Банкеръ Weekly



The future mayor of Sofia will not only be the fourth most powerful person in Bulgaria, but also the one to manage considerabel assets, to be more specific - about 7% of the domestic firms' real estates. According to the National Statistics Institte (NSI), the enterprises (excluding the financial institutions) possess buildings and land plots worth a total of BGN8.6BN, and all their long-term assets amount to BGN24BN.The real estates alonewhich are managed directly by the Sofia Municipality (accoding to documents) are worth BGN639.6MN. At least, that was the situation in end-2002, but not all its immovable property was inlcuded in the accounting registers. According to the report of the Accounting Office, the Sofia Municipality holds 10,351 non-housing real estates, but does not possess notary deeds for 1,100 of them. The situation is worst in Novi Iskar, where 61% of the municipality's plots have not been entered in the registers. A large part of the plots in the quarters of Krasno Selo, Ovcha Koupel and Poduyane, do not have notary deeds either. For another 1,339 real estates there are notary deeds, but their value has not been calculated. In other words, these plots are not included in the Sofia Municipality's property. There is another problem in Krasna Polyana. Plots that have been sold or transfered to Sofia Real Estates EADare entered as municipal. In fact that company held assets of BGN50MN in end-2002 (no more recent information is available). Real estates, including uncompleted construction, account for more than BGN38MN of these assets. The company was established in September 1995. Then shops, land plots and other assets, worth BGL2BN (about USD30MN), were trasferred to it in order to be managed. Initially, Sofia Real Estates was not entitled to sell and the Municipal Privatisation Agency was effecting sale deals. However, ways to get around the ban were found soon. Now, the company is considered to be the main sphere of influence of the Sofia Municipal Council (unlike Municipal Bank, which is controlled by the Mayor). Angry with the reluctance of the municipal councillors to permit the mortgaging of certain real estates as a guarantee to a loan of the municipality, last year the Sofia Mayor threatened to demand an inspection of Sofia Real Estates. However, this conflict seems to have been settled. Sofia Real Estates participates in several other firms with a similar subject of activcity. For example, it holds 50% in Digesta SIP (with assets of BGN4.35MN), Artemida BSI, the Sofia Company for Construction and Development, and Astrima. Sofia Real Estates is a 100% owner of Labelo EOOD as well. It is not only an exception from the scheme of joint-ventures, but is remarkable by the fact that in 2001 the municipal company bought it out from private owners: Boyan Mariyanov, Petar Iskrov, and two off-shore companies. Earlier, in 1999, it privatized 80% of the Sofia-based Zavodproect against BGN750,000. A few months ago the municipal councillors voted that Labelo EOOD should undertake the management of some assets of Sofia Real Estates.Anothercurious companywhich is entirely owned by the municipality is Galateya 2002. It was set up in end-2002 with the intention to manage school youth camps. But due to legal problems not all holiday facilities were transferred to it (the Sofia Municipality is said to have some 30 holiday sites). Meanwhile, Galateya was entitled by the Municipal Council to sell attractive plots of land in Sofia.Iris 2000 EAD, based in the Darvenitsa housing complex in Sofia, rents real estates and is also engaged in planting. Its capital has dropped two-fold since 1999 as a result of writing off assests. Nevertheless, the company reported a modest profit of BGN25,000 for 2001. In 2002 Iris 2000, whose long-term assets dropped to BGN1MN, was slated for privatisation. Sports Sofia 2000 EAD and Planting EAD have different profiles at first sight. The former manages sports facilities and the latter should be maintaining the green areas and the Vitosha mountain park. However, it turned out that the sports company was running parking lots and gardens, while Planting EAD played a more modest role. In 2001 Sports Sofia had long-term assets of BGN1.2MN, but in the spring of 2003 the capital was increased by BGN2.5MN, which means that the respective property might has been transferred to company. After the parking lots were mentioned, we cannot skip the two Sofia-based twin firms - Parking Lots and Garages EAD and Parking and Garages AD. The latter split from the former in 1998 and was privatized in 2002. The price for 75% of its capital was BGN5.75MN, and BGN300,000 was paid afterwards for the residual 13% share. After the sale the financial results of the twins' became uncomparable. Parking Lots and Garages EAD has long-term assets worth BGN1.9MN in 2001, proceeds of BGN3.3MN, and on that background - an extremely high profit of BGN735,000 after payment of due taxes. The privatized company's assets in 2001 exceeded BGN4MN and it posted a profit of BGN264,000. Egidais among the most well-known cash-boxes of the Sofia Municipality. The security company also manages subways in the capital city, which makes it one of the big players on the market of trade establishments in Sofia. Nevertheless, company insiders claim that the proceeds from the shops in the 54 subways in the capital are negligible and do not even cover the maintenance costs. However, three months ago the 3-year contract for managing the trade establishments was extended by another seven years. A little later, in August, a decision was taken that the shops should be written off as ownership of the municipality and transferred to Egida. It is expected to undertake also the establishments in the subway in front of the Central Railway Station, which is presently under construction.In addition, Egida and Sofia Real Estates hold the rights on a large number of billboards, the proceeds from which amounted to USD1MN in 2002. At end-2001, before the trade establishments were transferred to Egida, the company's assets totalled BGN10.7MN (including intangible assets of BGN4MN). Its proceeds for 2001 amounted to BGN11.7MN, and its profit was only BGN3,000.As a wholethe Sofia Municipality's shares in the 107 companiesin which it participates amount to BGN213MN (net value). But practically, this property is greater. Metropoliten AED, for example, has equity capital of BGN12.5MN and long-term assets of BGN146MN. The case, regarding the three companies for city transport s even more indicative. The equity capital of SKGT Autotransport is only BGN623,000, while its long-term assets amount to BGN58MN. The Central Heating Utility is an exception - its share capital is BGN107MN and its long-term assets total BGN119MN. The company posted a loss of BGN12MN for 2002. It is widely known that it is difficult to establish from the accounting reports the exact value of the property which the Sofia Municipality has entrusted to municipal companies. However, it could be concluded that their assets, together with the direct municipal property exceed BGN1BN. Sofia's regional mayors have extended the contracts for rental of their real estates without inviting new tenders or competitions, an inspection of the Accounting Office has established. The legally stipulated maximum term for rental is three years. 6,377 contracts for renting municipal non-housing real estates were closed in 2002. Most of them were signed by the regional mayor. The Sofia Mayor Stefan Sofiyansky closed only 611 contracts for rental - most of them for ads (billboards), buildings and parks. Overdue payment under rental contracts exceeded BGN2MN in 2002.

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