31 March, 2022
PLAZA CENTERS N.V.
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021
Plaza Centers N.V. (“Plaza” / “Company” / “Group”) today announces its results for the year ended 31
December 2021.
Financial highlights:
• Reduction in total assets by €2.7 million to €9.8 million mainly as a result of the decrease in Equity
accounted investees as detailed below, administrative expenses and costs of operations.
• Consolidated cash position as of December 31, 2021 increased by circa €3 million to app. € .74 million
(December 31, 2020: €1.7 million) as result of received consideration after the sale of plot in Chennai,
India.
• €2.9 million loss recorded at an operating level (December 31, 2020: €25.4 million loss) mainly due to
share in results of equity accounted investees and administrative expenses.
• Recorded loss of €27.1 million (December 31, 2020: €33.5 million), mainly due to finance expenses on
bonds.
• Basic and diluted loss per share of €3.95 (31 December 2020: loss per share of €4.89).
Impact of the Covid-19
The risks associated with the Covid-19 global health and economic crisis may affect the Company indirectly,
through possible regulatory changes and the impact on the macroeconomic environment, which may affect
the conducted activities which are concentrated at selling of the assets. The Company monitors the
consequences of the event and the actions taken in countries in which it operates and assesses the risks and
exposures arising from these consequences. At this stage, the impact of the effect of the COVID 19 was a
delay in the legal procedures against the purchaser of the SPV which owns the plot in Bangalore India (refer
to Note 6(b)(1) in the annual consolidated financial statements). Other than the above mentioned, at this stage,
the Company is not able to estimate the full future impact of COVID 19.
Material events during the period:
Sale agreement of plot in Bangalore, India:
Regarding the criminal cases filed for dishonor of the cheques which were given as security for payment of
certain instalments refer to Note 6(b)(1) in the annual consolidated financial statements.
Until the approval of the financial statements the Purchaser paid to EPI approximately INR 87.00 crores (EUR
11.2 million) (Company part INR 43.5 crores (approximately EUR 5.6 million)) out of a total consideration of
INR 356 crores (approximately EUR 42 million) (Plaza part INR 178 crores (approximately EUR 21 million) the
SPV should have been received as of the said date as per the Agreement.
At this stage, there is no clarity on payment of the remaining amount based on the Agreement. Accordingly,
the Company is taking necessary steps to protect its interest, including submitting an appeal before the
National Company Law Appellate Tribunal, Chennai, India against the decision of the National Company Law
Tribunal, Bengaluru, India, which dismissed the insolvency proceedings initiated against the Purchaser for the
recovery of the amounts due, and filing a motion with court in order to collect checks given by the Partner to
secure payments under the transaction, but were dishonored.
The local partner periodically submits, informally, offers for the acquisition of all EPI rights in the land in
amounts significantly lower than the contract price. As of the date of the approval of these financial statements,
EPI continues to take action against the local partner in order to exhaust the consideration for its rights in the
land (both proceedings to collect the consideration and proceedings to enforce separation between the parties)
but without any success so far. It is possible that the amounts that EPI will actually charge will be significantly
lower than the balance to be paid. It should be taken into account that any change in terms of the transaction
also requires the consent of Elbit Imaging ltd which holds approximately 47.5% of the share capital of EPI, and
that there is a joint control agreement between it and the Company.
The Company estimates that the procedures for separation from the local partner and cancellation of the future
right involve will cost up to one million euros, with the period of time of one to three years. (The difference in
costs involved in the said separation procedure and the period of time required for it depends on the legal
proceedings that EPI will take as well as on the question of whether the local partner will seek to compromise
during the legal proceedings).
Sale agreement of plot in Chennai, India:
On June 21, 2021, the Company announced regarding the agreement (the “SPA”) between Elbit Plaza India
Real Estate Holdings Limited (a subsidiary held by the Company (50%) and Elbit Imaging ltd.(50%)) ("EPI")
and the purchaser (the “Purchaser”) for the sale of 100% stake in the SPV (subsidiary of EPI) which owns 74.7
acre plot in Chennai, India, for a total consideration of INR 96.5 crores (approximately EUR 11.2 million), the
Purchaser completed the transaction and paid a consideration of INR 94.7 crores (approximately EUR 10.6
million). The change in the consideration is due to the Purchaser’s consent to take some additional liabilities
in connection with the SPV (which were not included in the original agreement with the Purchaser).
As stated above, Plaza were entitled to receive 50% of the transaction's compensation. Accordingly, the
Company received an additional consideration of approximately EUR 4.25 million, in addition to advanced
payments in a total consideration of EUR 1.05 million, it already received. Furthermore, Plaza and Elbit Imaging
Ltd granted the Purchaser an indemnification, jointly and severally, for some of EPI's presentations, which are
presentations customary in such transactions.
Update regarding a change in Elbit Imaging Ltd holdings
In the period since January 11, 2021 and up to January 13, 2022, the Company announced that since August
5, 2020 and up to the last announcement, Elbit Imaging Ltd. ("Elbit Imaging") sold about 1,670 thousand shares
of the Company, which are held in escrow account, for a total consideration of approximately NIS 1,683
thousand, thus, Elbit Imaging holdings in the Company have diminished from 44.9% to 20.55% of the
Company's issued and paid-up capital.
Deferral of payment of Debentures and partial interests’ payment:
Refer to the below in Liquidity & Financing.
Dutch statutory auditor:
Refer to Note 16 (b)(7) in the annual consolidated financial statements.
Annual General Meeting:
Annual general meeting of the Shareholders of the Company was held on June 30, 2021, all the proposed
resolutions were passed.
Information regarding proposals from G.C. Hevron Capital Ltd, L.I.A Pure Capital Ltd and Zero One
Capital Ltd:
In the period since July 9, 2021 till August 10, 2021, the Company received proposals from G.C. Hevron Capital
Ltd (“Hevron Capital”). According to revised proposal received on August 10, 2021 the Company's assets will
be transferred to a trustee and/or will be managed exclusively for the benefit of the bondholders, in order to
create a mechanism according to which the bondholders will exclusively benefit from any expected income
from the existing assets.
On July 21, 2021 the Company received additional proposal from L.I.A. Pure Capital Ltd. to purchase shares
of the Company, as a publicly-traded shell company.
On July 30, 2021 the Company received additional proposal from Zero One Capital Ltd to preserve the
Company’s existing assets in favor of the Company's bondholders and other interested persons and
simultaneously to enable to flow new activity.
All proposals were discussed on bondholders meeting which was held on August 1, 2021. Following this
bondholders meeting, an additional bondholders meeting was held on August 11, 2021, in which the
bondholders decided to approve that the Company's Board of Directors can conduct a negotiation with G.C.
Hevron Capital Ltd regarding the sale of the Company's public structure and to grant a no shop for a period of
60 days during which due diligence will be carried out by G.C. Hevron Capital Ltd and its advisor.
On October 4
th
, 2021 the Company received a request from G.C Hevron Capital Ltd. to extend the "NO-SHOP"
period, as Hevron Capital and its attorneys might not succeed to submit the agreement within the designated
time schedules, due to the holiday’s period and the complexity of the transaction.
The Company's Board of Directors has discussed Hevron Capital's request, as stated above, and decided to
approve an extension of the "NO-SHOP" period by an additional 30 days, until November 12, 2021.
On March 30, 2022 the Company announced that Hevron Capital submitted to the Company a request to
extend the No-Shop period, due to the complexity and the vast amount of data that needs to be procced in
order to evaluate the proposed settlement (“Hevron Capital’ Request”).
Following the above, the Company's Board of Directors approves Hevron Capital’s Request to extend the "No-
Shop" period until May 20, 2022 subject to the approval of the Company’s bondholders’.
Update regarding an agreement for the sale of the Plaza Centers Czech Republic S.R.O.’s receivables:
On August 10, 2021 the Company announced that Plaza Centers Czech Republic s.r.o ("Plaza Centers CR"),
a wholly owned subsidiary of the Company, has signed an agreement for the sale of its receivables to a third
party, for a total consideration of EUR 200,000, regarding an advanced payment for the purchase of a Czech
project company which Plaza Centers CR paid in the past.
Key highlights since the period end:
Update regarding an Engagement letter with a law firm in London in connection with the legal
proceedings in the “Casa Radio” project:
On January 14, 2022 the Company announced, that further to the Company's bondholders meeting dated
November 25, 2021 and the Company's bondholders' approval to initiate legal procedures in connection with
the "Casa Radio" project (the "Project"); that on January 13, 2022, the Company signed an engagement letter
with a law firm in London in order to take any relevant actions in connections with the Project. For details in
connection with the legal proceedings in the “Casa Radio” project please refer to Note 5 in the annual
consolidated financial statements.
Update regarding the issuance of a notice of dispute and acceptance of offer and consent to arbitrate
to Romania with respect to the “Casa Radio” project :
On February 15, 2022 the Company announced, further to the Company's bondholders meeting dated
November 25, 2021 and the Company's bondholders' approval to initiate legal procedures in connection with
the "Casa Radio" project (the "Project"); that on January 13, 2022, the Company signed an engagement letter
with a law firm in London in order to take any relevant actions in connections with the Project.
For details in connection with the legal proceedings in the “Casa Radio” project please refer to Note 5 in the
annual consolidated financial statements.
Commenting on the results, executive director Ron Hadassi said:
“Our active focus has continued to centre on asset disposals, accordingly we have managed to execute the
sale of our project in Chennai, India following which the company received an amount of approximately EUR
4.25 million. Regarding our Plot in Bangalore, India, as stated above, the Company is continuing to take all
necessary steps to protect its interest in its plot while continuing Its efforts to realize a transaction; in connection
with Casa Radio Project, the Company issued a Notice of Dispute and Acceptance of Offer and Consent to
Arbitrate to Romania with respect to the Project and we hope this will help us to unblock the current status of
the Project.
For further details, please contact:
Plaza
Ron Hadassi, Executive Director 972-526-076-236
Notes to Editors
Plaza Centers N.V. (www.plazacenters.com) is listed on the Main Board of the London Stock Exchange, on
the Warsaw Stock Exchange (LSE: “PLAZ”, WSE: “PLZ/PLAZACNTR”) and, on the Tel Aviv Stock Exchange.
Forward-looking statements
This press release may contain forward-looking statements with respect to Plaza Centers N.V. future (financial)
performance and position. Such statements are based on current expectations, estimates and projections of
Plaza Centers N.V. and information currently available to the Company. Plaza Centers N.V. cautions readers
that such statements involve certain risks and uncertainties that are difficult to predict and therefore it should
be understood that many factors can cause actual performance and position to differ materially from these
statements.
MANAGEMENT STATEMENT
During 2021 the management’s focus has been on executing of cash proceeds on signed SPA for the sale of
Chennai project in India. In the Bangalore project the Company together with Elbit continued to protect its
interest in the project, including by filling an appeal before the National Company Law Appellate Tribunal,
Chennai, India against the decision of the National Company Law Tribunal, Bengaluru, India, which dismissed
the insolvency proceedings initiated against the Purchaser for the recovery of the amounts due (refer also to
Note 6(1)). The Company also continued cost reductions and partial repayments to its bondholders.
In connection with Casa Radio Project, as stated above, the Company issued a Notice of Dispute and
Acceptance of Offer and Consent to Arbitrate to Romania with respect to the Project and we hope this will help
us to unblock the current status of the Project. In addition, on December 20, 2021 the Company and AFI
Europe N.V. (“AFI Europe”) agreed to extend the Long Stop Date, which is the date on which the parties will
execute a share purchase agreement, subject to the satisfaction of conditions precedent (the "SPA"), until
December 31, 2022. The addendum was approved by the bondholders meeting held on November 25, 2021.
Due to the board and management estimation that the Company is unable to serve its entire debt according
to the current redemption date (July 1, 2022) in its current liquidity position, the Company intends to request
from the bondholders of both series (Series A and Series B) postponement of the repayment of the remaining
balance of the bonds.
Results
During the year, Plaza recorded a €27.1 million loss attributable to the shareholders of the Company. This is
a decrease compared to the losses reported in 2020 (loss of €33.5 million). The losses were mainly from the
Net Finance Costs which were increased to €24.2 million in 2021, from €8.1 million in 2020 mainly due to
foreign currency losses on bonds (including inflation) and interests’ expenses accrued on the debentures
(partly due to penalty interest calculated on the deferred principal); and from administrative expenses and
share in results of equity-accounted investees.
Total result of operations excluding finance income and finance cost was a loss of €2.8 million in 2021
compared to the reported loss of €25.4 million in 2020.
The consolidated cash position (cash on standalone basis as well as fully owned subsidiaries) as of 31
December 2021 was €4.7 million (31 December 2020: €1.7 million).
Liquidity & Financing
Plaza ended the period with a consolidated cash position of circa €4.7 million, compared to €1.7 million at the
end of 2020.
As of December 31, 2021, the Group’s outstanding obligation to bondholders (including accrued interests) are
app. €121.7 million.
As disclosed by the Company in Note 8 in the annual consolidated financial statements, the Company was not
able to meet its final redemption obligation to its (Series A and Series B) bondholders, due on July 1, 2021,
the bondholders approved: (i) to postpone the final redemption date to January 1, 2022; (ii) that on July 1,
2021 the Company will pay to its bondholders a partial interest payment in the total amount of EUR 125,000.
On November 25, 2021, the bondholders of Series A and Series B approved: (i) to postpone the final
redemption date to July 1, 2022; (ii) that on January 1, 2022 the Company will pay to its bondholders a partial
interest payment in the total amount of EUR 200,000 and to deferral all other unpaid interest. The amount
reflected 0.92% of accrued interest as of that date.
Due to the board and management estimation that the Company is unable to serve its entire debt according
to the current bonds repayment schedule in its current liquidity position, the Company intends to request the
bondholders of both series for postponement of the repayment of the remaining balance of the bonds.
However, there is an uncertainty if the bondholders will approve the request. In the case that the bondholders
would declare their remaining claims to become immediately due and payable, the Company would not be in
a position to settle those claims and would need to enter to an additional debt restructuring or might cease to
be a going concern.
Strategy and Outlook
The Company’s priorities are focused on efforts to unblock the current status of the Casa Radio project, getting
further proceeds for Bangalore. The Company also intends to seek for bondholders’ approval for postponement
of the repayment of the bonds.
OPERATIONAL REVIEW
Over the course of the year to date, Plaza has continued to make progress against its operational and strategic
objectives. The Company’s current assets are summarized in the table below (as of balance sheet date):
Asset/
Project
Location
Nature of asset
Plaza’s
effective
ownership
%
Status
Casa Radio
Bucharest,
Romania
Mixed-use retail, hotel
and leisure plus office
scheme
75
for further information refer to note 5 (2) in
the annual consolidated financial
statements )
Bangalore
Bangalore, India
Residential Scheme
47.5
for further information refer to note 6(b)(1)
in the annual
consolidated financial statements
FINANCIAL REVIEW
Results
Finance income of €2.1 million in 2020 was mainly due to foreign exchange movements on the debentures,
which did not occur in the end of December 31, 2021.
Finance costs increased from €10.2 million in 2020 to €24.2 million in 2021. The main components of finance
costs were foreign currency losses on bonds (including inflation) and interests’ expenses accrued on the
debentures which includes also penalty interest calculated on the deferred principal.
As a result, the loss for the period amounted to circa €27.1 million in 2021, representing a basic and diluted
loss per share for the period of €3.95 (2020: €4.89 loss).
Balance sheet and cash flow
The balance sheet as of 31 December 2021 showed total assets of €9.8 million compared to total assets of
€12.5 million at the end of 2020, mainly as a result of the decrease in Equity accounted investees.
The consolidated cash position (cash on standalone basis as well as fully owned subsidiaries) as of 31
December 2021 increased to €4.7 million (31 December 2020: €1.7 million).
Investments in equity accounted investee companies has decreased by €5.6 million to circa €5.1 million (31
December 2020: €10.7 million) mainly as a result of cash distribution of €4.2 million (31 December 2020: €1.1
million).
As of 31 December 2021, Plaza has a balance sheet liability of app. €100 million from issuing bonds on the
Tel Aviv Stock Exchange. Additionally, Plaza recorded provision for interests on bonds as of December 31,
2021, in amount of €21.7 million (31 December 2020: €10.7 million).
Disclosure in accordance with Regulation 10(B)14 of the Israeli Securities Regulations (periodic and
immediate reports), 5730-1970
1. General Background
According to the abovementioned regulation, upon existence of warning signs as defined in the regulation, the
Company is obliged to attach its report’s projected cash flow for a period of two years, commencing with the
date of approval of the report ("Projected Cash Flow").
The material uncertainty related to going concern was included in the independent auditors’ report and in Note
1(b) in the consolidated financial statements as of December 31, 2021. In light of the material uncertainty that
the SPA between the Company and AFI Europe N.V. will eventually be executed and/or that the transaction
will be consummated as presented above or at all, (refer to Note 5 in the consolidated financial statements as
of December 31, 2021) as well as the default of purchaser of Bangalore project to meet payments schedule
according to the signed amendment agreement (refer to Note 6(b)(1) in the consolidated financial statements
as of December 31, 2021), the board and management estimates that the Company is unable to serve its
entire debt according to the due date the bond holders approved to postpone the final redemption date.
Accordingly, it is expected that the Company will not be able to meet its entire contractual obligations in the
following 12 months.
With such warning signs, the Company is providing projected cash flow for the period of 24 months following
for the coming two years.
2. Projected cash flow
The Company has implemented the restructuring plan that was approved by the Dutch Court on July 9, 2014
(the “Restructuring Plan”). Under the Restructuring Plan, principal payments under the bonds issued by the
Company and originally due in the years 2013 to 2015 were deferred for a period of four and a half years, and
principal payments originally due in 2016 and 2017 were deferred for a period of one year. During first three
months 2017, the Company paid to its bondholders a total amount of NIS 191.7 million (EUR 49.2 million) as
an early redemption. Upon such payments, the Company complied with the Early Prepayment Term (early
redemption at the total sum of at least NIS 382 million) and thus obtained a deferral of one year for the
remaining contractual obligations of the bonds.
In January 2018, a settlement agreement was signed by and among the Company and the two Israeli Series
of Bonds.
On November 22, 2018 the Company announced based on its current forecasts, that the Company expected
to pay the accrued interest on Series A and Series B Bonds on December 31, 2018, in accordance with the
repayment schedule determined in the Company's Restructuring Plan and Settlement Agreement with Series
A and Series B Bondholders from 11 January 2018 (the “Settlement Agreement”). The Company noted that it
will not meet its principal repayment due on December 31, 2018 as provided for in the Settlement Agreement.
On February 18, 2019 the Company paid principal of circa EUR 250,000 and Penalty interest on arrears of
EUR 150,000 following the bondholder’s approval to defer principal repayment to July 1, 2019.
In addition, during June 2019 the bondholders approved the deferral of the full payment of principal due on
July 1, 2019 and of 58% ("deferred interest amount") of the sum of interest (consisting of the total interest
accrued for the outstanding balance of the principal, including interest for part of the principal payment which
was deferred as of February 18, 2019, plus interest arrears for part of the principal which was fixed on February
18, 2019 and was not paid by the Company and all in accordance with the provisions of the trust deed; "the
full amount of interest"), the effective date of which is June 19, 2019, and the payment date was fixed as of
July 1, 2019. The company paid on the said date a total amount of circa EUR 1.17 million, which is only 42%
of the full amount of interest.
On July 11, 2019, the Company announced that its Romanian subsidiary had signed a binding agreement to
sell a land in Romania, and that the Company would use part of the proceeds now received by it EUR 0.75
million (hereinafter: "the amount payable"), in order to make a partial interest payment to the bondholders
(Series A) and (Series B) issued by the Company. The payment required changes in the repayment schedule
and amendments of the trust deeds which was approved unanimously by the Bondholders. The amount
payable was paid on August 14, 2019 and reflects 30% of accrued interest as of that date.
On November 17, 2019, the bondholders of Series A and Series B approved a deferral of all the scheduled
Principal payment and app. 87% of deferral of the scheduled Interest payment, both, as of December 31, 2019
to July 1, 2020.
On May 4, 2020, the bondholders of Series A and Series B approved: (i) to postpone the final redemption date
to January 1, 2021 of all the scheduled Principal; (ii) that on July 1, 2020 the Company will pay to its
bondholders a partial interest payment in the total amount of EUR 250,000 and to deferral all other unpaid
scheduled Interest payment.
Following receiving the Settlement Amount related to the final price adjustment of the sale of Belgrade Plaza
and in light of the potential negative impact of the Covid-19 on the possibility to receive future proceeds from
the Company's plots in India, the Company decided to increase the amount to be paid to the bondholders on
July 1, 2020, from EUR 250,000 to EUR 500,000. The amount reflected 6.74% of accrued interest as of that
date.
On November 12, 2020, the bondholders of Series A and Series B approved: (i) to postpone the final
redemption date to July 1, 2021 of all the scheduled Principal; that on January 1, 2021 the Company will pay
to its bondholders a partial interest payment in the total amount of EUR 200,000 and to deferral all other unpaid
scheduled Interest payment. The amount reflected 1.84% of accrued interest as of that date.
On April 12, 2021, the bondholders of Series A and Series B approved: (i) to postpone the final redemption
date to January 1, 2022; (ii) that on July 1, 2021 the Company will pay to its bondholders a partial interest
payment in the total amount of EUR 125,000 and to deferral all other unpaid interest. The amount reflected
0.84% of accrued interest as of that date.
On November 25, 2021, the bondholders of Series A and Series B approved: (i) to postpone the final
redemption date to July 1, 2022; (ii) that on January 1, 2022 the Company will pay to its bondholders a partial
interest payment in the total amount of EUR 200,000 and to deferral all other unpaid interest. The amount
reflected 0.92% of accrued interest as of that date.
The materialization, occurrence consummation and execution of the events and transactions and of the
assumptions on which the projected cash flow is based, including with respect to the proceeds and timing
thereof, although probable, are not certain and are subject to factors beyond the Company's control as well as
to the consents and approvals of third parties and certain risks factors. Therefore, delays in the realization of
the Company's assets and investments or realization at a lower price than expected by the Company, as well
as any other deviation from the Company's Assumptions (such as additional expenses due to suspension of
trading, delay in submitting the statutory reports etc.), could have an adverse effect on the Company's cash
flow and the Company's ability to service its indebtedness in a timely manner.
In € millions
2022
2023
Cash - Opening Balance
(2)
4.69
2.59
Proceeds from sales transactions, price adjustments
(5)
0
0
Net cashflow from equity companies in India
(6)
0
0
Total Sources
4.69
2.54
Debentures - principal
-
-
Debentures - interest
-
-
Other operational costs
(3)
0.9
0.9
G&A expenses (including property maintenance)
(4)
1.2
1.2
Total Uses
2.1
2.1
Cash - Closing Balance
(2)
2.59
0.49
(1) The above cash flow is subject to the approval of the bondholders of both series to postponement of the repayment of the remaining
balance of the bonds which are due on July 1, 2022.
(2) Total cash on standalone basis as well as fully owned subsidiaries.
(3) Includes provision for legal costs/Arbitrations.
(4) Total general and administrative expenses includes both cost of the Company and of all the subsidiaries.
(5) The Company did not include any proceeds from pre-sale agreement signed with AFI, due to the uncertainty as to the fulfilment of
the conditions set out in the preliminary agreement as mentioned in Note 5(2)(e) of the consolidated financial statements as of
31.12.2021, thus there can be no certainty an SPA will eventually be executed and/or that the Transaction will be completed.
(6) The Company did not include any proceeds from its holding in an indirect subsidiary (50%) which holds a property in Bangalore,
India due to the default of purchaser of Bangalore project to meet payments schedule according to the signed amendment agreement
(as detailed in Note 6(1) of the Consolidated Financial Statements as of December 31, 2021) as there can be no certainty that the
agreement will be completed, hence no resources are expected to be available in foreseeable future at this time.
Ron Hadassi
Executive Director
31 March 2022
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
IN 000 EUR
CONTENTS
Page
Independent Auditors' report
2 - 6
Consolidated statement of financial position
7
Consolidated statement of profit or loss
8
Consolidated statement of comprehensive income
9
Consolidated statement of changes in equity
10
Consolidated statement of cash flows
11
Notes to the consolidated financial statements
12 - 60
- - - - - - - - - - - - - - - - - - - - - -
Report on the Audit of the Consolidated Financial Statements
Independent Auditors' Report
To the shareholders of Plaza Centers N.V.
Opinion
We have audited the consolidated financial statements of Plaza Centers N.V. and its subsidiaries ("the
Company"), which comprise the consolidated statement of financial position as at December 31, 2021 and the
consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the year
then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Company as at December 31, 2021, and its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with International Financial
Reporting Standards as adopted by the European Union.
Basis for Opinion
As mentioned in note 2(a) in the consolidated financial statements, these consolidated financial statements,
with our report included, are not intended for Netherlands statutory filing purposes.
We conducted our audit in accordance with International Standards on Auditing. Our responsibilities under
those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We are independent of the Company in accordance with the
International Ethics Standards Board for Accountants’ International Code of Ethics for Professional
Accountants (including International Independence Standards) ("IESBA Code"), and we have fulfilled our
other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw your attention to Note 1(b) in the consolidated financial statements which discloses the Company's
financial position and board and management's future plans to meet its financial liabilities.
The board and management estimate that the Company is unable to serve its entire debt to bondholders
according to the current repayment schedule in total amount of EURO 121.7 million as of December 31, 2021
which is due on July 1, 2022). The Company is dependent on the bondholders' approval for any postponement
of payments. In addition, the Company is not in compliance with the main Covenants as defined in the
restructuring plan (for more details refer also to Note 8), hence in default which could trigger early repayment
by the bondholders.
The abovementioned conditions indicates the existence of a material uncertainty that casts significant doubt
about the Company's ability to continue as a going concern. Our opinion is not modified in respect of this
matter.
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road
Tel-Aviv 6492102, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
Emphasis of Matter
We draw your attention to Note 5(3)(c) which discloses the risk that the public authorities may seek to
terminate the Public Private Partnership Agreement ("PPP Agreement") and/or relevant permits and/or could
seek to impose delay penalties on the basis of perceived breaches of the Company's commitments under the
PPP Agreement.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the consolidated financial statements for the year ended December 31, 2021. In addition to the matter
described in the Material Uncertainty Related to Going Concern section, we have determined the matters
described below to be the key audit matters to be communicated in our report. These matters were addressed
in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of
how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor's Responsibilities for the Audit of the
Consolidated Financial Statements section of our report, including in relation to these matters. Accordingly,
our audit included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the consolidated financial statements. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying consolidated financial statements.
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road
Tel-Aviv 6492102, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
The Key Audit Matter we identified is:
Key Audit Matter
Our Response
Valuation of trading property
We have identified the measurement of
trading property (included in the joint venture,
EPI, as disclosed in Note 6(b)) at net
realizable value in the amount of EUR 20.4
million, as a significant audit matter due to the
size and the complexity and judgement
required in the valuation of trading property.
The valuation of this property as of December
31, 2021, involved significant judgements and
assumptions in reliance on an external
valuator. In the context of a property which is
not yet developed, these estimates contain
further risks in regards to success in obtaining
permits, market condition and political
environment, required to forecast all
circumstances affecting the valuation.
The Company's accounting policies regarding
trading properties are disclosed in Note 2(c)
and 2(m) to the consolidated financial
statements. The significant estimates involved
in the valuation are disclosed in Note 6(b).
Our procedures in relation to the management's fair
value assessment of trading properties included:
• Evaluation of the objectivity, independence,
expertise of the external valuator;
• Reviewed the report prepared by the external
valuator and held discussions with the valuator in
order to gain an understanding of the
methodology and the key assumptions used in
performing the valuation.
• Using our own real estate specialists to assess the
methodology used, the assumptions that were
made and the appropriateness of the key
estimates used in the calculation of the fair value
of the trading property based on their knowledge
of the local economic, legal, political
environment, and other specific circumstances,
used to analyse the appropriateness of the
valuation.
• Checked the appropriateness and consistency
with other information available to us of the
inputs used by the valuator.We also assessed the
appropriateness of the disclosures relating to the
assumptions, as we consider them important to
users of the financial statements.
Other information included in The Company’s 2021 Annual Report
Other information consists of the information included in the Annual Report, other than the financial
statements and our auditor’s report thereon. Management is responsible for the other information.
Our opinion on the financial statements does not cover the other information and we do not express any form
of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is
to read the other information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road
Tel-Aviv 6492102, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
Responsibilities of Management and the Board of Directors for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements
in accordance with International Financial Reporting Standards, as adopted by the European Union, and for
such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company's
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
The board of directors is responsible for overseeing the Company's financial reporting process.
Auditors' Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that
includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit
conducted in accordance with International Standards on Auditing will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated financial statements.
As part of an audit in accordance with International Standards on Auditing, we exercise professional judgment
and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditors' report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report.
However, future events or conditions may cause the Company to cease to continue as a going concern.
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road
Tel-Aviv 6492102, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with the board of directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the board of directors with a statement that we have complied with relevant ethical
requirements regarding independence and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
From the matters communicated with the board of directors, we determine those matters that were of most
significance in the audit of the consolidated financial statements for the year ended December 31, 2021 and
are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
The partner in charge of the audit resulting in this independent report is Mr. Itay Bar-Haim.
March 31, 2022
KOST FORER GABBAY & KASIERER
Tel Aviv, Israel
A member of Ernst & Young Global
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road
Tel-Aviv 6492102, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
CONSOLIDATED STATEMENT OF FINANCIAL POSITION IN '000 EUR
December 31,
Note
2021
2020
ASSETS
Cash and cash equivalents
3
Prepayments and other receivables
Total current assets
Equity - accounted investees
6
Total non-current assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Bonds at amortized cost
8
Accrued interests on bonds
8
Trade payables
Other liabilities
7
Total current liabilities
Share capital
10
Translation reserve
10
(30,838 )
(31,292 )
Other reserves
(19,983 )
(19,983 )
Share based payment reserve
10
Share premium
10
Accumulated deficit
(386,394 )
(359,305 )
Total equity
(112,387 )
(85,752 )
Total equity and liabilities
The notes are an integral part of the consolidated financial statements.
March 31, 2022
Ron Hadassi
David Dekel
Date of approval of the
financial statements
Executive Officer
Chairman of the Board of
Directors
CONSOLIDATED STATEMENT OF PROFIT OR LOSS IN '000 EUR
Year ended
December 31,
Note
2021
2020
Revenues and gains
Revenue from disposal of trading properties
5
Total revenues
Gains and other
Other income
4
Total gains
Total revenues and gains
Expenses and losses
Cost of trading properties disposed
5
(580 )
Cost of operations
(77 )
(85 )
Write-down of trading properties
5
(24,000 )
Share in results of equity-accounted investees
6
(1,903 )
(1,084 )
Administrative expenses
13
(1,243 )
(1,100 )
Other expenses
(14 )
(46 )
(3,237 )
(26,895 )
Finance income
14
Finance costs
14
(24,238 )
(10,176 )
(27,475 )
(34,975 )
Loss before income tax
(27,089 )
(33,490 )
Loss for the year
(27,089 )
(33,490 )
Loss attributable to:
Equity holders of the Company
(27,089 )
(33,490 )
Earnings per share
Basic and diluted loss per share (EUR)
11
(3,95 )
(4.89 )
The notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME IN '000 EUR
Year ended
December 31,
2021
2020
Loss for the year
(27,089 )
(33,490 )
Other comprehensive income
Items that are or may be reclassified to profit or loss:
Foreign currency translation differences - foreign operations (Equity accounted
investees)
(1,615 )
Other comprehensive loss (profit) for the year, net of income tax
(1,615 )
Total comprehensive loss for the year
(26,635 )
(35,105 )
The notes are an integral part of the consolidated financial statements.
- 10 -
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY IN '000 EUR
Share
capital
Share
Premium
Share based
payment
reserves
Translation
Reserve
Capital
reserve from
acquisition of
non-
controlling
interests
Accumulated
deficit
Total
Balance on January 1, 2020
(29,677 )
(19,983 )
(325,815 )
(50,647 )
Comprehensive income for the year
Net loss for the year
(33,490 )
(33,490 )
Foreign currency translation differences
(1,615 )
(1,615 )
Total comprehensive loss for the year
(1,615 )
(33,490 )
(35,105 )
Balance on December 31, 2020
(31,292 )
(19,983 )
(359,305 )
(85,752 )
Comprehensive income for the year
Net loss for the year
(27,089 )
(27,089 )
Foreign currency translation differences
Total comprehensive loss for the year
(27,089 )
(26,635 )
Balance on December 31, 2021
(30,838 )
(19,983 )
(386,394 )
(112,387 )
The notes are an integral part of the consolidated financial statements.
PLAZA CENTERS N.V.
- 11 -
CONSOLIDATED STATEMENT OF CASH FLOWS IN '000 EUR
Year ended
December 31,
2021
2020
Cash flows from operating activities
Loss for the year
(27,089 )
(33,490 )
Adjustments necessary to reflect cash flows used in operating activities
Net finance costs
Share of loss of equity-accounted investees, net of tax
Trading properties, net
(948 )
Changes in:
Trade receivables
(10 )
Other receivables
Trade payables
(36 )
Other liabilities, related parties' liabilities and provisions
(68 )
(13 )
Interest paid
(325 )
(699 )
Net cash used in operating activities
(1,154 )
(488 )
Cash from investing activities
Distribution received from Equity Accounted Investees
Net cash provided by investing activities
Net cash used in financing activities
Increase (Decrease) in cash and cash equivalents during the year
Effect of movement in exchange rate fluctuations on cash held
(42 )
Cash and cash equivalents as of January 1
st
Cash and cash equivalents as of December 31
st
The notes are an integral part of the consolidated financial statements.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 12 - -
NOTE 1: - CORPORATE INFORMATION
a. Plaza Centers N.V. ("the Company" and together with its subsidiaries, "the Group") was
incorporated and is registered in the Netherlands. The Company's registered office is at
conducted its activities in the field of establishing, operating and selling of shopping and
entertainment centres, as well as other mixed-use projects (retail, office, residential) in
Central and Eastern Europe (starting 1996) and India (from 2006). Following debt
restructuring plan approved in 2014 the Group’s main focus is to reduce corporate debt by
early repayments following sale of assets and to continue with efficiency measures and cost
reduction where possible.
The consolidated financial statements for each of the periods presented comprise the
Company and its subsidiaries (together referred to as the "Group") and the Group's interest
in jointly controlled entities.
The Company is listed on the premium segment of the Official List of the UK Listing
Authority and to trading on the main market of the London Stock Exchange ("LSE"), the
Warsaw Stock Exchange ("WSE") and on the Tel Aviv Stock Exchange ("TASE").
The Company's immediate parent company was Elbit Ultrasound (Luxemburg) B.V. /
s.a.r.l ("EUL"), which held 44.9% of the Company's shares, till December 19, 2018 when
EUL informed that it has signed a trust agreement according to which EUL will deposit its
shares of the Company with a trustee and no longer considers itself to be the controlling
shareholder of the Company. At the date of approval of these financial statements EUL
held 20.55% of the Company’s shares (please refer to note 17 regarding the sale of app.
24. 53 % of the Company’s shares held by EUL).
b. Going concern and liquidity position of the Company:
As of December 31, 2021, the Company’s outstanding obligations to bondholders
(including accrued interests) are app. EUR 121.7 million with due date that was postponed
to July 1, 2022 (the "Current Due date") (please refer to note 8).
Due to the above the Company’s primary need is for liquidity. The Company’s current and
future resources include the following:
1. Cash and cash equivalents (including the cash of fully owned subsidiaries) of
approximately EUR 4.688 million.
2. In addition, as detailed in note 5(2)(e), the Company and AFI Europe N.V.
entered into an addendum to the pre-sale agreement entered into between the
Parties in connection with the sale of its subsidiary (the "SPV") which holds 75%
in the Casa Radio Project (the "Project") (the "Addendum" and the "Agreement",
respectively) pursuant to which the Parties agreed to extend the Long Stop Date,
which is the date on which the parties will execute a share purchase agreement,
subject to the satisfaction of conditions precedent (the "SPA"(, until December
31, 2022. The addendum was approved by the bondholders meeting held on
November 25, 2021. There can be no certainty that the SPA will eventually be
executed and/or that the transaction will be consummated as presented above or
at all.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 13 - -
NOTE 1: - CORPORATE INFORMATION (Cont.)
3. Following the default of purchaser of Bangalore project to meet payments
schedule according to the signed amendment agreement (refer to Note 6(b)(1))
there can be no certainty that the agreement will be completed, hence at this time
no resources are expected to be available in the foreseeable future.
As of December 31, 2021, the Company is not in compliance with the main Covenants as
defined in the restructuring plan (for more details refer also to Note 8), hence constituting
an event of default which could also trigger early repayment demand by the bondholders.
Due to the abovementioned and due to the board and management estimation that the
Company is unable to serve its entire debt on the Current due date, the Company intends
to request the bondholders of both series an additional postponement of the repayment of
the remaining balance of the bonds. However, there is an uncertainty if the bondholders
will approve the request. In the case that the bondholders would declare their remaining
claims to become immediately due and payable, the Company would not be in a position
to settle those claims and would need to enter to an additional debt restructuring or might
cease to be a going concern basis.
Due to the abovementioned conditions, a material uncertainty exists that casts significant
doubt about the Company's ability to continue as a going concern.
c. Impact of the Covid-19
The risks associated with the Covid-19 global health and economic crisis may affect the
Company indirectly, through possible regulatory changes and the impact on the
macroeconomic environment, which may affect the conducted activities which are
concentrated at selling of the assets. The Company monitors the consequences of the event
and the actions taken in countries in which it operates and assesses the risks and exposures
arising from these consequences. At this stage, the impact of the effect of the COVID 19
was a delay in the legal procedures against the purchaser of the SPV which owns the plot
in Bangalore India (refer to Note 6(b)(1)). Other than the above mentioned, at this stage,
the Company is not able to estimate the full future impact of COVID 19.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. Basis of preparation of these financial statements:
The following accounting policies have been applied consistently in the financial
statements for all periods presented, unless otherwise stated.
The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS"), as adopted by the European Union ("EU").
The consolidated financial statements have been prepared on the historical cost basis.
These consolidated financial statements are not intended for statutory filing purposes. The
Company is required to file consolidated financial statements prepared in accordance with
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 14 - -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
the Netherlands Civil Code.
At the date of approval of these financial statements the Company had not yet submitted
consolidated financial statements for the year ended December 31, 2019, December 31,
2020 and December 31, 2021 in accordance with the Netherlands Civil Code (for more
details refer to Note 16(b)(7)).
The consolidated financial statements were authorized to be issued by the Board of
Directors on March 31, 2022.
b. Functional and presentation currency:
These consolidated financial statements are presented in EURO ("EUR"), which is the
Company's functional currency. All financial information presented in EUR has been
rounded to the nearest thousand, unless otherwise indicated.
c. Investment property vs. trading property classification:
The Group has designated all its properties for sale. The Company is actively seeking
buyers and does not hold the properties with the intention to gain from capital
appreciation. Therefore, management also believes that these are appropriately classified
as trading properties.
d. Functional and presentation currency
The EUR is the functional currency for Group companies (with the exception of Indian
companies - in which the functional currency is the Indian Rupee - INR) since it is the
currency of the economic environment in which the Group operates. This is because the
EUR (and in India the INR) is the main currency in which management determines its
pricing with potential buyers and suppliers, determine its financing activities and budgets
and assesses its currency exposures.
e. Operating cycle determination:
The Group is unable to clearly identify its actual operating cycle with respect to trading
properties. As such, the Group's operating cycle relating to trading properties and
corresponding liabilities is 12 months. Trading properties and liabilities associated
therewith are presented as non-current assets and non-current liabilities, respectively.
f. Use of estimates and judgments:
The preparation of the consolidated financial statements in conformity with IFRS as
adopted by the EU requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets and
liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various
other factors that are believed to be reasonable under the circumstances, the results of which
form the basis of making the judgments about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from these estimates.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 15 - -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Information about assumptions and estimation uncertainties that have a significant risk of
resulting in a material adjustment within the next financial year are included in the
following notes:
- Notes 5, 6 - key assumptions used in determining the net realisable value of trading
properties;
- Notes 5,16 - recognition and measurement of provisions and contingencies: key
assumptions about the likelihood and magnitude of an outflow of resources.
g. Basis of consolidation:
1. Subsidiaries:
Subsidiaries are entities controlled by the Group. The Group controls an entity when
it is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over the entity. The
financial statements of subsidiaries are included in the consolidated financial
statements from the date on which control commences until the date on which control
ceases. Where necessary, adjustments are made to the financial statements of the
subsidiaries in order to bring the accounting policies used in line with the ones used
by the Group in the consolidated financial statements.
2. Interests in equity-accounted investees:
The Group's interests in equity-accounted investees comprise interests in associates
and joint ventures.
Associates are those entities in which the Group has significant influence, but not
control or joint control, over the financial and operating policies. A joint venture is
an arrangement in which the Group has joint control, whereby the Group has rights
to the net assets of the arrangement, rather than rights to its assets and obligations
for its liabilities.
Interests in associates and the joint venture are accounted for using the equity
method. They are recognised initially at cost, which includes transaction costs.
Subsequent to initial recognition, the consolidated financial statements include the
Group's share of the profit or loss and other comprehensive income of equity-
accounted investees, until the date on which significant influence or joint control
ceases.
When the equity attributable to the owners of an associate changes as a result of the
associate selling or buying shares of its subsidiaries (that are consolidated in its
financial statements) to third parties while retaining control in those subsidiaries, the
balance of the investment in the associate that is presented on the Company's books
on the equity basis changes. The Company has chosen the accounting policy of
recognizing the change in the balance of the investment in these cases directly in
profit or loss.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 16 - -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
3. Loss of control:
When the Group loses control over a subsidiary, it derecognises the assets and
liabilities of the subsidiary, and any related NCI and other components of equity.
Any resulting gain or loss is recognised in profit or loss. Any interest retained in the
former subsidiary is measured at fair value when control is lost.
4. Transactions eliminated on consolidation:
Intra-group balances and transactions, and any unrealised income and expenses
arising from intra-group transactions, are eliminated. Unrealised gains arising from
transactions with equity-accounted investees are eliminated against the investment
to the extent of the Group's interest in the investee. Unrealised losses are eliminated
in the same way as unrealised gains, but only to the extent that there is no evidence
of impairment.
h. Foreign currency:
1. Foreign currency transactions:
Transactions in foreign currencies are translated to the respective functional
currencies of Group companies at exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated to
the functional currency at the exchange rate at the reporting date. Non-monetary
assets and liabilities that are measured at fair value in a foreign currency are
translated to the functional currency at the exchange rate when the fair value was
determined.
Foreign currency differences are generally recognised in profit or loss. Non-
monetary items that are measured based on historical cost in a foreign currency are
translated at the exchange rate at the date of the transaction. Foreign currency
differences are generally recognised in profit or loss.
2. Foreign operations:
The assets and liabilities of foreign operations, including goodwill and fair value
adjustments arising on acquisition, are translated into euro at the exchange rates at
the reporting date. The income and expenses of foreign operations are translated into
euro at the exchange rates at the dates of the transactions. Foreign currency
differences are recognised in other comprehensive income, and accumulated in the
translation reserve, except to the extent that the translation difference is allocated to
non-controlling interest.
When a foreign operation is disposed of in its entirety or partially such that control,
significant influence or joint control is lost, the cumulative amount in the translation
reserve related to that foreign operation is reclassified to profit or loss as part of the
gain or loss on disposal.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 17 - -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
If the Group disposes of part of its interest in a subsidiary but retains control, then
the relevant proportion of the cumulative amount is reattributed to non-controlling
interest.
When the Group disposes of only part of an associate or joint venture while retaining
significant influence or joint control, the relevant proportion of the cumulative
amount is reclassified to profit or loss.
If the settlement of a monetary item receivable from or payable to a foreign operation
is neither planned nor likely to occur in the foreseeable future, then foreign currency
differences arising from such item form part of the net investment in the foreign
operation. Accordingly, such differences are recognised in other comprehensive
income and accumulated in the translation reserve.
3. Index-linked monetary items:
Monetary assets and liabilities linked to the changes in the Israeli Consumer Price
Index ("Israeli CPI") are adjusted at the relevant index at each reporting date
according to the terms of the agreement.
i. Cash equivalents:
Cash equivalents are considered as highly liquid investments, including unrestricted short-
term bank deposits with an original maturity of three months or less from the date of
investment or with a maturity of more than three months, but which are redeemable on
demand without penalty and which form part of the Group's cash management.
j. Financial instruments:
1. Financial assets:
Financial assets are measured upon initial recognition at fair value plus transaction
costs that are directly attributable to the acquisition of the financial assets, except for
financial assets measured at fair value through profit or loss in respect of which
transaction costs are recorded in profit or loss.
Debt instruments are measured at amortized cost when:
The Company's business model is to hold the financial assets in order to collect their
contractual cash flows, and the contractual terms of the financial assets give rise on
specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding. After initial recognition, the instruments in this
category are measured according to their terms at amortized cost using the effective
interest rate method, less any provision for impairment.
2. Impairment of financial assets:
The Company evaluates at the end of each reporting period the loss allowance for
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 18 - -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
financial debt instruments which are not measured at fair value through profit or loss.
3. De-recognition of financial assets:
A financial asset is derecognized only when:
- The contractual rights to the cash flows from the financial asset has expired;
or
- The Company has transferred substantially all the risks and rewards deriving
from the contractual rights to receive cash flows from the financial asset or
has neither transferred nor retained substantially all the risks and rewards of
the asset, but has transferred control of the asset; or
- The Company has retained its contractual rights to receive cash flows from
the financial asset but has assumed a contractual obligation to pay the cash
flows in full without material delay to a third party.
4. Financial liabilities:
a) Financial liabilities measured at amortized cost:
Financial liabilities are initially recognized at fair value less transaction costs
that are directly attributable to the issue of the financial liability.
After initial recognition, the Company measures all financial liabilities at
amortized cost using the effective interest rate method.
5. De-recognition of financial liabilities:
A financial liability is derecognized only when it is extinguished, that is when the
obligation specified in the contract is discharged or cancelled or expires. A financial
liability is extinguished when the debtor discharges the liability by paying in cash,
other financial assets, goods or services; or is legally released from the liability.
6. Offsetting financial instruments:
Financial assets and financial liabilities are offset and the net amount is presented in
the statement of financial position if there is a legally enforceable right to set off the
recognized amounts and there is an intention either to settle on a net basis or to realize
the asset and settle the liability simultaneously.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 19 - -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
k. Fair value measurement
A number of the Group's accounting policies and disclosures require the measurement of
fair value, for both financial and non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the Group uses market observable
data as far as possible. The Company's finance department reviews significant
unobservable inputs and valuation adjustments. If third party information, such as broker
quotes, is used to measure fair values, then the finance department assesses the evidence
obtained from the third parties to support the conclusion that such valuations meet the
requirements of IFRS, including the level in the fair value hierarchy in which such
valuations should be classified. Fair values are categorized into different levels in a fair
value hierarchy based on the inputs used in the valuation techniques as follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: inputs other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from
prices)
- Level 3: inputs for the asset or liability that are not based on observable market data
(unobservable inputs)
Further information about the assumptions made in measuring fair values is included in the
following notes:
Note 15 - Financial instruments
l. Share capital:
Ordinary shares are classified as equity. Incremental costs directly attributable to issue of
ordinary shares and share options are recognized as a deduction from equity. Income tax
relating to transaction costs of an equity transaction is accounted for in accordance with
IAS 12. Costs attributable to listing existing shares are expensed as incurred.
m. Trading properties:
Trading properties are being designated for sale in the ordinary course of business and as
such are classified as trading properties (inventory) and measured at the lower of cost and
net realizable value.
Net realizable value is the estimated selling price in the ordinary course of business less the
estimated costs to complete construction and selling expenses. If net realizable value is less
than the cost, the trading property is written down to net realizable value.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 20 - -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In each subsequent period, a new assessment is made of net realizable value. When the
circumstances that previously caused trading properties to be written down below cost no
longer exist or when there is clear evidence of an increase in net realizable value because
of changed economic circumstances, the amount of the write-down is reversed so that the
new carrying amount is the lower of the cost and the revised net realizable value.
The amount of any write-down of trading properties to net realisable value and all losses
of trading properties are recognised as a write-down of trading properties expense in the
period the write-down or loss occurs. The amount of any reversal of such write-down
arising from an increase in net realizable value is recognized as a reduction in the expense
in the period in which the reversal occurs.
Costs comprise all costs of purchase, direct materials, direct labor costs, subcontracting
costs and other direct overhead costs incurred in bringing the properties to their present
condition.
Borrowing costs directly attributable to the acquisition or construction of a qualifying asset
are capitalized as part of the costs of the asset. A qualifying asset is an asset that necessarily
takes a substantial period of time to get ready for its intended use or sale. Other borrowing
costs are recognized as an expense in the period in which they incurred.
n. Impairment of non-financial assets:
The Company evaluates the need to record an impairment of non-financial assets whenever
events or changes in circumstances indicate that the carrying amount is not recoverable. If
the carrying amount of non-financial assets exceeds their recoverable amount, the assets
are reduced to their recoverable amount. The recoverable amount is the higher of fair value
less costs of sale and value in use. In measuring value in use, the expected future cash flows
are discounted using a pre-tax discount rate that reflects the risks specific to the asset. The
recoverable amount of an asset that does not generate independent cash flows is determined
for the cash-generating unit to which the asset belongs. Impairment losses are recognized
in profit or loss.
An impairment loss of an asset is reversed only if there have been changes in the estimates
used to determine the asset's recoverable amount since the last impairment loss was
recognized. Reversal of an impairment loss, as above, shall not be increased above the
lower of the carrying amount that would have been determined had no impairment loss
been recognized for the asset in prior years and its recoverable amount. The reversal of
impairment loss of an asset presented at cost is recognized in profit or loss.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 21 - -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The following criteria are applied in assessing impairment of these specific assets:
Investment in associate or joint venture:
After application of the equity method, the Company determines whether it is necessary to
recognize any additional impairment loss with respect to the investment in associates or
joint ventures. The Company determines at each reporting date whether there is objective
evidence that the carrying amount of the investment in the associate or the joint venture is
impaired. The test of impairment is carried out with reference to the entire investment,
including the goodwill attributed to the associate or the joint venture.
o. Provisions:
Provisions are determined by discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value of money and the risks specific
to the liability. The unwinding of the discount is recognized as finance cost.
Warranties
A provision for warranties is recognized when the underlying products or services are sold,
based on historical warranty data and a weighting of possible outcomes against their
associated probabilities.
Legal claims:
A provision for claims is recognized when the Group has a present legal or constructive
obligation as a result of a past event, it is more likely than not that an outflow of resources
embodying economic benefits will be required by the Group to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
p. Revenue recognition:
Revenue from contracts with customers is recognized when the control over the goods or
services is transferred to the customer. Revenues from trading properties are taken into
account at the moment the trading property is sold. The company considers the moment of
sale being the latest of a) receiving the payment for the trading property; or b) the transfer
of the deed at the public notary. The transaction price is the amount of the consideration
that is expected to be received based on the contract terms, excluding amounts collected on
behalf of third parties (such as taxes).
In determining the amount of revenue from contracts with customers, the Company
evaluates whether it is a principal or an agent in the arrangement. The Company is a
principal when the Company controls the promised goods or services before transferring
them to the customer.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 22 - -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In these circumstances, the Company recognizes revenue for the gross amount of the
consideration. When the Company is an agent, it recognizes revenue for the net amount of
the consideration, after deducting the amount due to the principal.
Variable consideration:
The Company determines the transaction price separately for each contract with a
customer. When exercising this judgment, the Company evaluates the effect of each
variable amount in the contract, taking into consideration discounts, penalties, variations,
claims, and non-cash consideration. In determining the effect of the variable consideration,
the Company normally uses the "most likely amount" method described in the Standard.
Pursuant to this method, the amount of the consideration is determined as the single most
likely amount in the range of possible consideration amounts in the contract.
Variable consideration is included in the transaction price only to the extent that it is highly
probable that a significant reversal in the amount of revenue recognized will not occur
when the uncertainty associated with the variable consideration is subsequently resolved.
q. Finance income and cost:
Interest income and expense which are not capitalized are recognized in the income
statement as they accrue, using the effective interest method.
r. Income tax:
Income tax expense comprises current and deferred tax. It is recognized in profit or loss.
Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss
for the year and any adjustment to tax payable or receivable in respect of previous years. It
is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax also includes any tax arising from dividends. Current tax assets and liabilities
are offset only if certain criteria are met.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 23 - -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Deferred tax
Deferred tax is recognized in respect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes.
Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible
Temporary differences to the extent that it is probable that future taxable profits will be
available against which they can be used. Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer probable that the related tax benefit
will be realized. Such reduction is reversed when the probability of future taxable profits
improved.
Unrecognized deferred tax assets are reassessed at each reporting date and recognized to
the extent that it has become probable that future taxable profits will be available against
which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary
differences.
When they reverse, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset only if certain criteria are met.
s. Employee benefits:
1. Bonuses:
The Group recognizes a liability and an expense for bonuses, which are based on
agreements with employees or according to management decisions based on Group
performance goals and on individual employee performance. The Group recognizes
a liability where contractually obliged or where past practice has created a
constructive obligation to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
2. Share-based payment transactions:
The fair value of options granted to employees to acquire shares of the Company is
recognized as an employee expense or capitalized if directly associated with
development of trading property, with a corresponding increase in equity. The fair
value is measured at grant date and spread over the period during which the
employees become unconditionally entitled to the options. The amount recognized
as an expense is adjusted to reflect the actual number of share options that vest.
Where the terms of an equity-settled award are modified, the minimum expense
recognized is the expense as if the terms had not been modified. An additional
expense is recognized for any modification, which increases the total fair value of
the share-based payment arrangement or is otherwise beneficial to the employees as
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 24 - -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
measured at the date of modification. The fair value of the amount payable to
employees in respect of share-based payments, which may be settled in cash, at the
option of the holder, is recognized as an expense, with a corresponding increase in
liability, over the period in which the employees become unconditionally entitled to
payment. The fair value is re-measured at each reporting date and at settlement date.
Any changes in the fair value of the liability are recognized as an additional cost in
salaries and related expenses in the income statement.
t. Disclosure of new standards in the period prior to their adoption:
1. Amendment to IAS 37, "Provisions, Contingent Liabilities and Contingent Assets":
In May 2020, the IASB issued an amendment to IAS 37, regarding which costs a
company should include when assessing whether a contract is onerous ("the
Amendment"). According to the Amendment, costs of fulfilling a contract include
both the incremental costs (for example, raw materials and direct labor) and an
allocation of other costs that relate directly to fulfilling a contract (for example,
depreciation of an item of property, plant and equipment used in fulfilling the
contract).
The Amendment is effective for annual periods beginning on or after January 1, 2022
and applies to contracts for which all obligations in respect thereof have not yet been
fulfilled as of January 1, 2022. Early application is permitted.
The Company estimates that the application of the Amendment is not expected to
have a material impact on the financial statements.
2. Annual improvements to IFRSs 2018-2020:
In May 2020, the IASB issued certain amendments in the context of the Annual
Improvements to IFRSs 2018-2020 Cycle. The main amendment is to IFRS 9,
"Financial Instruments" ("the Amendment"). The Amendment clarifies which fees a
company should include in the "10% test" described in paragraph B3.3.6 of IFRS 9
when assessing whether the terms of a debt instrument that has been modified or
exchanged are substantially different from the terms of the original debt instrument.
The Amendment is effective for annual periods beginning on or after January 1,
2022. Early application is permitted. The Amendment is to be applied to debt
instruments that are modified or exchanged commencing from the year in which the
Amendment is first applied.
3. Amendment to IAS 1, "Presentation of Financial Statements":
In January 2020, the IASB issued an amendment to IAS 1, "Presentation of Financial
Statements" ("the Amendment") regarding the criteria for determining the
classification of liabilities as current or non-current.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 25 - -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Amendment includes the following clarifications:
• What is meant by a right to defer settlement;
• That a right to defer must exist at the end of the reporting period;
• That classification is unaffected by the likelihood that an entity will exercise
its deferral right;
• That only if an embedded derivative in a convertible liability is itself an equity
instrument would the terms of a liability not impact its classification.
The Amendment is effective for annual periods beginning on or after January 1, 2023
and must be applied retrospectively.
The Company is evaluating the possible impact of the Amendment on its current
loan agreements.
4. Amendment to IAS 8, "Accounting Policies, Changes to Accounting Estimates and
Errors":
In February 2021, the IASB issued an amendment to IAS 8, "Accounting Policies,
Changes to Accounting Estimates and Errors" ("the Amendment"), in which it
introduces a new definition of "accounting estimates".
Accounting estimates are defined as "monetary amounts in financial statements that
are subject to measurement uncertainty". The Amendment clarifies the distinction
between changes in accounting estimates and changes in accounting policies and the
correction of errors.
The Amendment is to be applied prospectively for annual reporting periods
beginning on or after January 1, 2023 and is applicable to changes in accounting
policies and changes in accounting estimates that occur on or after the start of that
period. Early application is permitted.
The Company is evaluating the effects of the Amendment on its financial statements.
5. Amendment to IAS 12, "Income Taxes":
In May 2021, the IASB issued an amendment to IAS 12, "Income Taxes" ("IAS 12"),
which narrows the scope of the initial recognition exception under IAS 12.15 and
IAS 12.24 ("the Amendment").
According to the recognition guidelines of deferred tax assets and liabilities, IAS 12
excludes recognition of deferred tax assets and liabilities in respect of certain
temporary differences arising from the initial recognition of certain transactions.
This exception is referred to as the "initial recognition exception". The Amendment
narrows the scope of the initial recognition exception and clarifies that it does not
apply to the recognition of deferred tax assets and liabilities arising from transactions
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 26 - -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
that are not a business combination and that give rise to equal taxable and deductible
temporary differences, even if they meet the other criteria of the initial recognition
exception.
The Amendment applies for annual reporting periods beginning on or after January
1, 2023, with earlier application permitted. In relation to leases and decommissioning
obligations, the Amendment is to be applied commencing from the earliest reporting
period presented in the financial statements in which the Amendment is initially
applied. The cumulative effect of the initial application of the Amendment should be
recognized as an adjustment to the opening balance of retained earnings (or another
component of equity, as appropriate) at that date.
The Company estimates that the initial application of the Amendment is not expected
to have a material impact on its financial statements.
NOTE 3:- CASH AND CASH EQUIVALENTS
December 31,
Bank deposits and cash denominated in
2021
2020
EUR - bank balances
3,679
1,338
United States Dollar (USD) - bank balances
909
265
New Israeli Shekel (NIS) - bank balances
92
88
Other currencies
8
18
4,688
1,709
*) The balances are not bearing interest.
NOTE 4:- OTHER INCOME
December 31,
2021
2020
Sale of receivables (1)
200
-
Other income
186
33
386
33
(1) On August 10, 2021 the Company announced that Plaza Centers Czech Republic s.r.o
("Plaza Centers CR"), a wholly owned subsidiary of the Company, has signed an agreement
for the sale of its receivables to a third party, for a total consideration of EUR 200,000,
regarding an advance payment for the purchase of a Czech project company which Plaza
Centers CR paid in the past.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 27 - -
NOTE 5:- TRADING PROPERTIES
December 31,
2021
2020
Balance as of 1 January
-
40,375
Increase in value (Write-down) of trading properties, net (1)
-
(39,825)
Trading properties disposed (2)
-
(550)
Balance as of 31 December
-
-
Trading properties designated for sale
-
-
(1) Breakdown of write-downs (Increase in value) of trading properties is presented in the table
below:
Year ended
December 31,
Project name (location)
2021
2020
Casa Radio (Bucharest, Romania) (*)
-
39,825
-
39,825
Change in provision in respect to PAB (*)
-
(15,825)
Net write-downs
-
24,000
(*) See also note 5(2)(d) below.
For detailed information with respect to the write down, refer also to Note 5(3).
(2) Casa Radio:
(a) General:
In 2006 the Company entered into a PPP agreement with the Government of
Romania to develop the Casa Radio site in the city center of Bucharest ("Project")
and acquired 75% interest in the joint venture company developing the Project
("Project SPV"). After signing the PPP agreement, the Company holds indirectly
75% of the shares in the Project SPV, the remaining shares are held by the Romanian
authorities (through CNI, a Romanian company ultimately owned by the Romania
authorities)(15%) and a third-party private investor (10%).
Pursuant to the PPP agreement, the Project SPV was granted development and
exploitation rights in relation to the site for a period of 49 years, starting December
2006 (34 years remaining at the end of the reporting period). As part of its obligations
under the PPP agreement, the Project SPV has committed to construct a public
authority building ("PAB") measuring approximately 11.000 square meters for the
Romanian Government at its own cost.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 28 - -
NOTE 5:- TRADING PROPERTIES (Cont.)
Large scale demolition, design and foundation works were financed by loans given
to the Project SPV by the Company. These works were performed on site until 2010.
Construction and development were put on hold due to difficulties procuring further
financing because of the global financial crisis and later, as well as, the lack of
progress in the renegotiation of the PPP agreement with the Romanian authorities,
as detailed in subsection (c) below. These circumstances (and mainly the
bureaucratic deadlock with the Romanian authorities to deal with the issues specified
below) caused the Project SPV not to meet the development timeline of the Project
as specified in the PPP agreement. However, management believes that it had
legitimate reasons for the delays in this timeline, as discussed in subsection (c)
below.
(b) Obtaining of the Detailed Urban Plan ("PUD") permit:
The Project SPV obtained the PUD for the Project in September 2012. On December
13, 2012, the Court took note of the waiver of the claim submitted by certain
plaintiffs and rejected the litigation aiming to cancel the approval of the Zonal Urban
Plan ("PUZ") for the Project. The Court decision is irrevocable.
(c) Discussions with the Romanian authorities:
Following the Court decision with respect to the PUZ, the Project SPV was required
to submit a request for building permits within 60 days from the approval date of the
PUZ/PUD and commence development of the Project within 60 days after obtaining
the building permits. The building permits have not been obtained.
Due to substantial differences between the approved PUD and stipulations in the PPP
agreement and changes in EU law concerning environmental considerations in
buildings used by public bodies, the Project SPV attempted to renegotiate the future
development of the Project with the Romanian authorities on items such as timetable,
structure, milestones and adaptation of the PAB development to the current EU
requirements. Despite many notifications sent to the Romanian authorities,
expressing a wish to renegotiate the existing PPP agreement, no major breakthrough
has been achieved. The Company may be subject to significant delay penalties under
the terms of the PPP agreement if it is determined that the Company was at fault in
causing the delays.
Because of the failure of the Romanian authorities to cooperate, negotiate and adjust
the PPP agreement, the Project SPV was not able to meet its obligations under the
PPP agreement. This resulted in a situation where the Project SPV could not "de
facto" continue the execution of the Project and created a risk that the Romanian
authorities could attempt to terminate the PPP agreement and/or to impose penalties
on the Company and the Project SPV. As of the date of approval of these
consolidated financial statements, the Project SPV has not received any termination
notification from the Romanian authorities.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 29 - -
NOTE 5:- TRADING PROPERTIES (Cont.)
Still, in the case of termination of the PPP agreement, any disputes regarding the
relationship and compensation between the parties is to be determined by way of
arbitration. The management, believes that, in the case of termination, the Company
has a good case to claim compensation for damages.
The Romanian authorities undertook to discuss in good faith the restructuring of the
Project and the PPP agreement in situations where significant unexpected
circumstances arise. Further, the unresponsiveness of the Romanian authorities is a
violation of the general undertaking to support the Project SPV in the execution of
the Project as agreed in the PPP agreement.
Management has taken a number of steps in order to unblock the development of the
project and mitigate the risk of termination of the PPP agreement, including
commencing a process to identify third party investors willing and capable to join in
the development of the Project and/or potential buyers of the Company’s interest in
the Project. Management believes that reputable investors with considerable
financial strength can enhance negotiation position vis-à-vis the Romanian
authorities and assist in advancing an amicable agreement with the relevant
authorities with respect to the development of the Project. As a result of the
Company’s ongoing efforts, a pre-sale agreement for the sale of its shareholding in
the Project SPV and its interests in the Project was signed on 3 July 2019 (see (2)(e)
in this Note).
(d) Provision in respect of PAB:
As mentioned in point (a) above, when the Company entered into an agreement to
acquire 75% interest in the Project SPV it assumed a commitment to construct the
PAB at its own costs for the benefit of the Romanian Government. As detailed in
note 5(3) below, the carrying amount of the trading property was fully written as of
December 31, 2020. Accordingly, the Company also fully reduced the provision in
respect of the construction of the PAB as of December 31, 2020.
(e) On 3 July 2019 the Company’s wholly owned subsidiary Dambovita Center Holding
B.V (“Dambovita NL”) as seller, the Company as guarantor and AFI Europe N.V.
as buyer entered into a pre-sale agreement for the sale of the shareholding in
Dambovita Center S.R.L (“Dambovita RO”) (the "Pre-Sale Agreement"). Pursuant
to the terms of the Pre-Sale Agreement, AFI Europe N.V. shall carry out a due
diligence review which shall be completed no later than 5 September 2019 following
which, subject to the satisfaction of the other Conditions precedent in the Pre-Sale
Agreement, the parties to the Pre-Sale Agreement will execute a share purchase
agreement in the short form being Annex 3 to the Pre-Sale Agreement (the "SPA")
and an intragroup loan assignment/novation agreement.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 30 - -
NOTE 5:- TRADING PROPERTIES (Cont.)
Conditions precedent in the Pre-Sale Agreement comprise inter alia (i) the
satisfactory completion of a due diligence investigation by AFI Europe N.V. by the
latest on 5 September 2019; (ii) the Romanian competition council having issued
competition approval for the transaction; (iii) publication of the contemplated sale
of the shares in Dambovita RO by Dambovita NL in the Official Gazette of the
Romanian Government and the lapse of a 30-day objection period with no opposition
being lodged; (iv) no pending or imminent material adverse change (which includes
insolvency of Dambovita RO, termination of the PPP Agreement or a significant
amendment of the terms and conditions of the PPP Agreement rendering the
fulfilment thereof more onerous; (v) issuance of a Government Decision confirming
that Dambovita NL may transfer the shares to AFI Europe N.V.(or any of its
affiliates) and that the Company and Elbit Imaging Ltd. may transfer their rights and
obligations under the PPP Agreement to AFI Europe N.V.(vi); amendment of the
PPP Agreement in order to transfer the rights of Elbit Imaging Limited and the
Company to AFI Europe N.V.; (vii) obtaining a written confirmation that the 49
years term of the PPP Agreement shall be calculated, the earliest, starting from 2012,
however, in case the 49 years concession term is calculated from any other previous
date, the parties to the Pre-Sale Agreement will try to find an amicable compromise,
discounting the Purchase Price (as defined below) to reflect the shorter concession
term; in case of such parties’ failure to reach an agreement with respect to the
discounted Purchase Price, AFI Europe N.V. has the right to consider this condition
precedent as not being fulfilled; and (viii) the receipt of approval of the General
Meeting and the Company’s bondholders for the Transaction.
Upon satisfactory completion of the due diligence to be carried out by AFI Europe,
there will be a down payment of EUR 200,000, which shall be repaid upon the
occurrence of (i) cancellation of the PPP Agreement; (ii) initiation of Dambovita
RO’s dissolution due to negative equity requirements; (iii) the existence of elements
of criminal investigation against Dambovita RO, beyond the information as
disclosed to AFI Europe or, if such investigation would be held against Dambovita
RO’s directors of employees, in case this would trigger a significant impact on the
Dambovita Project or (iv) Dambovita NL refuses to proceed to closing or is not
present at the closing date, although all the conditions precedent were fulfilled or
waived. The fulfilment of the Conditions precedent relating to the approval of the
Company’s shareholders and bondholders as referred to above must occur no later
than 5 September 2019. On 30 July 2019, the bondholders of Bonds series A and
Bonds Series B decided to authorize the Company to enter into the agreement and
execute the transaction contained therein. In addition, an extraordinary general
meeting of Shareholders of the Company held on 29 August 2019 approved the
transaction as detailed in the Notice of EGM.
On 5 September 2019 in accordance with the pre-sale agreement, AFI has paid the
down payment of EUR 200,000.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 31 - -
NOTE 5:- TRADING PROPERTIES (Cont.)
PRE-SALE AGREEMENT – SPECIFIC PROVISIONS
The long stop date as referred to in the Pre-Sale Agreement (i.e. the date on which
all conditions precedent must be fulfilled and closing of the Transaction must occur)
is 15 months after the lapse of the due diligence period (5 September 2019).
Pursuant to the Pre-Sale Agreement, Dambovita NL will transfer its interest in
Dambovita RO and will assign the Intragroup Loans to AFI Europe N.V. for the
maximum consideration of EUR 60 million, subject to the fulfilment of certain
conditions (the "Purchase Price").
The Purchase Price is defined in the Pre-Sale Agreement as EUR 60 million minus
75% of Dambovita RO’s liabilities computed based on the closing accounts (being
the financial statements of Dambovita RO for the period from 1 January of the year
in which the closing of the Transaction will occur) and excluding the Intragroup
Loan, plus 75% of Dambovita RO’s available cash and other current assets as shown
in the closing accounts (as referred to above) and minus (insofar applicable) an
amount agreed upon by the parties to the Pre-Sale Agreement to be reduced from the
Purchase Price if the 49-year PPP-rights period will be calculated from any date prior
to the year 2012. The loan assignment amount (as part of the Purchase Price) will be
calculated on the Closing Date as the balance between the Purchase Price and the
price for the shares sold (being the nominal value of these shares RON 44,050,380,
which is the equivalent of USD 14,778,862).
Subject to fulfilment of the conditions precedent in the Pre-Sale Agreement as
detailed above which includes, among others, the execution of the SPA, AFI Europe
N.V. is bound to make a payment of EUR 20 million to Dambovita NL. A further
EUR 22 million is to be paid later upon the issuance by the competent authorities of
a building permit for the first stage of the Dambovita Project (the development of
the shopping mall or the office building, excluding the public authority building as
referred to above). The balance between the Purchase Price and the payments already
made, will be paid out to Dambovita NL upon all permits required for the operation
of any of the components (office building or shopping mall) of the first stage of the
Dambovita Project including a fire permit and the operation permit having been
obtained. In addition the Company and Dambovita NL, granted the AFI Europe N.V.
indemnification, jointly and severally, for some warranties under the Pre-Sale
Agreement, which customary in such transactions.
On November 2, 2020, the Company, Dambovita NL and AFI Europe N.V. ("AFI",
and together with the Company, the "Parties") entered into an addendum to the pre-
sale pursuant to which the Parties agreed to extend the Long Stop Date, which is the
date on which the parties will execute a share purchase agreement, subject to the
satisfaction of conditions precedent, until December 31, 2021.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 32 - -
NOTE 5:- TRADING PROPERTIES (Cont.)
The Parties have further agreed that in case of any litigation and/or arbitration
process to which the Company is a party, will result in the loss of any of their rights
under the PPP Agreement with the Government of Romania to develop the Casa
Radio site in the city center of Bucharest, AFI shall no longer be bound by its
obligations under the Agreement and the Company shall reimburse AFI with the
entire advance payment of EUR 200,000 already paid by AFI. The prepayment of
EUR 200,000 is included in Other Liabilities in the consolidate statement of financial
position.
The Addendum was subject to the approval of the Company’s bondholders which
was obtained on 12 November 2020.
Further to the above, on December 20, 2021 the Company, Dambovita NL and AFI
have signed an additional addendum to the Agreement (the "Addendum 2") which
pursuant to the Addendum 2 the Parties agreed to extend the Long Stop Date until
December 31, 2022.
In addition, for the avoidance of doubt, the extension of the Long Stop Date as stated
above, has been approved at the Company's bondholders' meetings which were held
on November 25, 2021.
As of the date hereof, there can be no certainty that either the conditions precedent
in the Pre-Sale Agreement as detailed above will be met, that the Sale Agreement
will be executed and/or that the Transaction will be consummated as presented above
or at all.
(3) Write-down of trading properties:
Trading properties are measured at the lower of cost and net realizable value.
Determining net realizable value is inherently subjective as it requires estimates of future
events and takes into account special assumptions in the valuations, many of which are
difficult to predict.
Actual results could be significantly different than the Company's estimates and could have
a material effect on the Company's financial results.
These valuations become increasingly difficult as they relate to estimates and assumptions
for projects in the preliminary stage of development.
Management is responsible for determining the net realizable value of the Group's trading
properties.
As detailed above, despite many notifications sent to the Romanian authorities expressing
a wish to renegotiate the existing PPP agreement, no major breakthrough could be
achieved, in addition, the Romanian authorities have not cooperated substantively with the
Company’s request to approve the transfer of the Company’s shares in the Project SPV and
its interest in the Project to AFI.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 33 - -
NOTE 5:- TRADING PROPERTIES (Cont.)
Because of the abovementioned issues surrounding the satisfaction of the conditions
precedent in the pre-sale agreement, it is currently not certain whether the sale agreement
as contemplated in the pre-sale agreement would be entered into and whether therefore the
transaction with AFI would proceed. As such the Company, Dambovita NL and AFI
Europe N.V. agreed to extend the Long Stop Date until December 31, 2022. Additionally,
as the external appraisers, in their opinion from the previous years did not reflect the risk
related to the uncertainty in respect of fulfilment of the conditions precedent set out in the
pre-sale agreement, as described above, the management has concluded that it can’t
measure the net realizable value of the Project based on either the pre-sale agreement or
based on the residual value approach as the management would need to assume that it
would receive the Romanian authorities approval to restructure and adjust the PPP
agreement. As a result, the value of the trading property of the Project was fully reduced.
Still, the Company believes that despite this reduction there is no change in the value of
the Company’s rights under the PPP Agreement. In addition, management, believes that in
case they will decide to pursue it material economic damage, the Company has a good case
to claim compensation for such damages. On the other hand, if the Company comes to an
understanding with the Romanian authorities, it will measure the Casa Radio NRV to
reflect its updated financial projections.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 34 - -
NOTE 6:- EQUITY ACCOUNTED INVESTEES
a. The Group has the following interest in the below joint ventures.
Interest of holding
(percentage)
as of December 31,
Company name
Country
Activity
2021
2020
Elbit Plaza India Real Estate
Holdings Ltd. ("EPI") (*)
Cyprus
Mixed-use large-
scale projects
47.5%
47.5%
(*) Though EPI is 47.5% held by the Company, the Company is accounted for 50% of
the results, as the third party holding 5% in EPI is deemed not to participate in
accumulated losses, hence Elbit and the Company, the holders of the remaining 95%
each account for 50% of the results of EPI.
The movement in equity accounted investees (in aggregation) was as follows:
2021
2020
Balance as of 1 January
10,737
14,419
Distribution received from equity-accounted investees
(4,175)
(983)
Share in results of equity-accounted investees, net of tax
(1)
(1,903)
(1,084)
Effect of movements in exchange rates
454
(1,615)
Balance as of 31 December
5,113
10,737
(1) Breakdown of the Group's share of increase (write-downs) of trading properties
projects held by equity accounted investees is as follows:
Year ended
December 31
Project name (holding company name)
2021
2020
Bangalore (held by EPI) (*)
(1,577)
(434)
Chennai (held by EPI) (*)
-
(526)
Other expenses
(326)
(123)
(1,903)
(1,084)
(*) Refer to the below paragraphs b(1) and b(2) regarding the properties' write
downs.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 35 - -
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
b. Material joint ventures:
The summarized financial information of the material joint venture EPI (due to holding of
major schemes in Bangalore and Chennai) is as follows:
2021
2020
Current assets (*)
183
1,106
Trading properties-non current
20,441
33,090
Other current liabilities
(10,398)
(12,722)
Net assets (100%)
10,226
21,474
Group share of net asset (50%) (**)
5,113
10,737
Carrying amount of interest in joint venture
5,113
10,737
(*) Including cash and cash equivalents in the amount of EUR 40 thousand (2020 – EUR
910 thousand);
(**) Refer to remark on EPI holding rate in section (a) above.
2021
2020
Write-downs of trading properties
(3,153)
(1,921)
Other expenses
(653)
(247)
Total loss (100%)
(3,806)
(2,168)
Group share of loss (50%)
(1,903)
(1,084)
Total results from investees
(1,903)
(1,084)
(1) Bangalore:
In March, 2008 Elbit Plaza India Real Estate Holdings Limited (a subsidiary held by
the Company (50%) and Elbit Imaging ltd.(50%)) ("EPI") entered into a share
subscription and framework agreement (the "Agreement"), with a third-party local
developer (the "Partner"), and a wholly owned Indian subsidiary of EPI which was
designated for this purpose ("SPV"), to acquire together with the Partner, through
the SPV, up to 440 acres of land in Bangalore, India (the "Project") in certain phases
as set forth in the Agreement.
As a result of the failure of the Partner to complete the transaction under the
Agreement and in accordance with the provisions thereto, EPI has 100% control over
the SPV and the partner is no longer entitled to receive the 50% shareholding.
The Partner has surrendered sale deeds to the SPV for approximately 54 acres (the
"Plot"). The Plot is registered in the name of a third party land owner who transferred
100% ownership right in the Plot to the Partner ( 90% ownership rights acquired
through Joint Development Agreement & Power of Attorney and balance 10%
ownership rights acquired through sale). The Partner in turn transferred 100%
Development rights and 90% rights in the Plot and constructed area therein to the
SPV through Joint Development Agreement & Power of Attorney while the balance
10% rights in the Plot and constructed area held by the Partner.
On December 2, 2015 EPI has signed an agreement to sell 100% of its interest in the
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 36 - -
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
SPV to the Partner (the "Sale Agreement"). The total consideration upon completion
of the transaction was INR 321 crores (approximately EUR 44 million) which should
have been paid no later than September 30, 2016 ("Long Stop Date"). On November
15, 2016, the Partner informed EPI that it will not be able to execute the aforesaid
payment.
As a result of the foregoing, the SPV has received from the escrow agent the sale
deeds in respect of additional 8.7 acres (the "Additional Property") which has been
mortgaged by the Partner in favor of the SPV in order to secure the completion of
the transaction on the Long Stop Date. The Additional Property has not yet been
registered in favor of the SPV for cost-benefit reasons. In addition, as per the Sale
Agreement, the Company took actions in order to get full separation from the Partner
with respect to the Plot and specifically the execution of the sale deed with respect
of the 10% undivided interest, all as agreed in the Sale Agreement.
In light of the above, and after lengthy negotiations between the parties, new
understandings were formulated and the parties signed a revised agreement that
substantially altered the outline of the original transaction (and this agreement was
amended several more times, the last of which in April 2019), and concluded that:
(i) the closing date for the transaction will be extended to November 2019, and may
be further extended to August 2020 (the "Closing Date"). It should be clarified that
the postponement of the closing date to November 2019 and August 2020 was
subject to receipt of payments as agreed in the Sale Agreement and subject to
mutually agreed payment terms; and (ii) the consideration was increased to INR 356
crores (approximately EUR 49 million) (Plaza part approximately EUR 24.5 million)
(the "Consideration").
After August 2019, the Partner was unable to pay any further amounts nor was able
to give firm commitment on payment of the remaining amount. In the absence of
clarity on payment of the remaining amount and failure of the Partner to give full
separation with respect to the Plot, on January 10, 2020, the Company announced
that a notice has been issued to the Partner to file its response in the insolvency
proceedings initiated for the recovery of the amounts due.
On May 18, 2021, the Company announced that the insolvency proceedings initiated
against the Purchaser for the recovery of the due amounts has been dismissed by the
National Company Law Tribunal in Bangalore since the case is not maintainable
before it and therefore the SPV should claim for the recovery of its debt or for the
resolution of its dispute in any other forum.
In addition, criminal cases for dishonor of the cheques aggregating INR 15 crores
which were given as security for payment of certain installments, the Court had
issued arrest warrants and the local police were on the lookout for the accused
persons. On May 18, 2021, the Company announced that all the accused persons
appeared before the court and were granted bail. In addition, all further proceedings
continue in the matter.
On July 29, 2021 the Company announced that the SPV has submitted an appeal
before the National Company Law Appellate Tribunal, Chennai, India against the
decision of the National Company Law Tribunal, Bengaluru, India, which dismissed
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 37 - -
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
the insolvency proceedings initiated against the Partner for the recovery of the
amounts due.
As of this date, the Partner paid to EPI approximately INR 87.00 crores (EUR 11.2
million) (Company part INR 43.5 crores (approximately EUR 5.6 million)) out of a
total consideration of INR 356 crores (approximately EUR 32 million) (Plaza part
INR 178 crores (approximately EUR 16 million) as per the Agreement.
Net realizable value measurement of Bangalore project:
As of December 31, 2021 and 2020 the Group measured the net realizable value of
the project. The net realizable value of the project based on the comparable Method
is INR 172 crores (EUR 20.4 million); 2020 - INR 198 crores (EUR 22.1 million).
Due to decrease in value of the plot EPI recognized a write down in the amount of
app. EUR 3.2 million (the Company part (50%) app. EUR 1.6 million).
The evaluation
method
Value in INR
million
Value in EUR
million
Comparable Method
1,718
20.4
DCF Method
1,634
19.4
Given that the plot is still in land stage and in light of the Company's intention to sell
the Plot to the Partner or to any other third party (see above), and in light of the
uncertainty as to the completion of the transaction with the Partner, the Company
believes that the comparable method reliably reflects the net realizable value of the
Plot and therefore the Company recorded the value of the plot as of December 31,
2021 at the value of INR 172 crores (EUR 20.4 million) (the Company part (50%)
app. EUR 10.2 million).
The valuation of the property reflects the interest that the partner still holds in the
plot (10% as described above), the size of the non-contiguous land parcel and the
petition/application filed with NCLT against the partner.
The following main parameters have been considered to arrive at the land value of
the subject property by land sale comparison method:
Parameter
Premium
(Discount)
Applicable land value (INR Mn/acre)
96
Applicable FSI value (INR/Sq. ft)
1,085
Total land value (INR Mn)
5,207
Discount on account of Revised Master Plan 2015 Buffer zone
norms (%)
-25%
Presence of minority shareholder
-20%
Total land value (INR Mn)
3,124
Discount on account of the petition / application filed with NCLT
-45%
Total land value (INR Mn)
1,718
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 38 - -
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
(2) Chennai:
In December 2007, EPI executed agreements for the establishment of a special
purpose vehicle ("Chennai Project SPV") together with a local developer in Chennai
("Local Partner"). The Chennai Project SPV acquired 74.73 acres of land situated in
the Sipcot Hi-Tech Park in Siruseri District in Chennai ("Property").
On September 16, 2015, EPI has obtained a backstop commitment from the Local
Partner for the purchase of its 80% shareholding in the Chennai SPV by January 15,
2016, for a net consideration of approximately INR 161.7 Crores (EUR 21.1
million). Since the Local Partner had breached its commitment, EPI exercised its
rights and acquired the Local Partner's 20% holdings in the Chennai Project SPV.
Accordingly, as of December 31, 2020, EPI has 100% of the equity and voting rights
in the Chennai Project SPV. However, there are two lawsuits (being filed in India)
by plaintiffs claiming to be legal heirs of the landowners of the Property, who wish
to recognize them as owners of 2.5% the Property.
During 2016, Chennai Project SPV has signed a Joint Development Agreement with
a local developer ("Developer" and "JDA", respectively) with respect to the
Property. Under the terms of the JDA, the Chennai Project SPV granted the property
development rights to the Developer" who shall bear full responsibility for all of the
project costs and liabilities, as well as for the marketing of the scheme. The JDA also
stipulates specific project milestones, timelines and minimum sale prices.
In February 2019 the Chennai Project SPV issued notice to Developer terminating
the JDA due to its failure to obtain the access road. The said termination of JDA has
been disputed by the Developer. Therefore, the Chennai Project SPV has initiated
arbitration proceeding against the Developer in accordance with the Arbitration
Rules of the Singapore International Arbitration Centre, in accordance with the JDA
Agreement to protect its rights. In June, 2019 the aforesaid dispute was amicably
resolved, the arbitration proceedings withdrawn and the JDA restored.
On June 13, 2019 the Company announced that EPI and the Developer have signed
a share purchase agreement ("SPA") according to which: (i) the Developer has paid
a deposit of INR 5 crores (approximately EUR 0.625 million) in order to provide the
Developer with an additional six months to complete the closing, which may be
extended by another three months upon payment by the Developer of an additional
deposit of INR of 5 crores (approximately EUR 0.625 million).
On December 5, 2019 the Company announced that EPI and the Developer have
reached a revised understanding regarding the amendment of the agreement
according to which: (i) The Developer further paid the Chennai Project SPV INR 5
crores (approximately EUR 0.625 million) and received a three months extension to
complete the closing (i.e., until March 3, 2020). This closing may be extended for an
additional three months period (i.e., until June 3, 2020), for an additional payment
of INR 5 crores, to be paid by the Developer. (ii) Out of the payments received from
the Developer (as detailed above) EPI is entitled to receive a total of INR 17 crores
(Plaza part INR 8.5 crores (approximately EUR 1.05 million).
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 39 - -
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
Accordingly, on February 18, 2020 the Company announced that EPI has received
INR 17 crores (approximately EUR 2.1 million (the Company’s part EUR 1.05
million)) from the Chennai Project SPV.
On March 8, 2020 the Company announced that EPI and the Developer have reached
a revised understanding regarding the amendment of the agreement according to
which: (i) The Purchaser paid further INR 5 crores (approximately EUR 0.625
million) and get additional three months to complete the closing until June 3, 2020,
which may be extended by another three months upon payment by the Purchaser of
an additional deposit of INR of 7.5 crores (approximately EUR 0.9 million).
On June 2, 2020 the Company announced the parties have reached to a revised
understanding as follows: (i) The Developer requests and gets an extension of 3
months to complete the closing (i.e. up to September 2, 2020) without an additional
payment of INR 7.5 crores (approximately EUR 0.9 million). The Developer will
have an option to extend this period of time by another 3 months (i.e., up to
December 2, 2020) upon paying additional deposit of INR 7.50 crores
(approximately EUR 0.9 million) (Plaza part INR 3.75 crores (approximately EUR
0.45 million)).
On August 31, 2020 the Company announced further to revised understanding
regarding the amendment agreed by the parties on June 2, 2020 the parties have
reached a revised understanding as follows: (i) The Purchaser will deposit INR 1
crore (approximately EUR 0.115 million) and agrees to deposit additional INR 0.50
crore (approximately EUR 0.0575 million) by December 1, 2020; (ii) The Purchaser
gets additional seven months to complete the closing (up to 1, April 2021), which
may be extended by another three months (up to June 30, 2021) upon payment by
the Purchaser of an additional deposit of INR 7.5 crores (approximately EUR 0.861
million);
Accordingly, the Purchaser has deposited INR 1.50 crore (approximately EUR 0.172
million) in accordance with his obligation in connection with the revised
understandings to the Agreement as agreed on August 31, 2020.
On March 31, 2020 the Company announced further the revision of the
understanding regarding the amendment agreed by EPI and the Purchaser (“The
Parties”). On August 31, 2020 the Parties have reached a revised understanding (the
"Revised Understandings") as follows: (i) The Purchaser will deposit INR 7.5 crore
(approximately EUR 0.861 million Plaza part is approximately EUR 0.43 million))
(ii) The Purchaser can complete the closing by April 30, 2021 at a revised
consideration of 96.50 crores (approximately EUR 11.6 million (Plaza part is
approximately EUR 5.8 million)). (iii) If the Purchaser fails to complete the closing
by April 30, 2021 then the Purchaser gets additional two months to complete the
closing by June 30, 2021 but at the initial consideration of INR 108 crores
(approximately EUR 13 million (Plaza part is approximately EUR 6.5 million)).
On June 21, 2021 the Company announced the Purchaser completed the transaction
and paid consideration of INR 94.7 crores (approximately EUR 10.6 million). The
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 40 - -
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
change in the consideration is due to the Purchaser's consent to take some additional
liabilities in connection with the SPV (which were not included in the original
agreement with the Purchaser).
Furthermore, the Company and Elbit Imaging Ltd granted the Purchaser an
indemnification, jointly and severally, for some of EPI's presentations, which are
presentations customary in such transactions.
NOTE 7:- OTHER LIABILITIES
December 31,
2021
2020
Prepayments (*)
200
200
Salaries and related expenses (**)
16
20
Accrued expenses
209
189
Total
425
409
(*) Including EUR 200 thousand payable due to down payment in regard to pre-sale agreement
for the sale of Casa Radio Project (refer to note 5(2)(e)).
(**) Refer to Note 17.
NOTE 8:- BONDS
a. Composition:
Effective
interest rate
Contractual
interest rate
Principal
final
maturity
Carrying
amounts
as at
December 31
2021
Series A Bonds
11.58%
CPI+8%
(*)
2022
41,275
Series B Bonds
13.83%
CPI+8.9%
(*)
2022
58,724
99,999
(*) Including 2% interest on arrears
b. Mandatory repayments subsequent to the reporting date (without early repayments):
2022
99,999
99,999
(1) Pursuant to the Company's Restructuring Plan, the Company will assign 78% of the
net proceeds received from the sale or refinancing of any of its assets as early
repayment.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 41 - -
NOTE 8:- BONDS (Cont.)
(2) Approved amendment to an early prepayment term under the Restructuring Plan
The Company has implemented the restructuring plan that was approved by the
Dutch Court on July 9, 2014 (the "Restructuring Plan"). Under the Restructuring
Plan, principal payments under the bonds issued by the Company and originally due
in the years 2013 to 2015 were deferred for a period of four and a half years, and
principal payments originally due in 2016 and 2017 were deferred for a period of
one year.
During the first three months of 2017, the Company paid to its bondholders a total
amount of NIS 191.7 million (EUR 49.2 million) as an early redemption. Upon such
payments, the Company complied with the Early Prepayment Term (early
redemption at the total sum of at least NIS 382,000,000 (approximately EUR 98
million)) and thus obtained a deferral of one year for the remaining contractual
obligations of the bonds.
In addition to the above, the following terms were approved by the bondholders:
(a) Casa Radio proceeds - If the Company shall sell the Casa Radio project
located in Romania (hereinafter: the "Project") to a third party, including by
way of selling its holdings in any of the entities through which the Company
holds the project (and said sale shall be carried out before the full repayment
of the
bonds and until no later than December 31, 2019, and for an amount which
exceeds EUR 45 million net (i.e. after brokerage fees (if any), taxes, fees,
levies or any other obligatory payment due to any authority in respect to the
said sale) which shall actually be received by the Company, then the holders
of bonds shall be eligible for a one-time payment (which shall come in
addition to the principal and interest payments in accordance with the
repayment schedule), in certain amounts specified in tranches.
(b) Registering of Polish bonds for trade - the Company has committed to
undertake best efforts to admit the Polish bonds for trading on the Warsaw
Stock Exchanges and proceeding in this respect are ongoing.
(c) Deferred debt ratio of Series B bonds - were reduced to 68.24% from 70.44%
following the cancellation of the treasury bonds. The ratio has been changed
for Series B bonds in order to maintain a distribution ratio between the three
series.
(c) Settlement agreement with Bondholders of Israeli Series of Bonds:
In January 2018, a settlement agreement was signed by and among the Company and the
two Israeli Series of Bonds ("Settlement Agreement"). In the Settlement Agreement it was
agreed, inter alia, to approve:
- New repayment ratios between the two Israeli Series of Bonds (new ratio: Bond A-
39% Bond B- 61%);
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 42 - -
NOTE 8:- BONDS (Cont.)
- An increase in the level of the mandatory early repayments from 75% to 78% of the
relevant net income;
- New repayment schedule;
- An increase in the compensation to be paid to the Bondholders in the event of
successful disposal of Casa Radio Project;
- A waiver of claims to the Company and its directors and officers; and
- To waive the request for publication of quarterly financial reports by the Company.
As a result of settlement agreement signing, Series A Bondholders withdraw their request
for immediate repayment.
It is clarified that the Settlement Agreement is a separate agreement among the parties
thereto with respect to the Company's restructuring plan, and as such has no effect on the
Polish Bondholders.
On January 31, 2018 the Company paid the bondholders a total amount of principal and
interest of EUR 38,487 thousand.
(1) The net cash flow received by the Company following an exit or raising new
financial indebtedness (except if taken for the purpose of purchase, investment
or development of real estate asset) or refinancing of real estate assets after
the full repayment of the asset's related debt that was realized or in respect of
a loan paid in case of debt recycling (and in case where the exit occurred in
the subsidiary - amounts required to repay liabilities to the creditors of that
subsidiary) and direct expenses in respect of the asset (any sale and tax costs,
as incurred), will be used for repayment of the accumulated interest till that
date in all of the series (in case of an exit which is not one of the four shopping
centres only 50% of the interest) and 78% of the remaining cash (following
the interest payment) will be used for an early repayment of the close principal
payments for each of the series (A, B, Polish) each in accordance with its
relative share in the deferred debt. Such prepayment will be real repayment
and not in bond purchase.
(2) On November 22, 2018 the Company announced based on its current
forecasts, the Company expected to pay the accrued interest on Series A and
Series B Bonds on December 31, 2018, in accordance with the repayment
schedule determined in the Company's Restructuring Plan and Settlement
Agreement with Series A and Series B Bondholders from 11 January 2018
(the "Settlement Agreement"). The Company noted that it will not meet its
principal repayment due on December 31, 2018 as provided for in the
Settlement Agreement. The Company may be able to partially pay the said
principal depending, among other things, on the actual sale of assets and
taking into consideration the cash needs in accordance with the scope of the
forecasted activity.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 43 - -
NOTE 8:- BONDS (Cont.)
2019
Following the announcement of the Company from January 2019, the Company repaid in
February 2019 circa EUR 400,000 (principal of circa EUR 250,000 and penalty interests
of circa EUR 150,000) to its Series A and Series B. As provided for in the Settlement
Agreement, the bondholders approved the deferral of payment to July 1, 2019.
In addition, during June 2019 the bondholders approved the deferral of the full payment of
principal due on July 1, 2019 and of 58% ("deferred interest amount") of the sum of interest
(consisting of the total interest accrued for the outstanding balance of the principal,
including interest for part of the principal payment which was deferred as of February 18,
2019, plus interest arrears for part of the principal which was fixed on 18.2.2019 and was
not paid by the Company and all in accordance with the provisions of the trust deed; "the
full amount of interest"), the effective date of which is 19.06.2019, and the payment date
was fixed as of 01.07.2019. The Company paid on the said date a total amount of circa
EUR 1.17 million of which is only 42% of the full amount of interest.
On July 11, 2019, the Company announced that its Romanian subsidiary had signed a
binding agreement to sell land in Miercurea Ciuc, Romania, and that the Company would
use part of the proceeds now received by it EUR 0.75 million (hereinafter: "the amount
payable"), in order to make a partial interest payment to the bondholders (Series A) and
(Series B) issued by the Company. The payment required changes in the repayment
schedule and amendments of the trust deeds which was approved unanimously by the
Bondholders. The amount payable was paid on August 14, 2019 and reflects 30% of
accrued interest as of that date.
On November 17, 2019 the bondholders of Series A and Series B approved a deferral of
all the scheduled Principal payment and app. 87% of deferral of the scheduled Interest
payment, both, as of December 31, 2019 to July 1, 2020.
Accordingly, in December 2019, Company made a partial interest payment in amount of
circa EUR 0.6 million of which is only 13% of the full amount of interest.
2020
On May 4, 2020, the bondholders of Series A and Series B approved: (i) to postpone the
final redemption date to January 1, 2021 of all the scheduled Principal; (ii) that on July 1,
2020 the Company will pay to its bondholders a partial interest payment in the total amount
of EUR 0.25 million and to deferral all other unpaid scheduled Interest payment.
Following receiving the Settlement Amount related to the final price adjustment of the sale
of Belgrade Plaza and in light of the potential negative impact of the Covid-19 on the
possibility to receive future proceeds from the Company's plots in India, the Company
decided to increase the amount to be paid to the bondholders on July 1, 2020, from EUR
0.25 million to EUR 0.5 million. The amount reflected 6.74% of accrued interest as of that
date.
On November 12, 2020, the bondholders of Series A and Series B approved: (i) to postpone
the final redemption date to July 1, 2021 of all the scheduled Principal; that on January 1,
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 44 - -
NOTE 8:- BONDS (Cont.)
2021 the Company will pay to its bondholders a partial interest payment in the total amount
of EUR 0.2 million and to deferral all other unpaid scheduled Interest payment. The amount
reflected 1.84% of accrued interest as of that date.
2021
On April 12, 2021, the bondholders of Series A and Series B approved: (i) to postpone the
final redemption date to January 1, 2022; (ii) that on July 1, 2021 the Company will pay to
its bondholders a partial interest payment in the total amount of EUR 125,000 and to
deferral all other unpaid interest. The amount reflected 0.84% of accrued interest as of that
date.
On November 25, 2021, the bondholders of Series A and Series B approved: (i) to postpone
the final redemption date to July 1, 2022; (ii) that on January 1, 2022 the Company will
pay to its bondholders a partial interest payment in the total amount of EUR 200,000 and
to deferral all other unpaid interest. The amount reflected 0.92% of accrued interest as of
that date.
As detailed in Note 1(b) the Company expects that it will not be able to meet its entire
contractual obligations in the following 12 months.
Accordingly, it intends to request the bondholders of both series to postponement of the
repayment of the remaining balance of the Bonds.
d. Covenants:
The bonds’ covenants are detailed in Note 16(b)(1).
In respect of the Coverage Ratio Covenant ("CRC"), as defined in the restructuring plan,
as at December 31, 2020 the CRC is not in compliance with 118% minimum ratio required.
e. Credit rating:
In January 2018, Standard & Poor's Maalot, the Israeli credit rating agency which is a
division of International Standard & Poor's has discontinued tracking Plaza's rating at the
Company's request.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 45 - -
NOTE 9:- INCOME TAXES
a. Unrecognized deferred tax assets:
Deferred tax assets have not been recognized in respect of tax losses in a total amount of
EUR 95,094 thousand (2020: EUR 107,717 thousand). Deferred tax assets have not been
recognized in respect of these items because it is not probable that future taxable profit will
be available against which the Group can utilize the benefits. As of December 31, 2021,
the expiry date status of tax losses to be carried forward is as follows:
Total tax losses
carried forward
2022
2023
2024
2025
2026
After 2026
95,094
25,232
18,470
14,646
23,736
10,538
2,472
Tax losses are mainly generated from operations in the Netherlands. Tax settlements may
be subject to inspections by tax authorities. Accordingly, the amounts shown in the
financial statements may change at a later date as a result of the final decision of the tax
authorities.
c. Reconciliation of effective tax rate:
2021
2020
Dutch statutory income tax rate
25%
25%
Loss from continuing operations before income taxes
(27,089)
(33,490)
Tax benefit at the Dutch statutory income tax rate
(6,722)
(8,372)
Effect of tax rates in foreign jurisdictions
376
158
Current year tax loss and other timing differences for
which no deferred taxes are created
6,162
8,087
Non-deductible expenses (exempt income)
234
127
Tax Expense
-
-
d. The main tax laws imposed on the Group companies in their countries of residence:
The Netherlands:
a. Companies resident in the Netherlands are subject to corporate income tax at
the general rate of 25%. The first EUR 245,000 of profits is taxed at a rate of
15%. Tax losses may be carried back for one year and carried forward for six
years (for 2019 – nine years).
b. Starting January 1, 2022 losses will be offset (forward or backward) in
accordance with the following restrictions:
1. Up to 1 million EUR - unlimited
2. Over 1 million EUR - against 50% of the remaining profit in that year
b. The Dutch participation exemption gives a full exemption from corporation
tax applies to benefits such as dividends and capital gains derived from a
qualifying participation. The participation exemption generally applies if the
parent Company holds at least 5 percent of the shares in the participation. The
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 46 - -
NOTE 9:- INCOME TAXES (Cont.)
requirements to meet the participation exemption are as follows:
1. The parent Company has an interest of at least 5 percent in the
participation; and
2. At least one of the following three tests is met:
a) The parent Company's objective with respect to its participation is
to obtain a return that is higher than a return that may be expected
from normal active asset management ("Motive Test"); or
b) The participation is subject to a "reasonable taxation" according to
Dutch tax standards ("Subject-to-Tax Test"); or
c) The direct and indirect assets of the participation generally consist
of less than 50 percent of 'low taxed free passive investments'
("Asset Test").
NOTE 10:- EQUITY
December 31,
2021
2020
Remarks
Number of shares
Authorized ordinary shares of par value EUR 1 each
10,000,000
10,000,000
Issued and fully paid
6,855,603
6,855,603
Translation reserve
The translation reserve comprises, as of December 31, 2021, all foreign currency differences
arising from the translation of the financial statements of foreign operations in India.
Restriction of dividend
The Company shall not make any dividend distributions, unless (i) at least 75% of the Unpaid
Principal Balance of the Bonds has been repaid
and the Coverage Ratio on the last Examination
Date prior to such Distribution is not less than 150% following such Distribution, or (ii) a Majority
of the Plan Creditors consents to the proposed Distribution.
Notwithstanding the aforesaid, in the event an additional capital injection of at least EUR 20
million occurs, then after one year following the date of the additional capital injection, no
restrictions other than those under the applicable law shall apply to dividend distributions in an
aggregate amount of up to 50% of such additional capital injection.
NOTE 11:- EARNINGS PER SHARE
The calculation of basic earnings per share ("EPS") at December 31, 2021 was based on the loss
attributable to ordinary shareholders of EUR 27,089 thousand (2020: loss of EUR 33,490
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 47 - -
NOTE 11:- EARNINGS PER SHARE (Cont.)
thousand) and a weighted average number of ordinary shares outstanding of 6,856 thousand
(2020: 6,856 thousand).
Weighted average number of ordinary shares basic and diluted:
In thousands of shares with a EUR 1 par value
December 31,
2021
2020
Issued ordinary shares at 1 January
6,856
6,856
Weighted average number of ordinary shares at 31 December
6,856
6,856
NOTE 12:- EMPLOYEE SHARE OPTION PLAN
Number
of options
Number of
options
2021
2020
Outstanding at the beginning of the year
235,520
235,520
Share options expired during the year
(195,550)
-
Outstanding at the end of the year
39,970
235,520
Exercisable at the end of the year
39,9700
235,5200
During 2021 and 2020 there were no employee costs for the share options granted.
NOTE 13:- ADMINISTRATIVE EXPENSES
Year ended
December 31
2021
2020
Salaries and related expenses
435
474
Professional services (1)
770
573
Offices and office rent
20
32
Travelling and accommodation
2
3
Others
16
18
Total
1,243
1,100
(1) Expenses include one-time payment of approximately EUR 222 thousand for directors and
officers liability – runoff policy.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 48 - -
NOTE 14:- FINANCE INCOME AND FINANCE COSTS
Year ended
December 31
2021
2020
Recognized in profit or loss
Foreign currency gain on bonds (including inflation)
-
2,096
Finance income
-
2,096
Interest expense on bonds
(9,612)
(10,155)
Foreign currency losses on bonds (including inflation)
(14,600)
-
Other finance expenses
(26)
(21)
Finance costs
(24,238)
(10,176)
Net finance costs
(24,238)
(8,080)
NOTE 15:- FINANCIAL INSTRUMENTS
Financial Risk Management:
Overview
The Group has exposure to the following risks from its use of financial instruments:
• Credit risk
• Liquidity risk
• Market risk
This Note presents information about the Group's exposure to each of the above risks, the Group's
objectives, policies and processes for measuring and managing risk, and the Group's management
of capital.
The Board of Directors has established a continuous process for identifying and managing the
risks faced by the Group (on a consolidated basis), and confirms that it is responsible to take
appropriate actions to address any weaknesses identified.
The Group's risk management policies are established to identify and analyse the risks faced by
the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits.
Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and the Group's activities.
The Company's Audit Committee oversees how management monitors compliance with the
Group's risk management policies and procedures and reviews the adequacy of the risk
management framework in relation to the risks faced by the Group.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 49 - -
NOTE 15:- FINANCIAL INSTRUMENTS (Cont.)
a. Credit risk:
Credit risk is the risk of financial loss to the Group if a counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Group's
financial instruments held in banks and from other receivables.
Management had a credit policy in place and the exposure to credit risk is monitored on an
ongoing basis.
Cash and deposits and other financial assets
The Group limits its exposure to credit risk in respect to cash and deposits, by investing
mostly in deposits and other financial instruments with counterparties that have a credit
rating of at least investment grade from international rating agencies. Given these credit
ratings, management does not expect any counterparty to fail to meet its obligations.
b. Liquidity risk:
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as
they fall due. For detailed information refer to Note 1(b).
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated
interest payments and excluding the impact of netting agreements:
December 31, 2021
Non-derivative
financial
liabilities
Carrying
amount
Contractual
cash flow
6 months or
less
6-12
months (*)
Bonds issued (*)
(121,692)
(126,870)
-
(126,870)
Trade and other
payables
(202)
(202)
(202)
-
121,894
(127,072)
(202)
(127,072)
December 31, 2020
Non-derivative
financial
liabilities
Carrying
amount
Contractual
cash flow
6
months
or less
6-12
months
(*)
Bonds issued (*)
(97,821)
(101,982)
-
(101,982)
Trade and
other payables
(147)
(147)
(147)
-
97,968
(102,129)
(147)
(101,982)
(*) Refer to Note 8.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 50 - -
NOTE 15:- FINANCIAL INSTRUMENTS (Cont.)
c. Market risk:
Currency risk:
Currency risk is the risk that the Group will incur significant fluctuations in its profit or
loss as a result of utilizing currencies other than the functional currency of the respective
Group Company.
The Group is exposed to currency risk mainly on borrowings (Bonds issued in Israel) that
are denominated in NIS.
The following exchange rate of EUR/NIS applied during the year:
Reporting date
Average rate
Spot rate
EUR
2021
2020
2021
2020
NIS 1
0,262
0,255
0,284
0,254
NIS denominated bonds – a change of 5 percent in EUR/NIS rates at the reporting date
would increase/decrease loss by EUR 5 million, as a result of having issued NIS linked
Bonds.
This effect assumes that all other variables, in particular CPI index, remain constant.
Interest Rate Risk (including inflation):
The Group's interest rate risk arises mainly from Bonds issued at fixed interest rate expose
the Group to changes in fair value, if the interest is changing. As the Israeli inflation risk is
diminishing to a level that management believes is acceptable (Israeli CPI 2021 – 1.49%;
2020 – (0.6%)) and due to liquidity constraints, the Company has stopped using hedging
of CPI in recent years.
Sensitivity analysis - effect of changes in Israeli CPI on carrying amount of NIS bonds
A change of 3 percent in Israeli Consumer Price Index ("CPI") at the reporting date (and in
2020) would have increased (decreased) profit or loss by the amounts shown below. This
analysis assumes that all other variables, in particular foreign currency rates, remain
constant.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 51 - -
NOTE 15:- FINANCIAL INSTRUMENTS (Cont.)
Profit (loss) effect
For the year ended
December 31,
Carrying amount
of bonds
CPI increase
effect
CPI
decrease effect
2021
99,999
(3,000)
3,000
2020
87,137
(2,614)
2,614
Shareholders' equity management:
Refer to Note 10 in respect of shareholders equity components in the restructuring plan
including dividend policy. The Company's Board of Directors is updated on any possible
equity issuance, in order to assure (among other things) that any changes in the shareholders
equity (due to issuance of shares, options or any other equity instrument) is to the benefit
of both the Company's bondholders and shareholders.
Fair values:
The table below is a comparison between the carrying amount and fair value of the
Company's financial instruments that are presented in the financial statements not at fair
value:
Carrying amount
Fair value (*)
2021
2020
2021
2020
Bonds A at amortized cost - Israeli
bonds
41,275
35,996
6,025
5,887
Bonds B at amortized cost - Israeli
bonds
58,724
51,171
8,849
7,086
(*) The fair value is based on Level 1 in fair value hierarchy and measured based on
market quote.
Management believes that the carrying amount of cash, receivables and trade payables
approximate their fair value due to the short-term maturities of these instruments.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 52 - -
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS
a. Contingent liabilities and commitments to related parties:
1. The Company entered into an indemnity agreement with all of the Company's
directors and senior management- the maximum indemnification amount to be
granted by the Company to the directors shall not exceed 25% of the shareholders'
equity of the Company based on the shareholders' equity set forth in the Company's
last consolidated financial statements prior to such payment. No consideration was
paid by the Company in this respect since the agreement was signed.
2. The Company maintains Directors' and Officers' liability cover, presently at the
maximum amount of USD 5 million for a term of 12 months commencing on May
1, 2021. Pursuant to the terms of this policy, all the Directors and Senior Managers
are insured. The new policy does not exclude past public offerings and covers the
risk that may be incurred by the Directors through future public offerings of equity
up to the amount of USD 5 million.
b. Contingent liabilities and commitments to others:
1. As part of the completion of the restructuring plan (refer also to Note 8), the Group
has taken the following commitments and collaterals towards the creditors:
a) Restrictions on issuance of additional bonds - The Company undertakes not to
issue any additional bonds other than as expressly provided for in the
Restructuring Plan.
b) Restrictions on amendments to the terms of the bonds - The Company shall not
be entitled to amend the terms of the bonds, with the exception of purely technical
changes, unless such amendment is approved under the terms of the relevant
series and the applicable law and the Company also obtains the approval of the
holders of all other series of bonds issued by the Company by ordinary majority.
Refer to Note 8 for recent amendments.
c) Coverage Ratio Covenant ("CRC") - the CRC is a fraction calculated based on
known Group valuation reports and consolidated financial information available
at each reporting period. The CRC to be complied with by the Group is 118%
("Minimum CRC") in each reporting period. For December 31, 2021 the
calculated CRC is not in compliance with Minimum CRC (also refer to Note 8(d)
regarding breach of covenant). In the event that the CRC is lower than the
Minimum CRC, then as from the first cut-off date on which a breach of the CRC
has been established and for as long as the breach is continuing, the Company
shall not perform any of the following: (a) a sale, directly or indirectly, of a Real
Estate Asset ("REA") owned by the Company or a subsidiary, with the exception
that it shall be permitted to transfer REA's in performance of an obligation to do
so that was entered into prior to the said cut-off date, (b) investments in new
REA's; or (c) an investment that regards an existing project of the Company or of
a subsidiary, unless it does not exceed a level of 20% of the construction cost of
such project (as approved by the lending bank of these projects) and the certain
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 53 - -
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
loan to cost ratio of the projects are met.
If a breach of the Minimum CRC has occurred and continued throughout a period
comprising two consecutive quarterly reports following the first quarterly/year-
end report on which such breach has been established, then such breach shall
constitute an event of default under the trust deeds, and the Bondholders shall be
entitled to declare that all or a part of their respective (remaining) claims become
immediately due and payable.
d) Minimum Cash Reserve Covenant ("MCRC") - cash reserve of the Company has
to be greater than the amount estimated by the Company's management required
to pay all administrative and general expenses and interest payments to the
bondholders falling due in the following six months, minus sums of proceeds from
transactions that have already been signed (by the Company or a subsidiary) and
closed and to the expectation of the Company's management have a high
probability of being received during the following six months. MCRC is not
maintained as of December 31, 2020 and 2021.
e) Negative Pledge on REA of the Company - The Company undertakes that until
the bonds have been repaid in full, it shall not create any encumbrance on any of
the REA, held, directly or indirectly, by the Company except in the event that the
encumbrance is created over the Company's interests in a subsidiary as additional
security for financial indebtedness ("FI") incurred by such subsidiary which is
secured by encumbrances on assets owned by that subsidiary.
f) Negative Pledge on the REA of Subsidiaries - The subsidiaries shall undertake
that until the bonds have been repaid in full, none of them will create any
encumbrance on any of REA except in the event that:
(i) the subsidiary creates an encumbrance over a REA owned by such
subsidiary exclusively as security for new FI incurred for the purpose
of purchasing, investing in or developing such REA; Notwithstanding
the aforesaid, subsidiaries shall be entitled to create an encumbrance on
land as security for FI incurred for the purpose of investing in and
developing, but not for purchasing, an REA held by a different Group
company (hereinafter: a "Cross Pledge"), provided the total value of the
lands owned by the Group charged with Cross Pledges after the
commencement date of the plan does not exceed EUR 35 million,
calculated on the basis of book value (the "Sum of Cross Pledges").
When calculating the Sum of Cross Pledges, lands that were charged
with Cross Pledges created prior to the commencement date of the plan
or created solely for the purpose of refinancing an existing FI shall be
excluded. The Group did not have cross-pledge as of December 31,
2021.
(ii) The encumbrance is created over an asset as security for new FI that
replaces existing FI and such asset was already encumbered prior to the
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 54 - -
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
refinancing. Any excess net cash flow generated from such refinancing,
shall be subject to the mandatory early prepayment of 75%.
The encumbrance is created over interests in a Subsidiary as additional
security for FI incurred by such subsidiary which is secured by
encumbrances on assets owned by that subsidiary as permitted by sub-
section (i) above.
The encumbrance is created as security for new FI that is incurred for
purposes other than the purchase of and/or investment in and
development of a REA, provided that at least 75% of the net cash flow
generated from such new FI is used for mandatory early prepayment.
g) Limitations on incurring new FI by the Company and the subsidiaries - The
Company undertakes not to incur any new FI (including by way of refinancing an
existing FI with new FI) until the outstanding bonds debt (as of November 30,
2014) have been repaid in full, except in any of the following events:
(i) the new FI is incurred for the purpose of investing in the development
of a REA, provided that: (a) the Loan To Cost ("LTC") Ratio of the
investment is not less than 50% (or 40% in special cases); (b) the new
FI is incurred by the subsidiary that owns the REA or, if the FI is
incurred by a different subsidiary, any encumbrance created as security
for such new FI is permitted under the negative pledge stipulation
above; and (c) following such investment the consolidated cash is not
less than the MCRC;
(ii) The new FI is incurred by a subsidiary for the purpose of purchasing a
new REA by such Subsidiary, provided that following such purchase
the cash reserve is not less than the MCRC.
(iii) At least 75% of the net cash flow resulting from the incurrence of new
FI is used for a 75% early prepayment of the bonds. Subject to the terms
of the plan, the Group may also refinance existing FI if this does not
generate net cash flow.
h) No distribution policy - The Company's ability to pay dividend is limited
unless certain conditions are met.
i) 75% mandatory early repayment - Refer to Note 8 and to other sections in this
note regarding changes in increase of repayment to 78%.
2. General commitments and warranties in respect of trading property disposals:
In the framework of the transactions for the sale of the Group's real estate assets, the
Group has provided indemnities which are customary for such transactions to the
respective purchasers.
Such indemnifications are limited in time and amount. No indemnifications were
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 55 - -
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
exercised against the Group till the date of the statement and approval of the financial
position
3. The Company is liable to the buyer of its previously owned shopping centre in the
Czech Republic ("NOVO") - sold in June 2006 - in respect to one of its tenants
("Tesco"). Tesco leased an area within the shopping centre for a period of 30 years,
with an option to extend the lease period for an additional 30 years, in consideration
for EUR 6.9 million which was paid in advance. According to the lease agreement,
the tenant has the right to terminate the lease agreement subject to fulfilment of
certain conditions as stipulated in the agreement.
In case Tesco leaves the mall before expiration of lease period the Company will be
liable to repay the remaining consideration in amount of EUR 1.29 million as of
balance sheet date, unless the buyer finds another tenant that will pay higher annual
lease payment than Tesco. The management does not expect to bear a material loss.
4. Contingent liabilities due to legal proceedings:
The Company is involved in litigation arising in the ordinary course of its business.
Although the final outcome of each of these cases cannot be estimated at this time,
the Company's management believes, that the chances these litigations will result in
any material outflow of resources to settle them is remote, and therefore no provision
or disclosure is required.
5. Lawsuit against entities involved in the sale of U.S. shopping centers in 2011:
In March 2018, a shareholder of the Company (hereinafter: "the Plaintiff") filed a
motion with the Economic Department of the District Court in Tel-Aviv to reveal
and review internal documents of the Company and of Elbit Imaging Ltd.
(hereinafter: "Elbit") (hereinafter: "the Motion"), in which the Court was asked to
instruct the Company and Elbit (hereinafter together: "the Respondents") to provide
the plaintiff with certain documents of the respondents in connection with the Casa
Radio project in Romania and with the sale of the U.S. Shopping Centers in 2011.
In February 2020, an agreement was reached between the Plaintiff and the
Respondents according to which the motion will be dismissed by consent and the
plaintiff and the respondents (hereinafter: "the Parties") will jointly examine the
feasibility of the lawsuit in connection with the above events.
In light of the aforesaid, an agreement was signed between the Plaintiff, the
Respondents and First Libra Israel Ltd. (hereinafter: "Libra") according to which
Libra will finance all the expenses of filing and managing of a new lawsuit by the
Respondents against certain parties (certain officers in the Respondents, a portion of
the heirs of Motti Zisser (the former controlling shareholder of the Respondents and
other parties)) who were involved in the Respondents' transaction for the sale of real
estate in the United States in 2011 and for which funds (brokerage fees) were
allegedly illegally transferred to private companies controlled by the late Mr. Motti
Zisser (hereinafter: "Financing Agreement" and "New Lawsuit", respectively).
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 56 - -
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
The parties to the Financing Agreement agreed, inter alia, that any consideration
received as a result of the New Lawsuit (to the extent received) (hereinafter: "the
Lawsuit Funds") will first be used to reimburse Libra's expenses for the New
Lawsuit (plus interest and VAT) and the balance after deduction of such expenses
(hereinafter: "the Balance of the Lawsuit Funds") will be divided among all those
involved in the New Lawsuit, so that each of the Company and Elbit will be entitled
to circa 20.75% of the Balance of the Lawsuit Funds.
In order to ensure the distribution of the Lawsuit Funds as stated above, both the
Company and Elbit signed lien documents in favor of Libra, the Plaintiff and the
attorneys representing them (hereinafter collectively: "the Eligibles") with respect
to the reimbursement of expenses and their portion in the Lawsuit Funds (hereinafter:
"the Lien").
On October 18, 2020 the parties filed the New Lawsuit (in the amount of circa NIS
60 million (approximately EUR 15 million)).
On February 2, 2021, Ran Shtarkman filied a motion to dismiss the lawsuit against
him in limine. On April 5, 2021, the court rejected the defendant Ran Shtarkman's
motion to dismiss the lawsuit against him in limine. An appeal that was filed to the
Supreme Court in respect of this decision was denied.
On April 4, 2021, one of the defendants, Philip Meyer, filed a motion for dismissal
in limine of the lawsuit against him. On August 10, 2021, the motion was accepted.
On November 14, 2021, the Company and Elbit filed an appeal to the Supreme Court
upon this court decision. A court hearing is schedule on January 4, 2023.
On September 14, 2021, the defendant David Zisser also filed a motion to dismiss in
limine the lawsuit against him. Following the Company’s and Elbit’s motions, on
November 4, 2021, the court ordered that the discussion on the abovementioned
motion will be stayed until a decision of the Supreme Court on the appeal against
Philip Meyer.
6. For details on the notice which were issued to a local investor in the Bangalore
project – India and on the Environmental status of the property in the project
please refer to Note 6(b)(1).
7. Dutch statutory auditor:
As described in Note 2(a) these consolidated financial statements are not intended
for statutory filing purposes. The Company is required to file consolidated financial
statements prepared in accordance with The Netherlands Civil Code. During 2019
the Company has been informed by the audit firm, Baker Tilly (Netherlands) N.V.,
that they would cancel their license to audit public interest entities (such as the
Company) and that, as a consequence, they are not in the position to provide the
Company with their audit services for the 2019 statutory annual accounts. As a listed
company, the Company needs to engage a Dutch audit firm that is licensed to
perform audits for public interest entities. The choice for such firms in the
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 57 - -
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
Netherlands is very limited as only six firms have the appropriate license.
Despite extensive effort of the Company to find a new Dutch auditor, none of those
six firms has been found prepared to accept the Company as their client. The
Company approached in writing the Dutch Ministry of Finance, The Royal Dutch
Institute of Chartered Accountants, the Authority for the Financial Markets to
indicate the severe adverse consequences the Company would suffer if this problem
will not be solved but none of those authorities has been able to find the solution.
The Royal Dutch Institute of Chartered Accountants has put considerable effort in
helping the Company by approaching audit firms and assessing their procedures for
client acceptance but has no legal possibilities at its disposal to force audit firms to
accept a specific client. This leaves the Company in the awkward position of not
being able to meet its obligations regarding the statutory audit.
The Company has proposed to the authorities various alternative solutions to get the
annual accounts of 2019 audited. It appeared that none of those are legally feasible
and none of the addressees came up with any alternatives. It is now time to emphasize
that the Company exhausted its sources to comply with the requirements of
mandatory Dutch law.
Due to the above and in order to avoid an outright violation of applicable stock
exchange regulations, the Company decided to engage EY Israel to audit its IFRS
consolidated annual accounts and to issue an auditor statement on that. The Company
submitted the annual consolidated financial statements as of December 31, 2019 and
as of December 31, 2020 which were filed to the London Stock Exchange, the
Warsaw Stock Exchange and the Tel Aviv Stock Exchange, to the Authority for the
Financial Markets and to other relevant Dutch authorities.
As of the date of approval of these consolidated financial statements the Company
still didn’t find any solution to get the annual accounts of 2019, 2020 and 2021
audited therefore, it will submit the annual consolidated financial statements as of
December 31, 2021 that were filed to the London Stock Exchange, the Warsaw Stock
Exchange and the Tel Aviv Stock Exchange, to the Authority for the Financial
Markets and to any other relevant Dutch authorities.
NOTE 17:- RELATED PARTY TRANSACTIONS
Related party transactions
Transactions between the Company and its subsidiaries have been eliminated on consolidation
and are not disclosed in this note. Details of transactions between the Group and other related
parties are disclosed below.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 58 - -
NOTE 17:- RELATED PARTY TRANSACTIONS (Cont.)
During the year, Group entities had the following trading transactions with related parties that are
not members of the Group:
Year ended
December 31,
2021
2020
Costs and expenses
Recharges – Elbit Imaging Ltd.
13
29
Compensation to key management personnel
170
174
Performance linked benefits - management
-
28
Compensation to board members (1)
224
230
The amounts disclosed in the table are the amounts recognised as an expense during the reporting
period related to key management personnel.
(1) 2021 – two board members; 2020 - two board members.
On March 23, 2020 Mr. David Dekel was appointed as the non-executive Chairman of the Board
of Directors.
Year ended
December 31,
2021
2020
Other liabilities
Elbit Imaging Ltd
26
13
Due amounts to directors and key management personnel
44
19
As of December 31, 2021, the Company identified Davidson Kempner Capital Management LLC
("DK") among the Company's related parties.
DK holds 26.3% of the Company's outstanding shares of the Company as of the reporting date,
following the finalization of the Restructuring plan. DK has no outstanding balance as of the
reporting date with any of the Group companies.
Update regarding a change in Elbit Imaging Ltd holdings
Since August 5, 2020 and up to last announcement Elbit Imaging sold about 1,670 thousand shares
of the Company for a total consideration of approximately NIS 1,683, thus, Elbit Imaging
holdings in the Company have diminished from 44.9% to 20.55% of the Company's issued and
paid-up capital. After the reporting date, out of the above, Elbit Imaging sold about 77 thousand
shares of the Company for a total consideration of approximately NIS 150 thousand, thus, Elbit
Imaging holdings in the Company have diminished by 2.67%.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
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NOTE 18:- DISCLOSURE OF MATERIAL EVENTS DURING AND AFTER THE REPORTING
PERIOD
a. For details regarding a change in Elbit Imaging Ltd holdings refer to note 17.
b. Update regarding an Engagement letter with a law firm in London in connection with the
legal proceedings in the “Casa Radio” project
On January 14, 2022 the Company announced, that further to the Company's bondholders
meeting dated November 25, 2021 and the Company's bondholders' approval to initiate
legal procedures in connection with the "Casa Radio" project (the "Project"); that on
January 13, 2022, the Company signed an engagement letter with a law firm in London in
order to take any relevant actions in connections with the Project.
For details in connection with the legal proceedings in the “Casa Radio” project please refer
to Note 5.
c. Update regarding the issuance of a notice of dispute and acceptance of offer and consent to
arbitrate to Romania with respect to the “Casa Radio” project
On February 15, 2022 the Company announced, further to the Company's bondholders
meeting dated November 25, 2021 and the Company's bondholders' approval to initiate
legal procedures in connection with the "Casa Radio" project (the "Project"); that on
January 13, 2022, the Company signed an engagement letter with a law firm in London in
order to take any relevant actions in connections with the Project.
For details in connection with the legal proceedings in the “Casa Radio” project please refer
to Note 5.
d. Update regarding proposal the Company received
In the period since July 9, 2021 till August 10, 2021, the Company received proposals from
G.C. Hevron Capital Ltd (“Hevron Capital”) based on which the Company's assets will be
transferred to a trustee and/or will be managed exclusively for the benefit of the
bondholders, in order to create a mechanism according to which the bondholders will
exclusively benefit from any expected income from the existing assets.
On July 21, 2021 the Company received additional proposal from L.I.A. Pure Capital Ltd.
to purchase shares of the Company, as a publicly-traded shell company.
On July 30, 2021 the Company received additional proposal from Zero One Capital Ltd to
preserve the Company’s existing assets in favor of the Company's bondholders and other
interested persons and simultaneously to enable to flow new activity.
All proposals were discussed on bondholders meeting which was held on August 1, 2021.
Following this bondholders meeting, an additional bondholders meeting was held on
August 11, 2021, in which the bondholders decided to approve that the Company's Board
of Directors can conduct a negotiation with G.C. Hevron Capital Ltd regarding the sale of
the Company's public structure and to grant a no shop for a period of 60 days during which
due diligence will be carried out by G.C. Hevron Capital Ltd and its advisor.
PLAZA CENTERS N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IN ‘000 EUR
- - 60 - -
NOTE 18:- DISCLOSURE OF MATERIAL EVENTS DURING AND AFTER THE REPORTING
PERIOD (Cont.)
On October 4th, 2021 the Company received a request from G.C Hevron Capital Ltd. to
extend the "NO-SHOP" period, as Hevron Capital and its attorneys might not succeed to
submit the agreement within the designated time schedules, due to the holiday’s period and
the complexity of the transaction.
The Company's Board of Directors has discussed Hevron Capital's request, as stated above,
and decided to approve an extension of the "NO-SHOP" period by an additional 30 days,
until November 12, 2021.
On March 30, 2022 the company announced that Hevron Capital submitted to the Company
a request to extend the No-Shop period, due to the complexity and the vast amount of data
that needs to be procced in order to evaluate the proposed settlement (“Hevron Capital’
Request”).Following the above, the Company's Board of Directors approves Hevron
Capital’s Request to extend the "No-Shop" period until May 20, 2022 subject to the
approval of the Company’s bondholders’.
NOTE 19:- LIST OF GROUP ENTITIES
As of December 31, 2021, the Company owns the following companies (all are 100% held
subsidiaries at the end of the reporting period presented unless otherwise indicated):
ACTIVITY
REMARKS
ROMANIA
Indirectly or jointly owned
Dambovita Center S.R.L.
Mixed-use project
75% held by Dambovita Centers Holding B.V.
Casa Radio project
THE NETHERLANDS
Directly wholly owned
Plaza Dambovita Complex B.V.
Holding company
Plaza Centers Enterprises B.V.
Finance company
100% held by Plaza Dambovita Complex B.V.
Mulan B.V. (Fantasy Park Enterprises B.V.)
Holding company
Holds Fantasy Park subsidiaries in CEE
Plaza Centers Management B.V.
Holding company
Dambovita Centers Holding B.V.
Holding company
100% held by Plaza Centers N.V.
Plaza Bas B.V.
Holding company
50.1% held by Plaza Centers N.V.
CYPRUS – INDIA
Indirectly or jointly owned
Elbit Plaza India Real Estate Holdings Ltd.
Holding company
Equity accounted investee
47.5% held by Plaza Centers N.V.
Polyvendo Ltd.
Holding company
100% held by Elbit Plaza India Real Estate Holdings
Ltd.
Elbit Plaza India Management Services Pvt. Ltd.
Management company
99.99% held by Polyvendo Ltd.
Vilmadoro Ltd.
Holding company
100% held by Elbit Plaza India Real Estate Holdings
Ltd.
Aayas Trade Services Pvt. Ltd.
Mixed-use project
99.9% held by Elbit Plaza India Real Estate Holdings
Ltd.
Bangalore project
ENTITIES DISPOSED OR DISSOLVED IN 2021
ACTIVITY
REMARKS
POLAND
EDP Sp. z o.o.
Inactive
Company dissolved 01/2021
CYPRUS – INDIA
Kadavanthra Builders Pvt. Ltd.
Mixed-use project
Company sold 06/2021
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