Marina Project

PROJECT / ACQUISITION OPPORTUNITY:

PROJECT MARINA, TIVAT/KOTOR BAY

LOCATION:

Boka Kotorska, Montenegro (also called “Monte Carlo of Adriatics”), Southern Europe

BRIEF DESCRIPTION:

Excellent land within the “Pink Zone” in the Master Plan (predetermined for “High Tourism”) and with 170 meters of its own beach set in a small bay to the back of the famous islands of St Marko and Island of Flowers and next to a natural habitat, this gem with good transport links can be acquired at VERY FAVOURABLE ACQUISITION PRICE. Project has a HUGE POTENTIAL being the only remaining available location in this area for this project type.

Good opportunity for developers/investors to acquire a project base with an estimated EUR 269million sales market value (once developed) for only EUR 35.5million.

Quick Navigation:

I..Project Summary | II. Basic Investment Summary | III. Further Location Details and Expansion Possibilities | IV. Sales Dynamics Estimate & Building Development Costs | IV. Montenegro Country & Economic Overview

I. PROJECT SUMMARY

Set in the famous Kotor Bay, a “natural harbour” of Montenegro coastline an opportunity has arisen for a development/investment company to acquire a strategically well placed land ideal for a luxury resort development set on 63,348m2 of land and with the ability to accommodate up to a 250 berth marina for small and medium size yachts in the area.

Being only a few minutes’ drive away from Tivat International Airport this location has a direct view over the famous islands of Saint Marko and The Island of Flowers. The area is already very popular internationally due to the fact that “Porto Montenegro” is building a 4th Generation Marina with 650 berths (http://www.portomontenegro.com/en/marina/) in the vicinity of this land along with the huge regeneration of the coastal area in Tivat to include “Four Seasons” Hotel together with a brand new Conference Centre, Shopping Centre, Museum, market square and a sports complex. It is no surprise then to find some well known names associated with that project, like Peter Munk, Oleg Deripaska, Bernard Arnault, Jacob & Nathaniel Rotschild to name a few.

(http://en.wikipedia.org/wiki/Porto_Montenegro)

Another testament to the potential value of this area can be found in the article in FORTUNE magazine on CNN MONEY:

http://money.cnn.com/magazines/fortune/fortune_archive/2007/10/15/100539069/index.htm

*Location map *Project land opportunity main

With amazing views, worldwide interest from upmarket clientele and excellent transport links it is not hard to see a luxury development project realized on this location. Excellent land sloping allows building with unobstructed views, and that only adds to the appeal.

EUR 269million estimated developed project sales value is based on relatively conservative selling estimates. Considering low acquisition price set for this project, depending on sales dynamics, breakeven point for the development on this project could be achieved with relative ease.

II. BASIC INVESTMENT SUMMARY

• Equity investment = € 35.5million (full project acquisition)

• Equity stake = 100%

Below is the basic estimation/summary of the costs, profits and potential returns based on very conservative estimates and higher allowances for costs. Further details are in the Chapter IV. Sales Dynamics Estimate and Building Development Costs

Building Costs Summary Estimated

• Municipal Taxes (commercial & residential) = EUR 6,651,540

• Building/Construction costs = EUR 60,243,948

• Project Architectural Planning = EUR 1,583,700

• Project Documentation/Administration/Legal = EUR 395,925

Total Building Costs = EUR 68,875,113

• TOTAL investment cost (developed) = EUR 104,375,113

(Note: this estimate includes land acquisition cost)

• Estimated developed Project Sales Value = EUR 269,229,000

(Note: based on conservative value estimates and smaller build size than maximum possible)

• Sales & Marketing Costs @ 5% of Gross = EUR 13,461,450

(Note: typical agency fees in the region are 2% up to a very maximum of 3% for top international agencies, but

higher margin given here can accommodate extra advertising and salaries for potential additional staff)

*Gross return per annum and Net return per annum refer to the average gross return per annum and average net return per annum respectively on linear basis for the overall 48 month project/full investment cycle estimated duration

III. LOCATION DETAILS & EXPANSION POSSIBILITY

As shown on the Google Earth map of Kotor Bay below the strategic location of the land on offer is excellent, being close to all the major attractions and values that this Bay has to offer

Below are some photos taken from the location itself. As can be seen the land is perfect to serve as an exclusive resort site and the area, being naturally shielded, is suitable for another marina (smaller than “Porto Montenegro”) and the possibility for berths is already planned for and included in the new location planning schedule by the Government bodies.

Due to current regulations, there is a sizeable opportunity to extend the project further as another plot of land adjoining the project on offer can be acquired from the Government directly on a very beneficial 99 year lease. The Government plot of land in question is marked in YELLOW in the map below and is 20.000m2 in size with 250m of its’ own beach. Government is only willing to give that plot to the investor/development company that would hold majority/ideal share of land in this micro-location and that would put forward plans for an upmarket resort as that would benefit the area and local economy as well, and by acquiring the land “Project Marina” on offer investor/developer would achieve just that. Government rent would in those cases be at “peppercorn rates” (ie very likely to be in the region of only EUR 1/sq.m. per annum!).

That extension could allow potential investor/developer to extend the resort and the preliminary estimate on Gross Square Meters of possible development would WELL EXCEED 100.000m2 of gross developed property with over 400 meters of its’ own beach and would therefore also push the estimate of the developed project sales value well over EUR 300.000.000

That possibility stands as a pure bonus to the investors/developers of “Project Marina” as the project already portrays huge profit potential even without the possible extension.

IV. SALES DYNAMICS & BUILDING COSTS ESTIMATE

All of the estimates given are for illustrative purpose, to be able to give a rough idea of the project scope. Being in the “Pink Zone” the maximum build allowance set by the government is by the factor of x1.5 giving the maximum build area of 95,055m2, where the minimum build would be 63,348m2. In order to give a conservative estimate median build size (of only 79,185m2) is used for calculations. It is assumed that the sale of the apartments and of a part of the commercial space will begin as off-plan, so it is assumed that the part of the development is to be sold prior to commencement of actual works on the development. It is also assumed that the sale will be phased and that each subsequent phase carries a small increase in price. Please note: there was also no direct assumption, nor addition to the overall sales estimate, of the possible value of marina berths and their generally huge impact on profitability.

1st HALF YEAR Sales estimate

First 10,000m2 of residential space

• 5,000m2 @ EUR 2,750 = EUR 13,750,000 (considering prime location this would be a good discount)

• 5,000m2 @ EUR 3,250 = EUR 16,250,000

2nd HALF YEAR Sales estimate

Second 10,000m2 of residential space

• 10,000m2 @ EUR 3,000 = EUR 30,000,000

(Note: for purposes of simplifying the projection all future apartment sales are estimated at the lower price value of ONLY EUR 3,000/m2 (this price is VERY easily achievable even in the current market place on this type of development) in order to achieve a very conservative estimate)

First 5,000m2 of commercial space

• 5,000m2 @ EUR 5,000 = EUR 25,000,000

(Note: for purposes of simplifying the projection all future commercial space sales are estimated at the lower price value of ONLY EUR 5,000/m2 in order to achieve a very conservative estimate)

1ST YEAR ESTIMATED GROSS SALES VALUE TOTAL = EUR 85,000,000

(Please Note: these are conservative estimates and are based on current market conditions and adjusted for the global economic slowdown, and is an off-plan sales estimate before the building/development work commences)

ESTIMATED SPACE SOLD TO THIS POINT REMAINING

RESIDENTIAL 20,000m2 only 43,348m2 (under median build size estimate)

COMMERCIAL 5,000m2 only 10,837m2 (under median build size estimate)

BERTHS no estimates made no estimates made

---------------------- FULL DEVELOPMENT/CONSTRUCTION COST FINANCIAL BREAKEVEN POINT -------------------------

Development and Sales Concept Description

 Development Gross Size: 79,185m2

 Residential Space: 63,348m2 price range: EUR 2,750 to EUR 3,250 per m2

 Commercial Space: 15,837m2 price range: EUR 5,000 per m2

Note: sales value estimates are based on LOWER market figures only in order to simplify and give a more conservative estimate

Overall building costs BRIEF BASIC SUMMARY

 Land Preparation for building @ EUR 1/m2 63,348m2 x EUR 1 = EUR 63,348

 Project architectural plan @ EUR 20/m2 79,185m2 x EUR 20 = EUR 1,583,700

 Municipal fees & taxes commercial @ EUR 120/m2 15,837m2 x EUR 120 = EUR 1,900,440

 Municipal fees & taxes apartments @ EUR 75/m2 63,348m2 x EUR 75 = EUR 4,751,100

 Building Cost apartments @ EUR 700/m2 63,348m2 x EUR 700 = EUR 44,343,600

 Building Cost commercial @ EUR 1,000/m2 15,837m2 x EUR 1,000 = EUR 15,837,000

 Project Legal/Administration @ EUR 5/m2 79,185m2 x EUR 5 = EUR 395,925

TOTAL building cost estimated inc. taxes = EUR 68,875,113 (for the whole development estimated)

 1st Year Gross Sales Value Generated = EUR 85,000,000 est.

 Minus Sales & Marketing 5% = EUR 4,250,000 est.

1st YEAR NET SALES VALUE GENERATED = EUR 81,750,000 est.

*All figures are based on conservative estimates and include higher margin to cover development costs.

Remaining sales potential

Residential 43,348m2 @ EUR 3,000/m2 flat rate EUR 130,044,000

Commercial 10,837m2 @ EUR 5,000/m2 flat rate EUR 54,185,000

Berths x 250 estimated potential not included in the estimate

SALES DYNAMICS ESTIMATE continued

It is also assumed that following the first Year of successful sales effort building works on the development are to start. For this size development it is estimated that the building/development works are to last for 36 months until finished product is in place (and this again is a generous time scope to allow for extra margin and give a more conservative estimate).

Once the building works start the sales effort can continue and the prices can generally be increased again through further phasing of the project, but for the purposes of the current estimate we have assumed that the whole remaining space will be sold at flat rates of only EUR 3,000/m2 for residential and EUR 5,000/m2 for commercial space (and that is even conservative for the current market conditions for that type of development and location, not to mention any future value possibility or even higher possible values of properties in a completed resort of that assumed type).

YEAR 2 & YEAR 3 Sales Estimate (during the development cycle)

Remaining 43,348m2 of residential space

• 43,348m2 @ EUR 3,000 = EUR 130,044,000

(Note: it is assumed that the whole space will be sold off-plan and does not account for high possible values of built space)

Remaining 10,837m2 of commercial space

• 10,837m2 @ EUR 5,000 = EUR 54,185,000

(Note: it is assumed that the whole space will be sold off-plan and does not account for high possible values of built space)

YEARS 2+3 ESTIMATED GROSS SALES VALUE TOTAL = EUR 184,229,000

1ST YEAR ESTIMATED GROSS SALES VALUE TOTAL = EUR 85,000,000

TOTAL GROSS ESTIMATED SALES VALUE = EUR 269,229,000