Carpathian was holding 75% interest in the company that opened today Atrium Center mall (photo) in Arad, which represented an investment of over €70 million. The remaining 25% shares were held by Bogol Management. Under this partnership, the property investor would have developed four other shopping centers, in Cluj-Napoca, Satu-Mare and Baia Mare. However, Carpathian has agreed to divest its share in Arad and Cluj-Napoca projects.

Glarstyle Limited, which is owned by certain key managers with Carpathian’s development partners, has acquired the 75% stake held by Carpathian in Atrium Center in Arad. Arcadom, the development’s main contractor will join as 50% shareholder of Arad project. Arcadom had to receive around €44 million after the construction of Atrium Center, under the provisions of the contract.

“Arad presently has €39.8 million of debt with a further €19.4 million likely to be drawn down prior to completion of the project, resulting in potential total debt of €59.2 million. The Company believes the net operating income for the project on opening will not exceed €3 million per year. Therefore, the directors do not consider there to be any realistic chance of realisable equity value in the short to medium term”, Carpathian said in a release.

Carpathian will also divest its 75% interest in Cluj project. Glarstyle will also be the buyer of the project. The Cluj property is a vacant site with €8.5 million of debt presently drawn.

“The Romanian property market is still fragile, with limited liquidity and consequently, MKB, the only lending bank to Arad and Cluj, required a solution outside the Company's ownership. In this regard, MKB wanted the existing project manager to continue to manage construction and pre-letting without forcing foreclosure”, the fund said.

Atrium Centers Arad has a gross leasable area of 30,000sqm and was opened today. The shopping center is 92% leased. The land was acquired in September 2007 for €11.8 million.