Buildings in the former Eastern Bloc may be evocative of concrete paving slabs, but one Alternative Investment Market-listed investor thinks there's gold in property in the region, and has become "Romania's shopping mall king". Argo Real Estate Opportunities (Areo), which focuses on emerging markets, has secured the acquisition of two shopping malls in Romania this month, in the cities of Iasi and Oradea, and the group's buying spree is unlikely to end there.
The latest deals give it four shopping centres in Romania and one in Ukraine – leading one Romanian newspaper to give it the regal title.
The business generates €25m (£21.8m) in annual gross rental income and the buildings have attracted tenants includingCarrefour, Real Hypermarket, Decathlon and the German DIY retailer Praktiker.
Areo, 72 per cent owned by the hedge fund Argo Capital Management and based in Guernsey, is betting on the long-expected growth of disposable income and consumer spending power in eastern Europe. This, according to Philip Morrish of Growth Equities & Company Research, is a bet that is likely to pay off sooner rather than later.
Eastern Europe suffered badly from the downturn, but Romanian GDP growth is running at 4 per cent compared with 1.6 per cent for the European Union as a whole. The IMF is forecasting a return to long-term growth. Mr Morrish said Romania was the EU's fastest-expanding economy, but that property values had not yet staged a significant recovery. Areo believes this provides a huge opportunity, and last month started the next phase of its plan to become "the dominant developer, owner and operator of international-quality retail parks and shopping centres in Romania and the region".
Shore Capital also highlights Areo as an investment opportunity, pointing to attractive assets and high occupancy rates. It says the shares trade at a significant discount to net asset value and "offer outstanding value in our view".
Charter forced to confront critics
Charter European Trust faces an extraordinary general meeting with an activist investor calling for it to scrap provisions in a saving scheme that it says make a mockery of shareholder democracy.
Midas Investment Management says the arrangements in place between the investment trust and Alliance Trust Savings Scheme allow the shares held by small savers in the scheme to be "rolled up" and voted as a block.
A similar arrangement had been the subject of controversy with Alliance Trust itself, and was ultimately abandoned earlier this year. The EGM has been requisitioned by Manchester & Metropolitan Investment, whose shareholding in Charter European is managed by Midas and is part of the 24.75 per cent stake Midas has rapidly built up in the trust.
Midas has been calling for change at Charter, arguing that it has been performing poorly and that it is too expensive. It also says there are too many directors on the payroll – five instead of "the usual three or four" for trusts of its size, and that four of them have been there for too long. The trust is a small one, capitalised at £43m, and has already had one reconstruction, at the beginning of the decade. However, Charter points out that over the longer term it has beaten its performance benchmark, returning 91 per cent against 75.4 per cent since the 2002 reconstruction.
It said it planned to write to shareholders "as soon as possible" regarding the trust's future and that it had tried to meet with Midas but was rebuffed.
Midas has yet to disclose its long-term intentions towards the trust, and Winterflood Investment Trusts said its previous entanglements with the sector had resulted in a variety of outcomes.
The Midas EGM motion would change the savings scheme's voting arrangements so that shares could only be voted if savers who were members requested it. The "scaling up" block voting arrangements would be scrapped. Needless to say, such a move would make it far easier for Midas to push through its preferred plans for the future.
Nautical updates North Sea find
Shares in Nautical Petroleum are likely to jump this morning as the North Sea oil prospector updates the market on its crucial Kraken field test well.
To be commercially viable, the field, which accounts for the bulk of the group's prospects, needs to be able to produce about 2,500 barrels of oil a day – translating to about 80 million barrels of "contingent reserves".
After drilling a 600m horizontal section of the Kraken appraisal well over 40 days, followed by a few days of analysis last week, the Aim-listed Nautical will announce today that the field has a flow rate of 4,500 barrels a day – meaning contingent reserves of about 150 million barrels.
The shares are about five times their level of 18 months ago, but are only about half their peak in March, when Nautical severely disappointed investors with bad news about its key Catcher Field in the central North Sea, in which it has a minority stake. But the world of oil exploration is a roller coaster, especially if you're a minnow pinning your hopes on just one or two areas. Kraken is Nautical's largest asset by some margin, being 70 per cent larger than its next biggest fields, Catcher and Mariner, combined.
Luckily for Nautical, the educated gamble appears to have paid off and its shares are likely to continue their upward trajectory today, after hopes of a positive announcement this week sent them 8 per cent higher on Friday.
Nautical and its partners in the Kraken field now face the task of raising $1bn of cash to invest in the infrastructure they need to extract and distribute the heavy oil the well will yield.
Nautical has a 50 per cent stake in the field, with Celtic Oil and Canamens Energy North Sea holding 30 per cent and 20 per cent, respectively. They will need to attract oil companies with more experience in North Sea drilling and, in return for their investment, analysts expect them to give up a little under half of their stake in the venture.
Nautical's cheery news will add to renewed interest in North Sea oil, coming a week after Apache, a US group that has been buying up assets in the area, added to its offshore portfolio. Apache paid Exxon-Mobil $1.75bn for a group of mature North Sea fields that collectively produce about 19,000 barrels a day.Reuse content