EPH Third Quarter 2011 Trading Update

Eastern Property Holdings Limited (EPH) /
EPH Third Quarter 2011 Trading Update
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The issuer is solely responsible for the content of this announcement. 

KEY EVENTS

  * Completed final stage of 90% sale of Berlin House and Geneva House

  * Cash proceeds from sale employed as foreseen

      * $21 million used to pay $5/share dividend
      * Investment in development projects
      * Debt reduced

  * Rights to Arbat 1 and Arbat 2 projects have been extended to June 2014,
    allowing ample time to complete the projects and significantly lowering
    their risk profile

  * Works progressing well on Arbat 1 project. Expect to complete 50% of
    concrete work by end-2011 and 100% in 2Q12

  * Turgenevskaya Parking completed and ready for opening immediately upon
    receipt of exploitation permit

  * Though little changed at 30 September, leases signed at Petrovsky Fort in
    October reduced the vacancy rate from the mid-year level of approximately
    24% to 18%, the lowest level since mid-2009

  * Analyst day in October introduced Moscow-based real estate sector equity
    analysts to EPH's assets and management

  * Ruble/dollar exchange rate continues to be volatile. Profits/losses
    generated by changed ruble value of dollar-valued assets likely to, again,
    be a factor at year-end

Significant financial events and changes for Q3 2011 are as follows (unaudited
results):

Income

  * Rental Income
    The sale of 90% stakes in Berlin House and Geneva House reduces the net
    rental income line of our income statement from an annualized amount of
    approximately $13.6 million - based on 1H 2011 results - to approximately
    $4.7 million. As 10% owner of Berlin House and Geneva House, we continue to
    benefit from our pro-rata share of net rents from the two properties, but as
    the 10% stakes are treated as Investments in Associates, and no longer
    consolidated, rental income from the properties will no longer be included
    in the Rental Income line of our financial statements.

  * Interest Income
    Interest of $1.4 million earned in Q3 alone was not far from $1.6 million
    earned in the first six months of the year. The accelerating growth of
    interest income in Q3 is due to increase of Arbat and Inkonika projects
    financing plus recognition of interest income from Connecta and EPH Real
    Estate, which were eliminated as internal debt in previous periods.

    Our significant cash balance is currently being retained until alternate
    financing is secured to ensure completion of the Arbat projects without
    interruption. In order to generate a reasonable return on our cash holdings
    without risk to principal, we have bought liquid, relatively short duration
    individual dollar or ruble-denominated bonds from investment grade European
    or Russian issuers.

    In future periods, interest income can be expected to be dramatically higher
    due to increased financing of the Arbat projects and investment of cash
    balances in debt instruments.

Expenses

  * Management Fees
    Management fees are based on our Net Asset Value (NAV). $1.4 million was
    accrued in management fees for the third quarter based on the NAV at 30
    June. The $21 million dividend paid on 21 September had little impact on the
    average NAV for Q3, but will result in still lower management fees in Q4.

  * Professional and Administration Fees
    Fees of almost $1.4 million in Q3 were higher than $1.2 million recognized
    for the first 6 months of the year, with the increase primarily due to legal
    expenses incurred in the first nine months of the year but invoiced and
    settled in Q3.

  * Finance costs
    As 100% owner of Berlin House and Geneva House, we also had approximately
    $77 million of bank debt secured by the properties. After the sale of 90%
    interests in both, the $40 million loan collateralized by Geneva House was
    paid off. Our 10% share of the $37 million Berlin House loan is no longer
    included in bank debt on our balance sheet, but is used in the calculation
    of the net carrying value of Berlin House, reflected as an Investment in
    Associates.

Changes in Financial Position

  * Loans and Receivables (long term)
    Increase of $6.3 million in Q3 as cash was used to finance the Arbat and
    Turgenevskaya Parking projects.

  * Investment in associates held for sale
    Reduced from $9.0 million at mid-year to zero due to sale of the additional
    10% stakes in the second stage of the Berlin House/Geneva House 90% sales.

  * Accounts receivable
    Accounts receivable were reduced from $29.2 million at mid-year to $6.1
    million on 30 September. This was primarily due to receipt of payment for
    the first stage of the Berlin House sale which was pending on 30 June.

  * Loans and receivables (short term)
    Short term loans and receivables, meaning those due within 12 months,
    decreased by $5.7 million. This is primarily because loans to Berlin and
    Geneva Houses have been effectively repaid by the new owner as part of the
    sale of the 10% interests.

  * Cash and Cash Equivalents
    At 30 September we had $79 million of cash. While this is just $4.1 million
    less than the $83.3 million held at mid-year, actual cash inflows and
    outflows were much more significant. Key movements were:


      * $37 million, net of deal expenses (primarily broker and legal fees) was
        received from first and second stages of the Berlin House/Geneva House
        transactions, in which 80% and 10% stakes were sold to a single buyer
      * $21 million was paid to shareholders in the form of a $5/share dividend
      * $9 million was used for debt reduction
      * $7 million was used to finance construction
      * Other uses included operating expenses and first debt instrument
        investments


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                        CONFERENCE CALL WITH MANAGEMENT

Please join the quarterly call with management today, Tuesday, 29 November 2011
                                at 17:30 (CET).

 The presentation for the call is available at www.easternpropertyholdings.com

                           Dial in: [phone]
                              Access Code: 691923

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Eastern Property Holdings Ltd. is an SIX Swiss Exchange-listed real estate
development and investment company focusing on Russia. The company holds
interests in office, residential, retail and parking properties and
developments, principally in Moscow and St. Petersburg. EPH is managed by
Valartis International Ltd. a wholly-owned subsidiary of Valartis Group AG.
Additional information on Eastern Property Holdings is available by contacting
Terry Olin, Tel: [phone].


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Eastern Property Holdings Limited (EPH)
Valartis Asset Management SA/Case Postale 3458 Geneva Switzerland

WKN: 250817;ISIN: VGG290991014;

Media release including key figures (PDF): 


http://hugin.info/139905/R/1567189/486788.pdf




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