Pressemitteilung BoxID: 373549 (DEMIRE Deutsche Mittelstand Real Estate AG)
  • DEMIRE Deutsche Mittelstand Real Estate AG
  • Lyoner Straße 32
  • 60528 Frankfurt/Main
  • Ansprechpartner
  • Mag. (FH) Michaela Haider
  • +49 (69) 71918979-0

Massive tax burden may arise in Turkey

(PresseBox) (Frankfurt am Main, ) MAGNAT reported yesterday that the Turkish tax authorities are demanding EUR 27m from a Turkish project company (Istanbul) in which MAGNAT owns a stake of 33.3% through the YKB project. The other two partners are Adama Holding (33.3%) and Immofinanz AG (33.3%). This represents a potential decrease of future cash flows of EUR 9m per partner. In the opinion of the Turkish tax authorities, the disposals made in form of share deals in the past actually have to be seen as asset deals. As a consequence a higher amount of taxes should have been paid on the profit of these disposals. The tax authorities have placed liens on the assets of the project company to secure the tax claim.

MAGNAT, the project partners, the local management as well as the local legal and tax consultants share the view that the project company is in full compliance with the tax rules and that the opinion of the tax authorities is not. Furthermore, they view the demanded amount as exaggerated. According to MAGNAT, the overall value of the assets in the project company is significantly higher than the claim. Therefore MAGNAT does not see any reason to write off the interest in the YKB portfolio of EUR 5.5m at present. The project company will take every possible legal countermeasure against the claim of the tax authorities.

Although MAGNAT is very confident that the tax authority claim will be rejected it is difficult for us to assess the outcome of this issue. A) Turkey is not a constitutional state like Germany and we do not know whether the project company or one of its partners has frictions with a relevant Turkish party. B) The legal dispute could last up to two years until a conclusion. Good news on this: according to MAGNAT until then no payment has to be made. A payment of EUR 9m would significantly lower the future cash flows for MAGNAT from the YKB portfolio.

The financials of the company will continue to be difficult to forecast as currency fluctuations and valuation gains and losses will go on to influence the financials beside political and legal challenges in the CEE, SEE, CIS countries as we can see in this case. Based on a scenario of moderate growth in the CEE, SEE, CIS countries and the confident view of MAGNAT regarding the tax issue, we maintain our BUY recommendation with a price target of EUR 4.00 per share and leave our earnings estimates unchanged.