According to Andrus Laurits, CEO of Pro Kapital Eesti, the aim of listing the subsidiary's shares is to turn them to liquid stock exchange traded securities, and raise additional capital to carry out the plans for expansion.
The core business of the company is renting out and administrating retail space in the Kristiine Kaubanduskeskus shopping mall, situated near the center of Tallinn.
It is also one of the largest shopping centers in the Baltic countries with a gross leasable area of 17,500 square meters, which will be expanded by 7,146 square meters by the end of August 2001.
About 60 percent of the new area will be rented out to a multiplex movie theater, which will be operated by Baltic Development Group. The rest will be rented out to additional trading partners and a bowling center.
About 30 percent of the 165 million kroon ($9.2 million) investment in the new expansion project will be covered by the company's own equities, the rest will be financed with a bank loan.
Through a public issue of two million new ordinary shares valued at 10 kroons each, Pro Kapital Eesti is planning to increase the volume of Kristiine Kaubanduskeskus' share capital to 200 million kroons.
In addition to the new float, Pro Kapital is planning to dispose of 7.8 million existing shares.
After the public issue and public offering of shares, Pro Kapital's share in Kristiine Kaubanduskeskus will decrease from 100 percent to 51 percent.
Eva Palu, investor relation's manager at the Tallinn Stock Exchange, said that Pro Kapital has not turned in an official application for the listing of Kristiine shares, but in general the exchange welcomes new shares on the stock exchange. Laurits said that the company was working on the conditions to be accepted in the list and the unofficial talks with the stock exchange had already started.
According to some specialists, nine to 11 companies listed on the Tallinn Stock Exchange might delist their shares in the near future due to a strategic investment in the company.
Toomas Reisenbuk, from the research department of Trigon Capital, said that Kristiine Kaubandus- keskus is too small to get the attention of big foreign investors and funds, but it is a good alternative for investors who are interested in real estate investments.
"The company will definitely receive some interest on the market. The success of their issue depends much on their transparency and the price of the offer," said Reisenbuk.
Kristiine Kaubanduskeskus earned a 7.3 million kroons profit from a 25 million kroon turnover in the first half of this year.
"There are many companies on the stock exchange with a market capitalization of about 200 million kroons or less, so the size really does not matter. It is positive that the company is purely engaged in real estate business," said Reisenbuk.
He said that the market capitalization of Tallinna Kaubamaja, the only retail sale-oriented company listed on the Tallinn Stock Exchange, is over 300 million kroons and the company is totally different from Kristiine Kaubanduskeskus, because it is engaged in retail sales as much as in real estate.
The subscription period for the public issue of Kristiine Kaubanduskeskus shares, which is scheduled to take place from Oct. 20 until Nov. 20, in all commercial banks in Tallinn. The initial public offering of existing shares of Kristiine Kaubanduskeskus will take place at the same time.