• Fabian Romania Limited (the “Company”), is an AIM listed, experienced and leading investor in the Bucharest and wider Romanian real estate market.

• The Company seeks to generate attractive total returns for its shareholders through a portfolio of income producing buildings, co-development residential, office, logistics and retail projects, with experienced partners and land investments. Fabian receives investment advice from Fabian Capital Limited, an independent investment management firm that specialises in Romanian real estate investment advice (Fabian Capital Limited does not carry out any regulated activities in the UK).

• As at 31 March 2008, the Net Asset Value (“NAV”) per share of the Company as determined in accordance with its Articles of Association was €1.703 (31 December 2007: €1.700) an increase of 0.2 per cent. over the fourth quarter of 2007 and 22.5 per cent. for the comparative  full year  (31 March 2007: €1.390).

• Adjusting the current NAV for the estimated future development profits of €0.522 per share indicates a potential future NAV (“Development Profit NAV” or “DPNAV”) of €2.225 per share (31 December 2007: €2.214) an increase of 0.5 per cent. over the fourth quarter of 2007.

• As at 31 March 2007, the company has now invested or committed €37.5 million, or 98 per cent. of the €38.1 million in net proceeds raised at the time of AIM listing in December 2006.

• Timisoara, the 50 per cent. joint venture residential project, acquired in the second quarter of 2007 to develop 350 apartments with local developer Coltex, has now attained upgraded planning consent for 38,524 square metres, an increase of 3,524 square metres from the expected 35,000 square metres at acquisition.  The building permit application is expected to be submitted to the authorities in the current quarter with construction commencing during this year.

• On 7 March 2008, the Company completed the acquisition of the Romana office development project. The Romana office building plot is located in the centre of Bucharest on Dacia Boulevard close to Romana Square. The building will be built to Class A specifications with a gross area of approximately 3,000 square metres while the net lettable office area will be circa 2,480 square metres over 7 floors, together with 40 car parking spaces. Construction is due to commence in second quarter of this year with practical completion anticipated in the second quarter of 2010.

• The office rental market is continuing to develop strongly. Approximately 90 per cent. of Lakeview, the office joint venture development with AIG/Lincoln has now been either pre-let or is at advanced stages of negotiation. Finalisation of the main construction contract is underway with construction expected to commence next quarter.  Pre-construction works have been underway since the fourth quarter of 2007.

• The New Town residential scheme continues to experience forward sales of its residential units. Sales commenced in July 2007 and to date 270 apartments have now been reserved off plan comprising 85 per cent. of the three sales releases totalling 316 apartments.

• The construction works for Cubic Centre office building are ahead of schedule with anticipated practical completion in the first quarter of 2009.

To the shareholders of Fabian Romania Limited

Fabian Romania Limited, is pleased to announce that its NAV as at 31 March 2008 is €1.703 per share. This represents a rise of 0.2 per cent. from the preceding fourth quarter NAV of €1.700 per share. Year on year, the NAV of the company has risen 22.5 per cent. from €1.390 per share as at 31 March 2007.

The published NAV was calculated according to the Company’s Articles of Association and the results are summarised below:

Future Development Profit of €0.522 per share

Under the Red Book methodology of the Royal Institution of Chartered Surveyors, residual land valuations for development projects provided to Companies such as Fabian Romania Limited exclude the net present value of future development profits. The Directors believe this approach, whilst logical for valuing land plots between buyers and sellers, is not ideal for shareholders in quoted property companies where development is a key component of the company’s activities. In order to provide transparency to our shareholders as to the potential level of such future development profits that may accrue to the Company, DTZ Echinox (“DTZ”) is asked to provide estimates of these development profits. These estimates by their very nature are forecasts relying on future events and accordingly are subject to uncertainty.  Shareholders may then choose to discount these profits to estimate their net present value in today’s terms based on current market conditions.

The forecast development profit figures are stated gross and do not include all costs that may be incurred by Fabian over the course of the projects (in particular transaction fees and any carried interest payable to the investment manager). The implied share of future development profit figures for the New Town and Timisoara residential schemes and the Lakeview, Cubic Centre and Romana Office schemes, based on the Company’s calculations using DTZ’s estimates, is highlighted in the table below:

* Fabian Romania Limited estimates

Adding these forecast development profits of €26.6 million or €0.522 per share to the NAV produces what the Directors have called the DPNAV of €2.225 per share. This represents a rise of 0.5 per cent. over the 31 December 2007 DPNAV of €2.214.

Portfolio Mix

As at 31 March 2008, the portfolio of the Company comprised the following type of investments as a percentage of the net asset value of the Company.

AIM proceeds 98 per cent. invested or committed

As at 31 March 2008, the company has now invested or committed €37.5 million, or 98 per cent. of the €38.1 million in net proceeds raised at the time of its AIM listing in December 2006. The following sums have been either invested or committed for investment during the first quarter. This is in line with the Company’s prudent policy of always ensuring it has the equity available to build out a development project when an acquisition is made.

                                        € million

Cash balance, at 31 December 2007                       23.90

Funds retained in existing joint venture development companies     (2.06)

Lakeview, equity reinvestment prior to construction                      (2.34)

Romana, future equity requirement                      (1.88)

New Town, potential future funding requirement                      (2.75)

Timisoara, future equity requirement                      (6.06)

New acquisitions currently undergoing due diligence, future equity requirement                      (4.18)

Jersey level contingency  (4.00)

Total free cash available for investment    0.63

Total net funds raised at IPO in December 2006                       38.10

Total invested since December 2006                        98%

Percentage of amounts still to be invested       2%

Timisoara new planning achieved

The new planning application (“PUZ”) lodged with the city planning authorities in the fourth quarter of 2007 for the Timisoara land plot was approved in the first quarter of 2008. This grants permission for 38,524 square metres of residential space over ground on a plot of 13,245 square metres. This represents an increase of 3,524 square metres over the previous planning permission obtained.

It is expected that the building permit application will be submitted to the local authorities in the second quarter of 2008. Construction work is planned to commence on site in the fourth quarter of this year.  A firm of UK architects is working together with local architects to develop the concept design. To date, the investment manager has been extremely impressed with the quality of the design ideas produced by the architects engaged.

The total purchase price for all the plots purchased between June and October 2007 amounted to €6.54 million representing a price of €494 per square metres of land or €187 per square metre built above ground. Timisoara is one of the richest cities in Romania, close to the Hungarian boarder with a strong local economy and low unemployment. The city is the centre for many international companies entering Romania preferring a base in the west of the country towards Hungary and the rest of the European Union.

The land value for the company’s 50 per cent. share in the Timisoara scheme given by DTZ at 31 March 2008 was €4.05 million, up 9 per cent. from the 31 December 2007 valuation of €3.7 million or 24 per cent since acquisition. Adding work in progress of €0.75 million, the total value of the Company’s investment stands at €4.8 million. This has been financed by €1.6 million of equity, and a proportionate share of bank debt drawn down from Banca Romanesca of €2.6 million, resulting in a small gain to date of €0.6 million on the Company’s net invested equity.  The Company currently forecasts project completion to be achieved by the end of 2010.

Romana acquisition

On 7 March 2008, the Company completed the acquisition of the Romana office project. The Romana office building will be built for Fabian on a centrally located site on Dacia Boulevard. The building will be built to Class A specifications with a gross area of approximately 3,000 square metres. The project management will be undertaken by Globus, an experienced local developer in Romania. Construction is due to commence in the second quarter of 2008 with completion anticipated in the second quarter of 2010. Upon completion, the building will provide a net lettable office area of around 2,480 square metres over 7 floors, together with 40 car parking spaces. The building is in a prominent position with views over Romana Square and is likely to attract international tenants seeking Class A office space. The Company will pay a total purchase price of €9 million of which €1.3 million has already been paid. Financing for the project has credit approval by the Bank of Cyprus. Upon debt draw down, the Company’s equity requirement is expected to be €1.9 million with debt finance to fund the balance.

The acquisition gives the company further exposure to both a city centre location and the office rental market. On base case rents of €22 per square metre per month, the implied acquisition yield amounts to 9.4 per cent., up from the 8.9 per cent. assumed when the acquisition was first signed in February last year. The continued strength of the Bucharest office market should underpin our current rental assumptions, with achieved rents in the area currently exceeding €22 per square metre per month.

Lakeview building now 90 per cent. pre-let or subject to heads of terms

At the time of writing, 67 per cent. of the building is pre-let to two tenants with a further 23 per cent. subject to heads of terms with a further tenant, all of whom are substantial multi-national corporations. The rentals achieved are in line or just above the investment manager’s expectations for a pre-let building in this location.

Since September 2007, when final building consent was granted for the construction, extensive work has been undertaken by our development partner, AIG/Lincoln, to prepare the site for the start of construction by next quarter. The negotiation of the construction agreement is in its final stages following a tendering process with local and international contractors.

In line with the Company’s policy, valuations take place at the half and full year stages, unless material changes have taken place during the quarter. The valuation of the Lakeview site therefore remains unchanged from the 31 December 2007 valuation of €8.8 million against the purchase price of €5.3 million equating to a 66 per cent. return on equity.  Adding work in progress of €3.1 million to this valuation, the value of the company’s investment stands at €11.9 million.  The development has been financed by €5.3 million of equity and bank debt drawn down from a facility with MKB Bank of €5.6 million.

The forecast gross development value of the scheme, according to DTZ, as at 31 March 2008, also remains unchanged from the 31 December 2007 valuation of €71.8 million. This is based on a core yield of 6.8 per cent. and forecast office rents of €15 per square metre per month. After deducting forecast development costs, DTZ’s forecast implies future development profits for the company amounting to €8.9 million or some €0.18 per share. The Company currently forecasts project completion to be achieved by the end of 2009.

Sales update at New Town

New Town is a scheme of 72,000 square metres above ground involving the construction of 636 apartments targeted at Bucharest’s emerging middle class. The scheme was granted final building consent at the start of April 2007. The joint venture development company, Phoenix Park SRL, in which the company has a 50 per cent. stake has agreed a fixed price build contract with Mivan Kier.

A full sales launch for New Town commenced in mid July 2007 with the first of six sales releases comprising 119 apartments. Two further releases have been made since then. The Directors are pleased to announce that as of the time of writing, 270 apartments in the New Town residential scheme have now been sold. All apartments in the first release, 117 out of 122 in the second release and 34 out of 75 in the third release have been sold. The first release had an average selling price of €1,299 per square metre, the second release had an average selling price of €1,437 per square metre and the third release is currently selling at an average price of €1,586 per square metre (excluding VAT).

The 31 December 2007 site valuation, by DTZ, of €15.6 million for the company’s 50 per cent. share in New Town remains unchanged.  Adding work in progress of €13.0 million to this valuation, but subtracting advances from customers of €4.7 million, the value of the company’s investment stands at €23.9 million. This has been financed by €5.8 million of equity and bank debt drawn down from HVB of €9.4 million. The resultant gain of €8.7 million equates to a 150 per cent. return on the company’s invested equity. The Company currently forecasts project completion to be achieved by the end of 2009.

Income producing buildings: Cascades, Banu Antonache, Baneasa Business Centre and Evo Centre

The Banu Antonache investment has remained constant at €17.7 million in line with the DTZ valuation at 31 December 2007. On the invested equity of €3.4 million, the return on the company’s equity has grown to 162 per cent. since acquisition in December 2005.

DTZ has valued Cascades at €18.51 million compared to the 31 December 2007 valuation of €18.5 million. On the original equity investment in April 2006 of €2.6 million, post debt drawdown, the return on the company’s equity invested in Cascades since acquisition has now grown to 258 per cent..

Baneasa Business Centre has been valued by DTZ as of 31 March 2008 at €29.5 million, unchanged from the valuation as at 31 December 2007.  The directors have included the building at a valuation of €29.0 million to reflect a more cautious approach in the current environment towards buildings that are not recently built, given Baneasa was built in 2001.

Since the acquisition of the Baneasa Business Centre on 29 June 2007, the investment manager has been able to renegotiate existing leases as they came up for renewal and increased the average remaining unexpired lease length to 3.7 years from 1.7 years. Further asset management initiatives are being considered and the investment manager is confident the building will continue to grow in value. Net equity invested by the Company is approximately €4.2 million pre revaluation. With a gain of €5.4 million since acquisition, the Company has achieved a pro forma return on equity invested of 129 per cent. to date.

The Evo Centre, comprising 3,213 square metres of lettable space, was valued at €6.1 million by DTZ on 31 March 2008 representing an uplift of €0.03 million or 0.05 per cent. from the previous valuation of €6.07 on 31 December 2007. The building was acquired from its developers, the Adama Group of Israel on 22 November 2007 for a purchase price of €5.2 million. In December 2007, the Company drew down €3.7 million from Investkredit Bank AG resulting in net equity post drawdown of €1.5 million. Since acquisition, the Company has made a gain of 60 per cent. on the initial equity invested.

Cubic Centre on budget but ahead of time schedule

The construction of the Cubic Centre office building is expected to be completed in the first quarter of 2009, a quarter earlier than the original plans. Fabian has paid an initial instalment of €12.5 million towards the anticipated purchase price which is expected to be the total equity requirement for the company.  At the practical completion of the building, Fabian will pay the final instalment based upon a forward purchase yield of 7.4 per cent. to 7.8 per cent. applied to the rents achieved by the developer. 

DTZ estimated the future value of the Cubic Centre at €64.8 million based on a yield of 7.15 per cent. as at 31 December 2007. After deducting the balance of the purchase price still to be paid by the company, the future developer’s profit is estimated at €4.4 million to the Company or €0.09 per share.

The Economy

The Romanian economy continues to power ahead. GDP growth for 2007 came out at 6 per cent. on top of 7.9 per cent. growth in 2006 and 4.1 per cent. in 2005. The economy has now been continuously expanding at above 4 per cent. per annum since the end of 2000. This represents a remarkable turnaround from the performance in the 1990s when two deep recessions took place in the space of ten years. Such strong GDP growth combined with an addressable market which, in population terms, is the size of the Czech Republic and Hungary combined is driving businesses’ expansion plans. This is directly reflected in the demand the Company, as a landlord, is seeing for office space. As an example, one of the Company’s prospective tenants is factoring in a 45 per cent. increase in their office space requirements over the next five years.

On the back of strong GDP growth, high employment and a benign tax environment, real wages grew by a staggering 21 per cent. in 2007. This comes on the back of a 26 per cent. growth in 2006. This surge in real disposable incomes is having a marked impact on the consumer. Retail sales are strong which are in turn driving retailers’ demand for new retail space. In residential, the impact is particularly marked with strong house price inflation to the benefit of developers.

The flip side of such strong GDP growth and rise in net wages has been a consumption boom. Along with the appreciation of the Lei against the Euro since 2005, this has contributed to a ballooning trade deficit contributing in turn to consensus forecasts for a 14 per cent. current account deficit in 2008. Only half of the deficit is expected to be covered by foreign direct investment, with the balance from portfolio inflows. As a response the Central Bank has increased interest rates to slow both the growth of credit and the overall economy. The currency has also depreciated against the Euro from the level of 3.11 against the Euro in May 2007 to 3.56 at the time of writing. Year to date, export growth has now recovered to grow at a faster rate than the growth of imports but it is too early to definitely predict the emergence of a positive trend.  The absolute level of the current account deficit remains a concern.

The Credit Crunch Impact

The sub-prime lending crisis in the US has now started to have an impact on Romania. This is not because any of the fifteen or so of the mainly Austrian, Greek, Italian or German owned banks conducting property lending in the country have been particularly hit by exposure to sub prime mortgages per se, but because of the European wide reduction in money market liquidity and the associated rise in Euro denominated interest rates. Banks have sought to pass on their increased costs of funding to borrowers. Financing is therefore still available but at higher costs and with reduced loan to value (“LTV”) ratios. According to Jones Lang LaSalle (“JLL”), investment loan margins have increased on average by 40-65 bps and LTV ratios have declined to 65-75 per cent. from 70-80 per cent. since the last half of 2007. Amortisation rates and debt service coverage ratios have remained unchanged. Owing to the investment manager’s relationship with a number of financial institutions, we believe securing financing for the company will not prove to be too onerous if the current market conditions persist but it will be at the expense of higher interest rate margins than was the case last summer.

In terms of an impact on demand in the country’s property market, we have noticed some caution from end buyers of residential apartments after a number of negative articles in the Romanian media concerning the credit crunch. There has also been some impact from the increase in Euro denominated mortgage rates, though given the current very low level of mortgage borrowing in the country, this effect should not be overstated.

For the office market, office leasing activity remains high and unchanged from last summer.  Vacancy rates remain sub 3 per cent. according to DTZ. In the absence of substantial new supply, office rents jumped 20 per cent. in 2007 according to JLL.  Corporates continue to seek new office space for expansion and there has been no noticeable change to occupiers demand for pre-lets of office space. In terms of investment purchases of office buildings, very few transactions have taken place since GTC’s sale of America House to Ixis at a 5.6 per cent. yield last August, albeit based on below market rents of €19.0 per square metre per month. However, headline yields are suspected to have increased to around 6 per cent. or just above. However, at this stage there have not been any major transactions in the market to support this view.

The Company has always been conservative in its approach to both financing and development risk and this is now paying dividends in the current more straightened financial environment. For instance, finance liquidity risk has always been prudently managed by spreading the credit risk to not only different financial institutions but with different and interpolating lengths of credits. The existing loan portfolio incorporates a mix of fixed and floating loans, which is being actively managed to limit an adverse impact on the Company from a sudden deterioration in European interest rates. On the letting side, the Company has always worked to secure pre-lets with strong tenants at an early stage for all development projects. Construction procurement and costs are secured by not relying on a single construction counterparty and by locking in fixed construction contracts once building consent is achieved.  By spreading investments into different sub sectors of the country’s property market, between development projects and fully let investment properties and between Bucharest and the regions, the investment manager has continued to ensure that no unnecessary concentration exists in the spread of the Company’s investment portfolio.