CEE REGION In June Michał Sołowow sealed the disposal of his 41.55 pct stake in Kielce-based developer Echo Investment for PLN 1.114 bln (PLN 6.5 per share), after the European Commission gave the share acquisition its consent under its simplified merger control procedures. The new owner of the largest single stake in the company is Echo BV, a company managed by Griffin Real Estate and co-controlled by Pimco and Oaktree. The transaction was financed by Poland’s largest insurer PZU. However, Michał Sołowow has not sold all his shares in the development group. He still holds 17.9 mln shares in Echo via his subsidiary Synthos Dwory 7, constituting 4.33 pct of the company’s share capital.
In March a subsidiary of PZU – PZU Specjalistyczny Fundusz Inwestycyjny Otwarty Universum – concluded a loan agreement with the companies buying into Echo as well as an order contract for the issue guarantees concluded by PZU. The total value of the liabilities on these contracts must not exceed PLN 1.665 bln. The acquisition of the 41.55 pct stake is being financed from the loan agreement granted by the PZU fund for a period of five years. Meanwhile PZU has undertaken to guarantee the payment of the price in a call for Echo’s shares and the payment of a contractual penalty provided for in an order contract concerning the purchase and sale of Echo’s shares.
When the transaction was finalised the new owners offered to buy up another 24.45 pct of Echo Investment’s shares, i.e. 100,897,904 securities at the price of PLN 6.75 per share. In this way they hope to obtain 66 pct of the developers’ shareholding structure. Subscriptions are to be made between July 14th and July 29th. The expected announcement of the acquisition of these shares on the WSE is August 3rd. If the offer is successful, over PLN 681 mln would have to be paid out for the shares, bringing the total invested by the new owners up to almost PLN 1.8 bln.
Former owner gives not only his word
The new owners of Echo Investment have also secured themselves against the risk related to the construction of the Warsaw skyscraper Q22, which the Griffin-led consortium has acquired due to the takeover. The management board of Echo Investment has revealed the closing of an option and profit sharing agreement between the developer and the seller. FTF Columbus – a subsidiary owned by Michał Sołowow – together with the buyer and Michał Sołowow himself will act as the guarantors – in other words, the developer, under the helm of the new owners, will guarantee to reduce the investment risk related to the construction and commercialisation of the building. Within half a year of obtaining the occupancy permit for the skyscraper, Echo would be able to use the option of selling the building to FTF Columbus. Columbus will be able to choose from a 75 pct share in the hypothetical profit from the property and the right to buy shares in the SPV company (Echo-70), which is building the office tower, at a price calculated on the basis of the property’s value minus the share in the profit. Columbus has also undertaken to help in the financing of the project if it was not possible to obtain this from external sources. The agreement between the main shareholder of Echo Investment (until the latest share acquisition) and his successor also entails the appointment of a specialised entity under the name of TIC Monitor that will deliver monthly reports to Echo Investment and Columbus, forming the basis for establishing payments. The parties have also agreed upon an obligation to pay contractual penalties in the case of the failure or improper execution of mutual obligations. Meanwhile, Michał Sołowow has given Echo Investment a guarantee concerning all the obligations of Columbus and related entities. The guarantee was granted for up to PLN 670 mln and will be valid until December 2022.
Q22 will be a 155m building offering a leasable office area of over 50,000 sqm. The Polish branch of Deloitte, which has leased 11,000 sqm, is the first tenant of the building. The design of Q22 was created by the Kuryłowicz & Associates studio in cooperation with Buro Happold Polska. The completion of the construction of the project is scheduled for Q1 2016. The property will be worth app. PLN 500 mln.
Echo Investment is one of the largest investment and development companies with Polish capital in Central Europe. The company carries out projects in four main sectors of the property market: residential construction, shopping centres, offices and hotels. Since 1996 the company has been listed on the Warsaw Stock Exchange. It has completed over 100 projects in cities across Poland, with a total area of over 1 mln sqm. The company also carries out projects in Romania, Hungary and Ukraine.
