer shall not be responsible for paying taxes in cases where the regulatory enactments of the Republic of Latvia do
not stipulate the Issuer’s duty to assess and withhold the tax amount before making interest income payments.
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9.
Terms and conditions of the offer
Under this Prospectus, the Issuer shall perform one issue of the Bonds. The Investors will be offered the Bonds
nominated in EUR. The Bonds are bearer debt securities without restraint on alienation.
9.1.
Issue volume
The face value of a single Bond is EUR 1,000.00 (one thousand euros).
The total face value of the issue is EUR 4,000 000.00 (four million euros).
The total number of the Bonds is 4,000 (four thousand).
The Bond issue shall be deemed performed to the amount of the placed Bonds. The Bonds that are not placed will be
redeemed by cancelling before being admitted to trading on the regulated market. Only Bonds actually placed will be
admitted to trading on the regulated market. The Issuer will inform about the total amount of actually placed Bonds in
accordance with paragraph 7.1 hereof.
9.2.
Determination of the price for initial placement transactions
The Issuer has determined the price of the Bonds’ initial placement depending on the current situation on the secondary
market of similar securities and, in particular, based on the evaluation of the demand on the securities market and the
yield of comparable market instruments.
The Issuer has determined the price of the Bonds’ initial placement expressed as percentage of the face value of the
Bonds. The price of the initial placement determined by the Issuer shall be the same for all Investors and shall remain
constant throughout the public offer period.
The price of the Bond initial placement shall be 100% of the face value of the Bonds.
The face value of a single Bond is EUR 1,000.00 (one thousand euros).
Purchasing the Bonds during the initial placement period, the Investor will have to pay the price of the Bond initial
placement stated herein per Bond purchased.
Additional expenses under the transaction, which might include, without limitation, fees for account opening, transaction
conclusion and execution, may vary in different investment companies, and the Investor can find those out in the
respective investment company to be engaged thereby in concluding the Bonds’ purchase transaction as an
intermediary. The Issuer shall not receive the said fees and payments stated by the investment companies and shall not
be responsible for those additional expenses.
9.3.
Term of the public offer and application procedure
The public offer start date is 15 November 2016.
Not later than on 14 November 2016, the information on the term of the public offer and application procedure shall be
published at the Issuer’s website www.balticregroup.com.
To apply for the Bonds purchase under the public offer, the Investor or the investment company to be engaged by the
Investor in concluding the Bonds’ purchase transaction as an intermediary shall, on business days from 8:30 a.m. to 6:30
p.m. (Riga time), submit its / his order to ABLV Bank using a form in accordance with the template “Financial Instruments’
Trade Order" attached as Annex 4 hereto. The order may also be submitted electronically, using the relevant order form
via ABLV Bank internetbank or other means of communication, upon agreement with ABLV Bank.
The public offer end date is 2 December 2016. ABLV Bank shall accept orders until the end of the business day –
6:30 p.m. (Riga time) or electronically until the end of the day – 11:59 p.m. (Riga time).
By submitting its / his order for the Bonds purchase to ABLV Bank, the Investor or the investment company to be
engaged by the Investor in concluding the Bonds’ purchase transaction as an intermediary agrees that information about
the Investor or the relevant investment company contained in such order shall be forwarded to the Issuer in order to
decide on concluding the transactions.
The Investor may not apply for purchasing less than 1 (one) Bond. No maximum number of the Bonds that a single
Investor may apply for is set.
Applications for the Bonds purchase submitted under the public offer may not be amended or revoked.
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Information on the procedure of submitting orders may be received:
•
over the phone: + 371 6700 2777;
•
via e-mail:
[email protected].
The initial placement of the Bonds shall be performed by means of their direct sale.
The arranger of the issue shall ensure complete placement of the issue within the public offering. If the issue is not
placed in full as at the public offer end date stated in the Prospectus, the arranger of the issue shall purchase the number
of debt securities that has not been placed within the initial placement period, on the same conditions that are stipulated
in the Prospectus.
The Issuer shall be entitled to redeem by cancelling such part of the Bonds that has not been initially placed.
9.4.
Decision on concluding the transactions
The Bonds purchase transactions shall be concluded on the basis of an order submitted by the Investor or the investment
company to be engaged by the Investor in concluding the Bonds’ purchase transaction as an intermediary under the
public offer.
The Investor or the investment company to be engaged by the Investor in concluding the Bonds’ purchase transaction as
an intermediary shall be obliged, by the settlement date under the Bond issue, to ensure that funds required to pay for the
Bonds purchase transaction are available in the Investor’s or the investment company’s cash account with ABLV Bank.
Transactions shall be concluded in accordance with the following decision-making procedure:
•
After the public offer end date and before the decision on concluding the transactions is made, ABLV Bank shall
make the list of Investors that have applied for the Bonds purchase known to the Issuer, disclosing to the Issuer only
such information about the Investors that is contained in the relevant orders.
•
The decision on concluding the transaction shall be made on the date stated herein in accordance with the sequence
in which orders were submitted, however providing for the decision-maker’s right to execute an order partially or to
deny the transaction, inter alia, for the sake of limiting possible reputational risk.
•
The decision on concluding the transactions with the Investors in accordance with the procedure hereunder shall be
made by ABLV Bank on the Issuer’s behalf.
9.5.
Settlement procedure
The day when the decision on concluding the transaction is made – not later than 8 December 2016.
The date when the transaction is concluded – 9 December 2016.
The settlement date under the Bond issue – 12 December 2016.
Settlements for the initial placement transactions in accordance with the procedure stated herein shall be ensured by
ABLV Bank on the Issuer’s behalf.
Settlements for the initial placement transactions shall be made in accordance with the DVP principle regulated by LCD
Rules No 5 “On DVP Settlement for OTC Transactions”.
9.6.
Information on the initial placement results
Information on the initial placement results shall be published in accordance with the disclosure procedure under
paragraph 7.1 hereof not later than within 10 (ten) business days after the public offer end date. The Bond issue shall be
deemed performed to the amount of the placed Bonds.
9.7.
Depository
Functions of the depository shall be performed by the LCD.
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10.
Admission to the regulated market and trading procedure
10.1. Application for admitting the Bonds to the regulated market
The regulated market maker to which the application for including the Bonds in the official listing shall be submitted:
Joint stock company “Nasdaq Riga”
Registration No:
Legal address:
Website:
40003167049
1 Vaļņu Street, Riga, Latvia
www.nasdaqbaltic.com
The Issuer shall submit all documents required for admission of the Bond issue to the regulated market – Nasdaq Riga
Baltic Bond List.
The application for admission of the Bonds to the regulated market shall be prepared in accordance with the
requirements of the stock exchange and submitted not later than within 2 (two) months after the initial placement is
completed, and shall enclose all documents under the Financial Instrument Market Law and information on the Bond
issue. All Bonds to be placed under the public offer shall be admitted to trading on the regulated market.
The Issuer undertakes to cover all expenses relating to admission of the Bond issue to the regulated market.
The Bonds shall be available for trading on the regulated market from the date when Nasdaq Riga decides to start listing
of the Bonds on the regulated market.
As at the moment of approving this Prospectus, the Issuer has not entered into an agreement with any person on
maintaining the Bonds liquidity on the secondary market.
10.2. Previous issues performed by the Issuer and admitted to the regulated market
As at the day of approving this Prospectus, no other issues of Baltic RE Group securities are included on Nasdaq Riga
lists.
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11.
Additional information
11.1. Advisers relating to the Bond issue
The Issuer has used the services of the arranger of the Bond issue, ABLV Bank, in preparing this Prospectus.
ABLV Bank is responsible for the accurate record herein of the information and data provided by the Issuer to prepare
this Prospectus. Therefore, ABLV Bank is not responsible for information and data provided herein being true.
11.2. Information on the Bond issue provided by third persons
Not applicable.
11.3. Credit ratings assigned to the Bonds
Not applicable.
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12.
Information about the Issuer
12.1. Basic information about the Issuer
Name:
Country of incorporation:
Registration No:
Place of registration:
Registration date:
Legal address:
Type of business:
Joint stock company “Baltic RE Group”
Republic of Latvia
40103716434
Register of Enterprises of the Republic of Latvia
2 October 2013
19 Šķūņu Street, Riga, Latvia
Joint stock company
The Issuer operates in accordance with the Commercial Law and other applicable regulatory enactments of the Republic
of Latvia.
The Issuer’s financial indicators are available in Section 13 hereof.
12.2. Certified auditor
Joint stock company “Baltic RE Group” consolidated annual report for the period from 2 October 2013 to
31 December 2014 (in accordance with the requirements of Latvian legislation) contained herein has been audited by:
Limited liability company “AUDIT ADVICE”
Registration No:
Legal address:
Member of the Board,
Responsible Sworn Auditor:
(licence No 134)
40003858822
9-3 Grēcinieku Street, Riga, Latvia
Marija Jansone
(certificate No 25)
Joint stock company “Baltic RE Group” consolidated and parent company’s annual report for the year ended
31 December 2015 (in accordance with International Financial Reporting Standards (IFRS)) contained herein has been
audited by:
LLC “Nexia Audit Advice”
Registration No:
Legal address:
Member of the Board,
Responsible Sworn Auditor:
(licence No 134)
40003858822
9-3 Grēcinieku Street, Riga, Latvia
Marija Jansone
(certificate No 25)
Joint stock company “Baltic RE Group” consolidated interim statement for period from 1 January 2016 to 30 June 2016
(H1 2016) (in accordance with the requirements of Latvian legislation) contained herein has been reviewed by:
LLC “Nexia Audit Advice”
Registration No:
Legal address:
Member of the Board,
Responsible Sworn Auditor:
(licence No 134)
40003858822
9-3 Grēcinieku Street, Riga, Latvia
Marija Jansone
(certificate No 25)
LLC “Nexia Audit Advice” is a company of certified auditors, which provides audit, accountancy, tax and legal services as
an internationally recognised audit company. Since 2008 it represents in Latvia one of the biggest worldwide network of
independent accounting and consulting firms, Nexia International. Nexia International is ranking in the top ten of the
largest international audit firms and networks and is a full member of the Forum of Firms of International Federation of
Accountants. Now Nexia is represented in 110 countries, with 600 member firms employing more than 24,000
professionals.
Clients of LLC “Nexia Audit Advice” represent various branches, industries and business forms, as well as differ on the
structure and complexity of business. LLC “Nexia Audit Advice” provides its services also to public interest entities (PIEs)
and companies that are listed on the stock exchange Nasdaq Riga.
The Issuer’s consolidated annual reports and auditor’s reports for 2014 (in accordance with the requirements of Latvian
legislation) and 2015 (in accordance with International Financial Reporting Standards (IFRS)), as well as the consolidated
interim financial report and report on review for period from 1 January 2016 to 30 June 2016 (H1 2016, in accordance
with the requirements of Latvian legislation) are available in Annexes hereto.
It has to be underlined that the Issuer was set up on 2 October 2013 with the purpose of becoming the parent company of
all Latvian subsidiaries previously controlled by Baltic Re S.P.A. The relevant reorganization process started on 4
December 2014 and ended on 24 March 2015, so the consolidated annual report for 2014 represents the state of matters
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in the middle of the ongoing process showing the temporary credit position of the future shareholders for the underwritten
share capital and with revenues referable to 27 days only (from 4 December 2014 to 31 December 2014).
12.3. Issuer’s principal activities
Baltic RE Group is a group mostly providing the services of premises rental and management, as well as engaged in
development of its subsidiaries by giving them support in economic, tax, financial, marketing, legal and technical matters.
The portfolio of the Issuer’s group consists of premium-class properties in the most visited locations in Old Riga, the
historical centre of Riga. The Issuer buys historical buildings with a potential of transformation of the commercial area,
renovates them, restoring the original appearance of the facade as far as possible and putting in order internal
engineering networks to the full. After the premises are repaired, the Issuer acquires solvent and well-known tenants,
receiving the rent from them as the main source of its cash flow. It often happens that premises are reconstructed and
improved in accordance with the tenants’ individual needs.
Currently, the Issuer’s group is the largest lessor of all-purpose and high quality commercial areas in Old Riga, with
agreements concluded with such well-known companies and organisations as Norwegian Embassy, the Financial and
Capital Market Commission, H & M Hennes & Mauritz LLC, If P & C Insurance LTD (publ) Latvian branch, LPP
(Reserved), etc. Currently, the Issuer’s real estate portfolio consists of six properties in Old Riga of the total gross
building area (GBA) over 20,000 m2, and the net leasable area (NLA) of 14,783 m2. In the group’s history there was a
property sale transaction, and currently it continues to manage this property for a special fee.
Baltic RE Group founders are confident that the historical centre of Riga has a high trading potential in the high street
segment where the key shops and offices of this city are located. This is determined by the combination of historical
sights of Riga, the street quality and the consumer purchasing power. The Issuer plans to purchase properties in central
Riga, incl. Old Riga, except vacant land plots, thus consolidating its leadership positions.
12.4. Issuer’s history and development
The key events in the development of the Issuer and its group companies are described below.
2008
Baltic RE S.P.A. is founded and enters the Latvian real property market.
2009
Property at 19 Šķūņu Street (Old Riga) is purchased – a historical building located in Dome Square and
being the only private building in the square. The property is renovated; after renovation works are
completed it is leased to solvent and well-known tenants.
2010
Property at 1 Kungu Street (Old Riga) is purchased – a historical building located in Townhall Square.
The property is renovated, increasing the retail area; after renovation works are completed it is leased
to solvent and well-known tenants.
The property at 6 Kaļķu Street (Old Riga) is purchased – a historical building located in the most active
pedestrian and tourist street. The property is renovated, significantly increasing the retail area; after
renovation works are completed it is leased to solvent and well-known tenants.
2011
Property at 2 Krāmu Street (Old Riga) is purchased – a historical building located in one of the busiest
pedestrian and tourist areas which connects Dome Square and Townhall Square. The property is
renovated, significantly increasing the retail area; after renovation works are completed it is leased to
solvent and well-known tenants.
2012
Property at 16 Šķūņu Street (Old Riga) is purchased – a historical building facing Tirgoņu Street, one of
the busiest pedestrian and tourist streets which connects Dome Square and Townhall Square.
The property was renovated and sold in 2015, however the Issuer continues to manage it.
Property at 15 Kaļķu Street is purchased – a historical Art Nouveau building with the status of a stateprotected cultural monument in Old Riga. The property is renovated, significantly increasing the retail
and the office area; after renovation works are completed it is leased to solvent and well-known
tenants. It was the project that enabled the Issuer to achieve a new level in building renovation.
2013
Property at 12/14 Kaļķu Street (Old Riga) is purchased – a historical building close to Līvu Square
located in the best commercial area of Old Riga. The property is fully renovated, significantly increasing
the retail and the office area; after renovation works are completed it is leased to solvent and wellknown tenants.
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2014
Reorganization process starts in December in order for Baltic RE Group to become the holding
company of the group and, consequently, the owner of all subsidiaries.
2015
The group’s activity is focused on extending its lines of business, improving the organisation of its work,
thus ensuring stable and coordinated operation of all units of the group and the required financial
support for the group’s units. The work with the group’s clients is active, as well as successful
measures are taken to study, develop and implement new lines of business.
The building at 12 Kaļķu Street receives Latvian Construction Industry Annual Award 2015 in “Facade
Renovation” nomination, as well as LANĪDA (Latvian Real Estate Association) award “The Contribution
to the Improvement of Development of the Old Town, Kaļķu 12, Riga”.
Revenues (consolidated) from leases and other triple net income for 2015 reach EUR 3,241,121.
2016, H1
Baltic RE Group increases its share capital by issuing new registered shares. Upon this shares issue,
the Issuer’s current fixed capital is EUR 25,000,000 (twenty-five million euros).
Revenues (consolidated) from leases and other triple net income for 2016 H1 reach EUR 2,024,952.
Baltic RE Group management evaluates, on a continuous basis, external factors that influence operations of the group
companies and takes measures required to optimise and develop the group’s operations.
12.5. Issuer’s organisational structure
The Issuer is a parent company within the group comprising six companies. The group’s operations are connected with
real estate management, i. e., the management of six properties owned by the group and one property owned by another
entity. Currently, the Issuer has two properties under its management and the companies owned by the Issuer manage
one property each (except Baltic RE S.P.A.). This enables the group to make the management of each particular property
more effective and optimised, as well as to focus better on appropriate tasks.
The Issuer’s structure is consistent in full with Baltic RE Group consolidated annual financial report for 2015:
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12.5.1. Issuer’s management bodies
• Meeting of the shareholders
The Meeting of the shareholders is the supreme management body of the Issuer.
• Council
First name, surname
Position held
Cesare Pizzul
Chairman of the Council
Appointed on 21.04.2016
Aleksandrs Mahajevs
Deputy Chairman of the Council
Appointed on 21.04.2016
Edgars Murāns
Member of the Council
Appointed on 21.04.2016
The Council is the supervisory institution of the Issuer, which represents the interests of the shareholders during the
time periods between Meetings of the shareholders and supervises the activities of the Board within the scope
specified in the Commercial Law and the Statutes.
The Statutes of Baltic RE Group regulate the composition and election of the Council, its functions, and decision
making. Council Regulations are adopted according to the provisions of the Commercial Law and the Statutes of the
Issuer and regulate Councils decision-making authority and procedures, as well as execution of Council decisions.
• Board
First name, surname
Position held
Giovanni Dalla Zonca
Chairman of the Board
Appointed on 02.10.2013
Marco Chioatto
Member of the Board
Appointed on 02.10.2013
Dina Abaja
Member of the Board
Appointed on 02.10.2013
The Board is the executive body of the Issuer, which manages and represents the Issuer. The Board supervises and
manages the affairs of the Issuer. It is responsible for the commercial activities of the Issuer, as well as for accounting,
in compliance with the laws. The Board administers the property of the Issuer and acts with its means according to the
requirements of the law, the Statutes and decisions of Meetings of the shareholders and the Council.
The Statutes of Baltic RE Group regulate the composition and election of the Board, its functions, the representation of
the Issuer and the decision-making process. The Board Regulations determine rights, duties, responsibilities and
operating procedures of the Board.
12.5.2. Issuer’s management
The Issuer’s Board ensures the company management and consists of three persons with vast experience in real
estate management both in Italy and Latvia.
• Giovanni Dalla Zonca, Chairman of the Board, CEO
Graduated with honours in economics from the University of Trieste (Italy). Giovanni Dalla Zonca has extensive
experience in real estate consulting and entrepreneurship. He worked for many years as a financial consultant for
the real estate industry, and was the founder and CEO of Renta, an important Italian sales network of real estate
loans issued by leading international financial institutions. Giovanni Dalla Zonca worked as a strategic consultant
for over 10 years with leading Italian private and institutional investors in the retail real estate sector, assisting
clients in the selection of investments, and in preparing financing and turnaround projects. The further results in
international real estate development allowed Giovanni Dalla Zonca to found Baltic Re Group in 2007 to enhance
experience on emerging markets with high growth potential in the retail sector. Giovanni Dalla Zonca is the
Honorary Member of the Latvian Real Estate Association, and represents the Company in the Baltic Chapter of the
International Real Estate Federation FIABCI, i. g. FIABCI-Baltic; he is widely recognized as a leading real estate
expert in the high street retail in the Baltic countries and in that capacity participated as a speaker in several
international industry conferences.
• Marco Chioatto, Member of the Board, CFO
Graduated from the University of Economics in Venice (Italy). Marco Chioatto is Certified Chartered Accountant in
Italy. From 1998 to 2004 he held the position of Director and Vice President of the Association of Certified
Chartered Accountants in Padua, Italy. Held the position of a chief financial officer in the consulting industry.
Having worked as a consultant in the real estate area both in Italy and European countries, providing advice in
transactions for real estate purchase and participating in managing real estate companies, in 2007 he co-founded
Baltic Re Group. Marco Chioatto cooperates with international consulting companies to provide consultations in
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high street investment valuation to financial institutions. Works as an auditor and external auditor for companies in
the North-Eastern region of Italy and in Milan.
• Dina Abaja, Member of the Board
Graduated from the International Commercial University (Latvia). Dina Abaja has more than seven-year experience
in high-class real estate area, i. e., in retailing, offices and mixed-use centres management, as well as in mediation
between owners and tenants. Working as a managing director of a company specialised in property management,
she was responsible for the full property management of buildings, including such areas as reconstructions, finance
supervision, property marketing, advertising and consulting. Dina’s extensive experience enabled her to provide
qualitative real estate market review, to succeed in searching new tenants, and to develop the concepts of
buildings.
12.5.3. Other key executive personnel
•
Cesare Pizzul, Head of the Council
Graduated with honours in Mining Engineering from the University of Trieste (Italy), he received a postgraduate
specialization in Mining Geostatistics at the Ecole Nationale des Mines de Paris, and attended a master course in
General Management at the ISTUD of Stresa (Italy). In 1994 he became the founder and CEO of Sunshine
Investments, a private equity and financial holding destined to invest in industrial companies in the North East of
Italy. Since 2001 he is a corporate advisor for primary companies following the international expansion of several
important clients. In 2006 Cesare Pizzul founded Wulfenia Business Consulting, an international corporate advisors
company involved in financial, administrative, fiscal and corporate consulting in Central and Eastern Europe, the
Balkans and South America, specifically focusing on outsourcing of administration and other services for retail
shops chains all over Europe. In 2008–2014 Cesare Pizzul held the positions of Independent Director, President of
the Remuneration Committee, President of the Related Parties Committee, Member of the Internal Control
Committee at Eurotech Group S.P.A, a nano high performing computers company listed in Milan Stock Exchange.
Cesare Pizzul has extensive experience in advising and independent control in major (even listed) companies all
over Europe.
12.5.4. Issuer’s Audit Committee
First name, surname
Position held
Cesare Pizzul
Chairman of the Audit Committee
Appointed on 11.04.2016
Edgars Murans
Member of the Audit Committee
Appointed on 11.04.2016
Inta Fominova
Member of the Audit Committee
(independent member)
Appointed on 11.04.2016
The Audit Committee is responsible for supervising the drawing up of the financial reports of Baltic RE Group
(incl. consolidated financial reports), as well as for supervising the effectiveness of internal control operations and risk
management systems of Baltic RE Group.
The Statutes of Baltic RE Group regulate the composition and election of the Audit Committee, its functions and
represention of the Issuer.
12.5.5. Issuer’s shareholding structure
Interest in Baltic RE Group, in per cent of the voting shares, as at 30 June 2016:
Number of
voting shares
Share of voting
share capital
SFEM ITALIA S.R.L. (Italy)
4,900,000
19.60%
Limited liability company ”AXIA” (Latvia)
2,807,274
11.23%
AREPO FIDUCIARIA S.R.L. – SOCIETA CON SOCIO UNICO (Italy)
2,520,000
10.08%
Other shareholders (9 legal entities and 7 individuals)
14,772,726
59.09%
Total:
25,000,000
100.00%
In H1 2016 the Issuer increased its share capital by issuing new registered shares. Currently the Issuer’s share capital
is EUR 25,000,000 (twenty-five million euros).
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12.6. Main operational principles
The group’s business model provides for purchasing historical buildings with prime retail high street location in central
Riga, incl. Old Riga, at strategically important crossings, carrying out high quality renovation works and further leasing the
premises to solvent tenants. Commercial areas owned by the group consist of both trading and office premises that are
considered premium-class premises with excellent location, smartly designed layout, high quality finish and furniture,
energy efficiency, innovative facilities, etc.
Striving to preserve the importance of buildings in terms of the state history, the Issuer is aware, at the same time, of their
potential for satisfying the needs of high street vendors and tenants of high-class offices. One of the Issuer’s operational
principles is to preserve the importance of buildings and to increase their value further on, which provides not only
financial benefits for the Issuer, but also contributes to the maintenance of the historical centre of Riga. In the future, the
Issuer plans to purchase commercial areas in central Riga, incl. Old Riga, except vacant land plots.
After the group purchases properties, the Issuer carries out their refurbishment by making the required internal and
external reconstruction and repairs, focusing on the reconstruction of the building facades. The Issuer invests in the
purchase of state-of-the-art facilities and the implementation of innovative solutions, and acquires solvent, mostly wellknown tenants. The Issuer’s development strategy is based on the maximum rise of the investment value by increasing
the number of leasable premises and rent income, as well as by decreasing operational costs of the properties.
One of the Issuer’s operational principles is cost optimization. Since Baltic RE Group headcount is less than 10, this
makes it possible not to spend large financial resources for administrative costs, whereas management and maintenance
of the real estate is outsourced on the basis of a long-term agreement with the key company in the field. Such
organizational approach allows the company to offer a 24/7 help desk to its clients to immediately solve all technical
issues and timely grant the tenants a top-level service and care.
In accordance with its main operational principles and development strategy, the Issuer acquires only and solely highclass tenants that may add value to each property. In cooperation with its clients, the Issuer is able to offer them not only
high-class trading or office premises usually in the busiest locations of the historical centre of Riga, i. e., Old Riga, but
also mutually beneficial conditions and such support information as, for example, the number of people passing by the
show-windows of a particular shop / office every day. It often happens that the Issuer carries out reconstruction or
improvement of the premises in accordance with the relevant tenant’s needs.
12.7. Major markets where the Issuer operates and its client base
Baltic RE Group is an experienced investor in and manager of properties currently specialising on establishing a real
estate portfolio in Latvia and its further sale. It was founded by a group of businessmen willing to take advantage of
excellent investment opportunities arising in different Eastern European countries due to various reasons. The Republic
of Latvia, in particular Riga, was chosen mostly because of the development of the retail market, its political stability, fixed
exchange rate of the euro, high standard of its financial and public administration, as well as its competitive financial
budget and good educational level.
Baltic RE Group has always invested with a long-term outlook and concentrated vision, a non-speculative short-term
approach and a focus on establishing long-term stable values. Following its value creation strategy, Baltic RE Group aims
to investing in assets with strong foundation and potential, in order to add value by means of effective management.
The portfolio of the Issuer’s group is diversified and covers mixed-use properties comprising both office premises and
commercial premises for retailers. This causes high demand and a wide range of clients. The most significant
agreements include lease and management agreements with the following well-known local and international clients:
•
Restaurants:
• Il Patio and TGI Fridays (brands managed by Rosinter Group, one of the most important restaurant chains in
Eastern Europe, with over 300 restaurants in 10 countries),
• 3 PRIR managed by an experienced group of the best chefs of Latvia: Ēriks Dreibants and Juris Dukaļskis,
• Costa Coffee coffee shop that has over 2,700 coffeehouses in 30 countries,
• Tokyo City, the flagship restaurant chain in the Baltics that owns more than 60 eateries,
• and others.
• Retailers:
• ARMITANA UAB (Salamander Store), the largest footwear retailer in the Baltics,
• Reserved, a flagship store in Latvia (member of LPP Fashion Group that owns a fashion retail chain with over
1,600 stores across Europe),
• H & M Hennes & Mauritz LLC (the company H & M Hennes & Mauritz GBC AB launched its operations by
opening a women’s clothing store in Västerås, Sweden; currently H & M Hennes & Mauritz GBC AB covers six
independent brands (H & M, COS, Monki, Weekday, Cheap Monday and & Other Stories) and 4,000 stores
globally,
• and others.
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•
Other service providers:
•
Financial and Capital Market Commission,
•
If P & C Insurance LTD (publ) Latvian branch (If is owned by the largest non-life insurance company in Northern
Europe),
•
Norwegian Embassy,
•
Booking.com,
•
ECOVIS Convents Law office,
•
BDO Law firm,
•
Scandiweb,
•
Joint stock company “Citadele banka”.
The Issuer’s advantage is professional property management based on extensive experience, which enabled it to
increase property value in a few years.
Moreover, the Issuer’s strengths may include the following:
•
high quality materials used in renovation and repair works, which minimise the likelihood of unforeseen repair
costs;
•
the buildings’ value as historical monuments and their advantageous locations (high attendance, easy access);
•
long-term lease agreements (for 6 years on the average).
The Issuer has extensive development opportunities because there are still a lot of properties with considerable potential
in Old Riga and central Riga (outside Old Riga). This is why the Issuer plans to strengthen the group's positions by
acquiring new properties for rental or sale.
12.8. Portfolio of properties
The Issuer’s group owns the following six properties and manages one property. Currently, all properties in the portfolio
of the Issuer’s group are well organised, have more than 97% occupancy and are managed carefully. The list of
properties owned and managed by the Issuer’s group is provided below.
All owned buildings are fully renovated, duly put on exploitation and all inventories files are updated. All buildings are in
compliance with laws and regulations of Latvia in force. Taking into account pending new energy saving regulations, the
Issuer took a decision to proceed with the improvements and certification of all the buildings in order to meet new
requirements of energy savings already in advance.
All properties are freehold (ownership of the building and land beneath).
Currently, the condition of all buildings owned by the group should be evaluated as explicitly good in terms of both their
appearance and interior equipment, as well as engineering networks. Although the scope of works done so far practically
obviates the need for major repairs in the nearest future, the Issuer is ready to carry out various renovation works on a
regular basis, which will make it possible to maintain the current value of the building over time. Therefore, the historical
buildings sorted by the Issuer, which are a unique and literally unparalleled asset, will continue to be attractive to tenants
for more than one decade.
•
19 Šķūņu Street (owned and managed)
Gross Building Area: 1,814.76 m2
Total Internal Area: 1,501.38 m2
Leasable area: 1,071.60 m2 (retail area: 593.40 m2, office area: 478.20 m2)
Number of floors: 5 above ground, and a basement
Cadastre number: 01000060034.
Owned by the group since 2009.
Location: the corner building faces Dome Square and is the only private building on the square; it has 14 large shop
windows and 56 windows.
The building at 19 Šķūņu Street was built in the 18th century by the project of architect Cristoph Haberland (1750 – 1803)
as a mixed-use building and in 1872 was reconstructed by architect John Friederich Baumann; the building facade is
registered as an architectural monument of state’s importance. It faces Dome Square with a spectacular view of the
Dome Cathedral and the former Riga Stock Exchange. After the building was acquired in 2009, the Issuer carried out
extensive renovation and repair works (in 2010) making use of high quality finishing materials, inter alia, renovated the
2nd floor in full modifying its use as a retail area, and renewing the entrance and the office area. In 2014 additional
refurbishment works were performed and the facade was fully illuminated.
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The main tenants are Charlie Pizza restaurant and the Latvian Real Estate Association (LANĪDA). The building also
contains office premises, which were renovated in 2012.
•
1 Kungu Street (owned and managed)
Gross Building Area: 3,989.06 m2
Total Internal Area: 3,499.88 m2
Leasable area: 2,916.66 m2 (retail area: 858.26 m2, office area: 2,058.40 m2)
Number of floors: 6 above ground, and a basement
Cadastre number: 01000010078.
Owned by the group since 2010.
Location: the centre of Townhall Square (the only private building), the site of the Townhall of Riga and of the Blackhead
House, the most visited monument in the Baltics.
The building was built in 2001 by the project of architect Zane Kalinka on the base of the historical Kamarin House. After
the building was acquired in 2010, the Issuer carried out extensive renovation and repair works, making use of high
quality finishing materials, and recovering for the retail use extensive areas in the basement and on the 2nd floor. In 2011,
the building facade was redone and illuminated. Currently, the Issuer submitted to the relevant authorities a project of the
extension of the leasable area of the building by creating new premises in the attic and by modifying existing technical
spaces.
The building is the headquarter of the Financial and Capital Market Commission; another significant tenant is Costa
Coffee, an international coffee shop chain.
•
6 Kaļķu Street (owned and managed)
Gross Building Area: 1,324.70 m2
Total Internal Area: 1,081.31 m2
Leasable area: 896.90 m2 (retail area: 799.40 m2, office area: 97.50 m2)
Number of floors: 2 above ground, and a basement
Cadastre number: 01009101904 (01000020078001011, 01000020078001010) and 01009104081 (01000020078001014).
Owned by the group since 2010.
Location: a prime location in the busiest pedestrian and tourist area. The corner building has 11 large shop windows
facing the highest footfall street segment of Riga.
The building was built in the 18th century as a retail building with apartments facing Kaļķu Street and Sķūņu Street. It was
rebuilt in 1896 and in the following years two different neighbouring buildings were merged in one; in such configuration
the property was renovated in 2004. After the building was acquired in 2010, the Issuer carried out extensive renovation
and repair works, making use of high quality finishing materials, modifying the use of the 2nd floor as a retail area, thus
significantly increasing the overall leasable area.
The main tenants are the restaurants Il Patio and TGI Fridays (Rosinter Group).
•
2 Krāmu Street (owned and managed)
Gross Building Area: 1,814.74 m2
Total Internal Area: 1,456.69 m2
Leasable area: 1,166.95 m2 (retail area: 660.20 m2, office area: 506.75 m2)
Number of floors: 5 above ground, a basement and an outdoor terrace
Cadastre number: 01000070115.
Owned by the group since 2011.
Location: the building faces Tirgoņu Street, one of the busiest pedestrian and tourist areas which connects Dome Square
with Townhall Square, the site of the Blackhead House. This corner building has 7 large shop windows and 31 windows.
The building at 2 Krāmu Street was built in 1875 by the project of architect Fridrihs Vilhelm Hess (1872 – 1877) as a
mixed-use building. After the building was acquired in 2011, the Issuer carried out extensive renovation and repair works
of the whole building, making use of high quality finishing materials, creating new leasable areas in the mansard,
installing new lifts, building a terrace, doubling the retail areas and greatly increasing the size of the new shop front
windows.
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The main tenants are Tokyo City restaurant, a flagship restaurant chain in the Baltics that owns more than 60 eateries,
and office tenants, i. e. the Financial and Capital Market Commission and IUSTUS Law Office.
•
15 Kaļķu Street (owned and managed)
Gross Building Area: 7,617.00 m2
Total Internal Area: 6,683.85 m2
Leasable area: 5,203.14 m2 (retail area: 1,632.80 m2, office area: 3,570.34 m2)
Number of floors: 6 above ground, and a basement
Cadastre number: 01000090033.
Owned by the group since 2012.
Location: a prime location in the busiest pedestrian and tourist area. This corner building has 16 large shop windows.
The building at 15 Kaļķu Street was built in 1913 by the project of the famous Latvian architect Jānis Alksnis (1869 –
1939), for the headquarters of the Mutual Credit Union Bank. After this magnificent Art Nouveau building was acquired in
2012, the Issuer carried out extensive renovation and repair works, making use of high quality finishing materials, inter
alia, renovated the basement in full, installed new lifts and a retail escalator. The building is a state-protected cultural
monument and is situated in one of the best retail locations in Riga. The main facade is facing Kaļķu Street and Vaļņu
Street where people flow is one of the busiest in the capitals of the Baltic states.
This project is among the most significant in the group’s history because it helped the Issuer to understand its
capabilities, opened prospects for further renovation works at a new level, as well as for taking up various challenges
relating to the initial condition of the building.
The main tenants are Reserved, Norwegian Embassy, Booking.com, H&M, Rīgas Viļņi, BDO, Ecovis.
•
12/14 Kaļķu Street (owned and managed)
Gross Building Area: 4,209.99 m2
Total Internal Area: 3,658.42 m2
Leasable area: 3,524.32 m2 (retail area: 1,523.36 m2, office area: 2,000.96 m2)
Number of floors: 6 above ground, a basement and 3 terraces
Cadastre number: 01000020074.
Owned by the group since 2013.
Location: 12/14 Kaļķu Street is composed of two different buildings in an extraordinary retail location, overlooking the
segment of Kaļķu Street with the greatest footfall in the entire Riga.
The building at 12/14 Kaļķu Street was built in 1930 by the project of architect Pauls Mandeļštams (1872 – 1941) as a
prestigious retail building. After the building was acquired in 2013, the Issuer carried out extensive renovation and repair
works of the whole building, making use of high quality finishing materials, inter alia, rebuilt the top floor, implemented the
best possible engineering solutions in electric power supply and use, innovative IT solutions, and redesigned the facade
with wide shopfront windows.
The main tenants are Salamander (Armitana), the largest footwear retail chain in the Baltics; Rockabilly House managing
the first Harley Davidson concept store in Latvia; If P & C Insurance LTD (publ) Latvian branch. It is significant that the
Issuer managed to double the property value over two years.
•
16 Šķūņu Street (managed only)
Gross Building Area: 1,958.02 m2
Total Internal Area: 1,618.03 m2
Leasable Area: 1,252.10 m2
Number of floors: 6 above ground, basement and a roof terrace
Cadastre number: 01000070088.
Purchased in 2012, sold in 2015.
Location: the building faces Tirgoņu Street, one of the busiest pedestrian and tourist streets which connects Dome
Square and Townhall Square.
The building was built in 1822 and reconstructed in 1879 (architect Heinrihs Kārlis Šēls) as a retail building featuring
apartments. After the building was acquired in 2012, the Issuer carried out extensive renovation and repair works, making
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Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
use of high quality finishing materials, increasing the retail area and modifying the commercial windows, adding new retail
entrances, and fully recovering the 75% of the upper floors apartments.
The main tenants are restaurant Planeta Sushi, a brand of Rosinter Group, Laima and Latvijas Balzams. The building has
12 apartments: 9 of them are managed by a single tenant for short-term lease use.
12.9. Key competitors
Baltic RE Group is the largest manager of commercial areas in the historical centre of Riga, i. e. Old Riga. Currently, the
company has no direct competitors to offer as high quality, spacious and mixed-use premises in Old Riga. The Issuer has
already managed to establish itself as a reliable partner in the real estate area, which does not need extensive
advertising anymore because businessmen apply for and show interest in premises lease themselves.
12.10. Long-term financial investments in subsidiaries
The information provided in the table below is consistent in full with that presented in Baltic RE Group consolidated
annual financial report for 2015.
The Issuer’s interest in subsidiaries:
Interest of the group (%)
No
Company
1.
BALTIC RE
S.P.A.
2.
Country of
Registration
incorporation number
Company’s line of business
Direct
interest (%)
Indirect
interest (%)
100.00
-
04277380285
Management of related
companies, strategic
development and study and
development of properties
Limited liability
company
LV
“KEY 1”
40103212372
Rental / lease, management of
real estate
25.00
75.00
3.
Limited liability
company
LV
“Key 2”
40103451102
Rental / lease, management of
real estate
-
100.00
4.
Limited liability
company
LV
“KEY 6”
40103285982
Rental / lease, management of
real estate
51.66
48.34
5.
Limited liability
company
LV
“Key 15”
40103568148
Rental / lease, management of
real estate
33.00
67.00
6.
Limited liability
company
LV
“Skunu 19”
40003993617
Rental / lease, management of
real estate
-
100.00
IT
All subsidiaries are (directly or indirectly) fully owned (100%).
In 2017, Baltic Re Group will streamline the company structure, both operationally and in terms of taxation, and will
proceed, where appropriate, with the merger or incorporation of the wholly owned subsidiaries.
12.11. Information about trends in operation development
Drafting its development strategy for the next years, the Issuer intends to continue its actions for the effective
development of the group’s operations, incl. searching for new properties, optimising and developing the group’s current
lines of business. In the future, it is planned to strengthen cooperation with loyal customers and partners, to improve the
quality control system, as well as to attract new clients (tenants) and to increase turnover.
In the next few years, the Issuer plans to follow its existing business model and to expand its real estate portfolio with
properties in Latvia (central Riga, incl. Old Riga). As to date, the Issuer will be interested in buying such unique and
historically important real property in strategically favourable, in terms of trading, i. e. frequently visited, locations, which
has a potential for conversion into premium-class premises suitable for shops and offices in the so-called high street
segment, renovating these buildings in accordance with their condition at the moment of purchase, attracting qualitative
and well-known tenants to ensure a regular cash flow for the Issuer and to add value to the buildings.
12.12. Significant changes in the Issuer’s financial position
In H1 2016 the Issuer increased its share capital by issuing new registered shares. Currently the Issuer’s share capital is
EUR 25,000,000 (twenty-five million euros).
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After the annual report for 2015, no other significant changes occurred that might affect the Issuer’s financial position.
12.13. Legal and arbitration proceedings
As at the moment when this Prospectus is prepared, there are no pending proceedings initiated by or against
Baltic RE Group that might significantly affect the Issuer’s operations or financial position.
12.14. Material contracts
On 6 January 2015, the loan agreements with the credit institution entered into by the groups’ subsidiaries, limited liability
company “KEY 1”, limited liability company “Key 2”, limited liability company “KEY 6”, limited liability company “Key 15”
and limited liability company “Skunu 19”, were transferred to the parent company of the group, as well as the parent
company restructured the loan agreement with the credit institution dated 2014. As a result, Baltic RE Group entered into
a unified loan agreement with the credit institution and entered into individual loan agreements with limited liability
company “KEY 1”, limited liability company “Key 2”, limited liability company “KEY 6”, limited liability company “Key 15”
and limited liability company “Skunu 19”.
As at 31 December 2015, the Issuer had a long-term loan from the credit institution on the following conditions:
Interest rate
2.25% + 3M Euribor
Date of repayment
06.01.2020
Loan amount at the
EUR 28,000,000
moment of disbursement
Long-term loan amount1
as at 31.12.2015
EUR 25,950,389
Collateral
In accordance with the loan agreement entered into with the credit institution, liabilities
against the credit institution are secured by a mortgage on properties owned by the Issuer.
The maximum amount of the secured claim is EUR 56,000,000 (fifty-six million euros).
1
As at 31 December 2015, the Issuer has also current liabilities from credit institutions amounting to EUR 1,110,714.
Total non-current and current liabilities from credit institutions are EUR 27,061,103.
In addition to loans from credit institutions, as at 31 December 2015 the Issuer was granted a long-term loan amounting
to EUR 31,616 by a legal entity. The loan is without collateral and is to be repaid in 2017.
12.15. Credit ratings assigned to the Issuer
The Issuer is not assigned any credit ratings.
12.16. Information about trends
The Issuer has no information on any trends, uncertainty factors, claims, liabilities or events, except those stated herein,
that might have a negative impact on the Issuer’s financial position.
12.17. Membership in associations or organisations
Giovanni Dalla Zonca, the Chairman of the Board of the Issuer, is an associated member of the Latvian Real Estate
Association (LANĪDA), as well as holds a seat in LANĪDA Developers’ Council. At the same time he is a member of the
Baltic Chapter of the International Real Estate Federation (FIABCI).
12.18. Profit forecasts
Baltic RE Group made no profit forecasts for the following periods of operations.
12.19. Available documents of the Issuer
The Issuer’s incorporation documents, articles of association and financial reports are available to the Investors at the
Register of Enterprises of the Republic of Latvia, at 2 Pērses Street, Riga, Latvia.
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13. Issuer’s financial information
13.1. Report of the audit of financial information
Independent auditors’ reports for the years 2014, 2015 and independent auditor’s report on review for the H1 2016
are available in Annex 1, Annex 2 and Annex 3.
13.2. Joint stock company “Baltic Re Group” financial reports for 2014 and 2015
Joint stock company “Baltic RE Group” consolidated annual report for the period from 2 October 2013 to
31 December 2014 is prepared in accordance with the requirements of Latvian legislation.
Joint stock company “Baltic RE Group” consolidated and parent company’s annual report for the year ended
31 December 2015 is prepared in accordance with International Financial Reporting Standards (IFRS).
The Issuer’s consolidated reports for 2014 and 2015 and independent auditor’s reports are available in Annex 1 and
Annex 2.
Information included in this section corresponds to the joint stock company “Baltic RE Group” consolidated and parent
company’s annual report for the year ended 31 December 2015 (data for the years 2014 and 2015).
Statement of financial position, EUR
Group
31.12.2015.
Group
31.12.2014.
Issuer
31.12.2015.
Issuer
31.12.2014.
9 503 744
8 063 077
1 440 667
-
820
-
820
-
ASSETS
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Investment property
Investments in subsidiaries
Loans to related companies
110 584
34 921
59 101
-
39 372 481
37 876 157
11 351 315
9 685 259
-
-
20 645 408
16 017 688
-
-
17 189 209
582 866
Other securities and investments
32 230
71 264
-
-
Other loans and non-current receivables
13 000
104 100
13 000
-
265 706
-
11 559
-
49 298 565
46 149 519
50 711 079
26 285 813
714 889
95 136
163 496
989
Deferred income tax assets
Total non-current assets
Current assets
Trade receivables
Receivables from related companies
-
-
851 620
230 814
772 332
818 660
448 346
230 576
67 686
52 632
15 725
835
1 638 774
612 472
1 261 702
459 781
3 193 681
1 578 900
2 740 889
922 995
-
248 944
-
-
3 193 681
1 827 844
2 740 889
922 995
52 492 246
47 977 363
53 451 968
27 208 808
Share capital
24 853 452
5 200 000
24 853 452
5 200 000
Other reserves
(1 841 117)
-
16 101
-
1 076 985
(105 197)
(141 425)
(215 529)
24 089 320
5 094 803
24 728 128
4 984 471
Other receivables
Accrued income
Cash and cash equivalents
Total current assets
Non-current assets classified as held for sale
Total current assets and non-current assets
classified as held for sale
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Retained earnings / (loss) for the year
Equity attributable to equity holders of the parent
company
Non-controlling interest
Total equity
-
2 322 225
-
-
24 089 320
7 417 028
24 728 128
4 984 471
25 950 389
17 978 016
25 950 389
3 508 754
Non-current liabilities
Loans from credit institutions
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Borrowings
Payables to related companies
Other payables
Deferred income
Total non-current liabilities
Group
31.12.2015.
Group
31.12.2014.
Issuer
31.12.2015.
Issuer
31.12.2014.
31 616
60 000
-
-
-
-
279 000
114 000
381 783
339 938
181 626
113 969
-
11 000
-
-
26 363 788
18 388 954
26 411 015
3 736 723
1 410 968
1 969 513
1 110 714
249 667
-
281 616
-
-
Current liabilities
Loans from credit institutions
Borrowings
Prepayments received from customers
Trade payables
Payables to related companies
-
7 743
-
-
295 584
1 787 534
23 051
638 331
-
-
1 108 963
144 326
Taxes payable
103 797
72 820
5 405
207
Other payables
112 030
17 597 075
4 256
17 317 048
11 000
11 000
-
-
Deferred revenue
Accrued liabilities
105 759
444 080
60 436
138 035
2 039 138
22 171 381
2 312 825
18 487 614
Total liabilities
28 402 926
40 560 335
28 723 840
22 224 337
TOTAL EQUITY AND LIABILITIES
52 492 246
47 977 363
53 451 968
27 208 808
Group
01.12.2015.31.12 2015.
Group
02.10.2013.31.12.2014.
Issuer
01.12.2015.31.12 2015.
Issuer
02.10.2013.31.12.2014.
Total current liabilities
Statement of comprehensive income, EUR
Revenue
3 241 121
262 807
645 325
61 014
Cost of sales
(1 474 474)
(298 159)
(255 691)
(120 878)
Gross profit
1 766 647
(35 352)
389 634
(59 864)
Distribution costs
(1 576)
(1 731)
(1 538)
(1 287)
(498 649)
(178 110)
(259 445)
(145 317)
Other operating income
95 285
13 448
70 424
-
Other operating expenses
(2 422)
(9 403)
(355)
(497)
375 131
-
-
-
-
(6 822)
-
-
(39 033)
(15 750)
-
-
Administrative expenses
Revenue from sale of non-current assets classified
as held for sale
Share of loss of investments accounted for using the equity
Write-down of long-term financial investments and
short-term securities
Negative goodwill write-off
-
213 308
-
-
1 695 383
(20 412)
198 720
(206 965)
4 136
909
429 081
-
Finance costs
(643 458)
(48 715)
(539 022)
(3 700)
Profit or loss before tax
1 056 061
(68 218)
88 779
(210 665)
(21 782)
-
-
-
Operating profit or loss
Finance income
Corporate income tax
Deferred corporate income tax
262 793
-
11 559
-
Other taxes
(114 890)
(10 864)
(26 234)
(4 864)
PROFIT OR LOSS FOR THE YEAR
1 182 182
(79 082)
74 104
(215 529)
-
-
-
-
1 182 182
(79 082)
74 104
(215 529)
1 182 182
(105 197)
Other comprehensive income or loss
TOTAL COMPREHENSIVE INCOME OR LOSS
Profit or loss attributable to:
Equity holders of the parent company
Non-controlling interest
Total
-
26 115
1 182 182
(79 082)
40/45
Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
Group
01.12.2015.31.12 2015.
Group
02.10.2013.31.12.2014.
0.056
(0.017)
Equity holders of the parent company
-
-
Non-controlling interest
-
-
TOTAL
-
-
Group
01.12.2015.31.12 2015.
Group
02.10.2013.31.12.2014.
Issuer
01.12.2015.31.12 2015.
Issuer
02.10.2013.31.12.2014.
1 056 061
(68 218)
88 779
(210 665)
828 496
80 991
56 741
-
6 715
402
421
-
39 033
22 572
-
-
Negative goodwill write-off
-
(213 308)
-
-
Profit or loss from foreign currency exchange rate
fluctuations
6
362
-
362
(4 136)
-
(429 081)
-
643 458
48 715
539 022
-
2 569 633
(128 484)
255 882
(210 303)
Basic and diluted earnings or loss per share for profit
attributable to the equity holders of the parent company
during the year:
Basic and diluted earnings or loss per share
Total comprehensive income or loss attributable to:
Statement of cash flows, EUR
Cash flows from operating activities
Profit or loss before tax
Adjustments for:
Depreciation of investment property
Depreciation of property, plant and equipment
Write-down of long-term financial investments and
short-term securities
Financial income
Financial costs
Operating cash flows before working capital
changes
(Increase) / decrease in trade receivables
(697 992)
(956 428)
2 111 026
(463 214)
(13 246 616)
1 669 861
(3 533 003)
921 681
(11 374 975)
584 949
(1 166 095)
248 164
Interest paid
(643 458)
(165 781)
(534 795)
(117 066)
Real estate tax paid
(114 890)
(10 864)
(26 248)
(4 864)
(12 133 323)
408 304
(1 727 138)
126 234
(2 529 679)
(180 000)
(4 971 720)
(180 000)
-
-
16 101
-
(2 327 447)
(9 373 929)
(1 783 139)
(9 314 645)
Loans gtanted
(13 000)
-
(22 062 606)
-
Proceeds from loan repayment
120 100
-
1 219 835
-
4 136
909
428 843
-
(4 745 890)
(9 553 020)
(27 152 686)
(9 494 645)
Increase / (decrease) in trade and other payables
Cash generated from operations
Net cash generated from operating activities
Cash flows from investing activities
Aquisitions of subsidiary, net of cash acquired
Profit of merged company as a result of
reorganization
Purchases of property, plant and equipment and
intangible assets
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
433 642
5 200 000
433 642
5 200 000
Proceeds from borrowings
28 000 000
4 737 306
30 295 000
4 737 306
Repayments of borrowings
(10 528 120)
(179 756)
(1 046 897)
(108 752)
17 905 522
9 757 550
29 681 745
9 828 554
(7)
(362)
-
(362)
1 026 302
612 472
801 921
459 781
612 472
-
459 781
-
1 638 774
612 472
1 261 702
459 781
Net cash used in financing activities
Foreign currency exchange rate fluctualions
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the
year
CASH AND CASH EQUIVALENTS AT THE END OF
THE REPORTING YEAR
41/45
Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
Statement of changes in equity (Group), EUR
Equity attributable to equity holders
of the parent company
Share
capital
Other
reserves
Retained
eqrnings /
(loss)
Balance as at 2 October 2013
TOTAL
Non-controlling
interest
TOTAL
-
-
-
-
-
-
5 200 000
-
-
5 200 000
-
5 200 000
Profit or loss for the year
-
-
(105 197)
(105 197)
26 115
(79 082)
Other comprehensive income or loss
-
-
-
-
-
-
Total comprehensive income or loss
-
-
(105 197)
(105 197)
26 115
(79 082)
Non-controlling interest arising on
business combination
-
-
-
-
2 296 110
2 296 110
5 200 000
-
(105 197)
5 094 803
2 322 225
7 417 028
19 653 452
-
-
19 653 452
-
19 653 452
-
16 101
-
16 101
-
16 101
Profit or loss for the year
-
-
1 182 182
1 182 182
-
1 182 182
Other comprehensive income or loss
-
-
-
-
-
-
Total comprehensive income or loss
-
-
1 182 182
1 182 182
-
1 182 182
Acquisition of non-controlling interest
-
(1 857 218)
-
(1 857 218)
24 853 452
(1 841 117)
1 076 985
24 089 320
Share
capital
Other
reserves
Retained
eqrnings /
(loss)
TOTAL
Proceeds from shares issued
Comprehensive income or loss
Balance as at 31 December 2014
Proceeds from shares issued
Profit of merged company as a result of
reorganization
Comprehensive income or loss
Balance as at 31 December 2015
(2 322 225) (4 179 443)
-
24 089 320
Statement of changes in equity (Issuer), EUR
Balance as at 2 October 2013
-
-
-
-
5 200 000
-
-
5 200 000
Profit or loss for the period
-
-
(215 529)
(215 529)
Other comprehensive income or loss
-
-
-
-
Total comprehensive income or loss
-
-
(215 529)
(215 529)
Non-controlling interest arising on
business combination
-
-
-
-
5 200 000
-
(215 529)
4 984 471
19 653 452
-
-
19 653 452
-
16 101
-
16 101
Profit or loss for the year
-
-
74 104
74 104
Other comprehensive income or loss
-
-
-
-
Proceeds from shares issued
Comprehensive income or loss
Balance as at 31 December 2014
Proceeds from shares issued
Profit of merged company as a result of
reorganization
Comprehensive income or loss
Total comprehensive income or loss
Balance as at 31 December 2015
-
-
74 104
74 104
24 853 452
16 101
(141 425)
24 728 128
42/45
Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
13.3. Joint stock company “Baltic Re Group” interim financial report for H1 2016
Joint stock company “Baltic RE Group” consolidated interim statement for period from 1 January 2016 to 30 June
2016 is prepared in accordance with the requirements of Latvian legislation.
The Issuer’s consolidated report for period from 1 January 2016 to 30 June 2016 and independent auditor’s report on
review are available in Annex 3.
Information included in this section corresponds to the joint stock company “Baltic RE Group” consolidated interim
statement for period from 1 January 2016 to 30 June 2016 (data for the H1 2016).
Balance sheet, EUR
Group
30.06.2016.
ASSETS
Non-current assets
Intangible assets
Concessions, patents, licences, trade marks and similar rights
Other intangible assets
Goodwill
Total intangible assets
684
3 061
9 520 144
9 523 889
Property, plant and equipment
Other fixtures anf fittings, tools and machinery
Total property, plant and equipment
Investment property
121 199
121 199
39 145 668
Non-current financial assets
Other securities and investments
32 230
Other loans and non-current receivables
13 000
Deferred corporate income tax assets
Total non-current financial assets
Total non-current assets
265 706
310 936
49 101 692
Current assets
Receivables
Trade receivables
562 467
Other receivables
857 077
Prepaid expenses
192 530
Accrued income
Total receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS
49 738
1 661 812
852 409
2 514 221
51 615 913
EQUITY AND LIABILITIES
Equity
Share capital
25 000 000
Reserves
reserves which has developed from purchase of extra shares
(1 796 681)
Retained earnings
brought forward
for the financial year
Total equity
822 934
118 227
24 144 480
Liabilities
Non-current liabilities
Loans from credit institutions
Other borrowings
Other liabilities
Deferred income
Total non-current liabilities
25 950 389
31 616
443 949
11 000
26 436 954
43/45
Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
EQUITY AND LIABILITIES
Current liabilities
Loans from credit institutions
Trade payables
Taxes and statutory social insurance payments
Other liabilities
Deferred income
Accrued liabilities
Total current liabilities
760 111
94 498
120 524
23 712
346
35 288
1 034 479
Total liabilities
27 471 433
TOTAL EQUITY AND LIABILITIES
51 615 913
Income statement, EUR
Group
01.01.2016.-30.06.2016.
Net sales
2 024 952
Cost of sales
(1 046 205)
Gross profit
978 747
Distribution costs
Administrative expenses
(4 332)
(478 505)
Other operating income
35 197
Other operating expense
(2 827)
Interest expenses and similar expenses
(356 131)
Profit before tax
172 149
Other taxes
(53 922)
Net profit for the financial period
118 227
Statement of cash flows, EUR
Group
01.01.2016.-30.06.2016.
Cash flows to / from operating activities
Profit before taxes
172 149
Adjustments for:
Depreciation of investment property
Depreciation of property, plant and equipment
Amortisation of intangible assets
Interest and similar expenses
Operating profit or loss before changes in current assets and liabilities
563 810
12 011
76 376
356 131
1 180 477
Adjustments for:
Increase / decrease in receivables
(270 600)
Increase / decrease in payables
(292 706)
Cash generated from operations
617 171
Interest and similar expenses
(356 131)
Real estate tax paid
Net cash flows to / from operating activities
(53 922)
207 118
Cash flows to / from investing activities
Acquisition of property, plant, equipment and intangible assets
Net cash flows to / from investing activities
(489 174)
(489 174)
Cash flows to / from financing activities
Proceeds from issue of share capital and debenture or investments in other companies
Repayments of borrowings
Net cash flows to / from financing activities
146 548
(650 857)
(504 309)
Net decrease / increase in cash and cash equivalents
(786 365)
Cash and cash equivalents at the beginning of the year
1 638 774
Cash and cash equivalents at the end of the year
852 409
44/45
Joint stock company “Baltic RE Group” Prospectus of the Bond Issue – BREG FXD EUR 121220
Statement of changes in equity (Group), EUR
As at 31.12.2014.
Share capital
Reserves
Noncontrolling
interest
Retained
earnings
Total
5 200 000
-
2 206 039
(246 088)
7 159 951
19 600 000
-
-
-
19 600 000
Reserves
-
(1 796 681)
-
-
(1 796 681)
Non-controlling interest
-
-
(2 206 039)
-
(2 206 039)
Profit for the financial year
-
-
220 378
220 378
(25 710)
22 977 609
Issue of share capital
As at 30.06.2015.
24 800 000
(1 796 681)
-
53 452
-
-
-
53 452
-
-
-
860 409
860 409
24 853 452
(1 796 681)
-
834 699
23 891 470
Issue of share capital
146 548
-
-
-
146 548
Dividends calculated
-
-
-
(11 765)
(11 765)
-
-
-
118 227
118 227
25 000 000
(1 796 681)
-
941 161
24 144 480
Issue of share capital
Profit for the financial year
As at 31.12.2015.
Profit for the financial year
As at 30.06.2016.
Annexes
Financial information on the Issuer’s assets and liabilities, financial position, profits or losses
Annex 1: Joint stock company “Baltic RE Group” consolidated annual report for the period from 2 October 2013 to
31 December 2014 (in accordance with the requirements of Latvian legislation).
Annex 2: Joint stock company “Baltic RE Group” consolidated and parent company’s annual report for the year ended
31 December 2015 (in accordance with International Financial Reporting Standards (IFRS)).
Annex 3: Joint stock company “Baltic RE Group” consolidated interim statement for period from 1 January 2016 to
30 June 2016 in accordance with the requirements of Latvian legislation).
Annex 4: Financial Instruments’ Trade Order.
45/45