“NeXUS” PLOT 2, AHELOY, BURGAS, BULGARIA
NEXUS PLOT 2 DEVELOPMENT SITECONTENTS
Page No.status of valuer and inspections / 1
compliance / 1
location / 2
situation / 3
description / 3
legal status / 4
town planning / 5
environmental matters / 5
proposed scheme / 5
market overview / 6
black sea holiday home commentary / 7
demand / 12
sales prices / 13
forecast / 14
valuation methodology / 15
MARKET value / 16
liability and publication / 17
APPENDICES
Appendix I / General Assumptions and Definitions
MPG Associates Ltd 3
“NeXUS” PLOT 2, AHELOY, BURGAS, BULGARIA
Your RefOur Ref / G:\INTERNATIONAL\CFT\Projects\MPG
Date / 27 March 2008 / 9 Marylebone Lane
London
W1U 1HL
Tel: 020 7935 4499
Fax: 020 7487 1800
www.collierscre.com
Direct Line +44 20 7344 6609
Direct Fax +44 20 7344 6539
Mobile +44 7768 500202
The Directors
MPG
100 Pall Mall
London
SW1Y 5HP
For the attention of Michael Gallucci
Dear Sirs
“NEXUS” PLOT 2 DEVELOPMENT SITE
In accordance with your instructions, we have inspected the above development site in order to provide you with our opinion of Market Value, as at 31 January 2008, for secured lending purposes.
STATUS OF VALUER AND INSPECTIONS
The property has been inspected and valued by suitably qualified valuers who fall within the requirements as to competence as set out in PS 1.4 and 1.5 of the Valuation Standards (the Red Book) issued by the Royal Institution of Chartered Surveyors (the RICS). We confirm that Colliers CRE complies with the requirements of independence and objectivity under PS 1.6 and that we have no conflict of interest in acting on your behalf on this matter.
The property was inspected on 9 January 2007 by Kristian Engley BSc MRICS and supervised and valued by Christopher Fowler-Tutt BSc MRICS.
The extent of our investigations and the sources of information on which we have relied upon are described under PS 5 of the Red Book.
The General Assumptions and Definitions form Appendix I to this report.
COMPLIANCE
This appraisal has been prepared in accordance with the International Valuation Standards 2005 and the RICS Valuation Standards (the Red Book). In the context of the valuation Colliers CRE act as an Independent Valuer. The valuers do not have any direct or indirect personal or corporate relationships with the property or Company that is the subject of this assignment and that might lead to a potential conflict of interest.
This engagement has been performed independently and without bias toward the client or others. We have complied with the code of conduct and adhered to the ethical standards set out in the RICS Valuation Standards.
LOCATION
The subject property is located on the eastern Black Sea coast of Bulgaria, in the locality of Aheloy, a small rural village. Aheloy is located within the Pomorie Municipality and the wider Burgas region. The village is located approximately 6km west of the Black Sea coastline and the Sunny Beach tourist resort. Aheloy also lies approximately 5km west of town of Nessebar, 40km north of Burgas and is 100km south of Varna.
The wider Burgas region is one of the most developed areas in Bulgaria. With the second largest land area, it is the fourth most densely populated region of the country. The Burgas region operates as an important gateway to the country, with 74% of Bulgaria’s imports and exports being handled through the port of Burgas. The region provides 5.22% of the country’s GDP and houses Burgas International Airport, the Burgas Port complex, and the Triple Way extended railway stations between Burgas and Kamobat.
A large, highly skilled, labour pool in the region also serves the growing manufacturing and construction industries, primarily concentrated around the city of Burgas. Bulgaria’s largest tourist costal resort is the costal area of Sunny Beach situated approximately 5km north of Burgas. The resort has upwards of 500 hotels stretching along and directly behind the beachfront, arranged over medium to high-rise hotel blocks. The resort also houses a large number of apartment blocks ranging in design and quality. Contributing further to the region’s tourist industry are the numerous thermal mineral spa springs that populate the Burgas coastal areas.
A map extract showing the wider location of Aheloy is detailed below:
Source: (Google 2008)
SITUATION
The subject property sits 2km north of Aheloy and 1.5km south of Tankovo, both villages in a predominantly rural location, and is situated approximately 5km from the Black Sea coastline within easy access of the popular tourist destinations of Sunny Beach, Nessebar, and Pomorie. The property lies to the west of the tertiary Tankovo – Aheloy link road, and is accessed via an un-surfaced access road leading westwards from the link road. The property can be found on the southern side of the access road, approximately 100m from the link road junction.
The village of Aheloy has good transport links and is bisected by the E79 Highway. The E79 is the main arterial route into the Sunny Beach resort from both northerly and southerly directions, providing a direct link to the cities of Varna and Burgas. The nearest international airport is located in Burgas (40km), with Varna (100km) also having an international airport.
Aheloy is predominantly residential in nature, with local amenities limited to local convenience stores catering for the small local population. An aerial photo of the site is shown below:
Source: (Google Earth 2008)
DESCRIPTION
The subject property comprises an undeveloped land plot with a total area of 14,000 m2 (1.4 hectare) currently used as agricultural grazing land with covering vegetation in the form of short grasses together with some vine beds. Topographically the plot is broadly level with no notable geographic features. The plot is arranged in a regular rectangular shape with the longest axis of the plot running in a north-south orientation, with the northern boundary lying adjacent to the unmade access road.
The plot is bounded by agricultural land to all sides, similar in nature to the plot itself. On inspection of the property there was no evidence of any adjacent buildings or features in the immediate locality with the closest development occurring in the adjacent villages of Tankovo and Aheloy. We have attached photos of the subject property below:
Main view of the property View looking east of the property
View of property looking east View of Tankovo-Aheloy link road
View of property looking west Junction of access and link road
LEGAL STATUS
We understand that the subject property is held freehold by MPG Associates Ltd (MPG) and is free from any legal encumbrances that may have a material impact on the value of the property. However, we would advise interested third parties to make their own enquiries into the legal status of the property to establish the current situation. We have not been provided with the ownership documents for the property, however we have summarised the address, parcel ID and plot size information, received from MPG.
Address / Land parcel ID / Size (m2)Aheloy Village,
Pomorie Municipality,
Burgas Region / № 00833.1.282 / 7,999
Aheloy Village,
Pomorie Municipality,
Burgas Region / № 00833.1.283 / 6,001
Total / 14,000
TOWN PLANNING
The property is currently zoned for residential development by the Burgas Municipality as per decision Nr.7 dated 5 July 2007 which details a change in the use of the land from farmland to a site endorsed for design and infrastructure. We have summarised the zoning parameters in the table below:
Land parcels ID / Coefficient of construction / Density / Green areas / Eaves Height (m) / Permitted UseПИ № 00833.1.282 / 0.8 / 30% / 50% / 7 / Residential Development
ПИ № 00833.1.283 / 0.8 / 30% / 50% / 7 / Residential Development
ENVIRONMENTAL MATTERS
We have not carried out soil, geological or other tests or surveys in order to ascertain the site conditions or other environmental conditions of the properties. Additionally, we have not received an environmental report or any comment on the environmental condition of the property. Subsequently, our valuation assumes that there are no unusual ground conditions, contamination, pollutants or any other substances that may be environmentally harmful and that may have a material affect on value.
PROPOSED SCHEME
We understand that there is currently no proposed scheme on the site, therefore we have adopted a hypothetical development scenario based on the current zoning parameters applicable to the site. Subsequently we have assumed 10,500 m² of residential accommodation and 145 m² of commercial space. We have summarised our adopted area summary in the table below:
Premises / Units / Size per Unit (m2) / Total Size (m2)Area / Terrace / Total
Residential
Apartments / 150 / 60 / 10 / 70 / 10,500
Car Parking / 175 / 1,750 / - / 1,750 / 1,750
Subtotal / 12,250
Commercial
Café / Shop / Fitness / 1 / 145 / - / 145 / 145
Subtotal / 145
Total / 12,395
MARKET OVERVIEW
Bulgaria joined NATO in 2004 and the EU in January 2007. During the first half of the 1990s Bulgaria’s economy shrunk dramatically owing to the loss of the COMECON markets, and UN sanctions against its major trading partner Yugoslavia. In 1994, GDP began to show signs of growth and inflation fell for the first time since transition commenced in 1990. The collapse of the economy in 1996 was primarily due to an unstable banking system. Since 1997 the economy has gradually recovered due to sound macroeconomic policies and a broad structural reform programme.
Since 2000, GDP has grown at 4% to 6% per annum and is forecast to grow by similar levels in 2007 and 2008.
Bulgaria macroeconomic data and forecasts2005 / 2006e / 2007f / 2008f / 2009f
Nominal GDP (Euro bn) / 21.4 / 24.4 / 27.5 / 30.5 / 33.5
Per capita GDP (Euro) / 2,780 / 3,170 / 3,590 / 4,010 / 4,420
Real GDP, yoy (%) / 5.5 / 6.3 / 6.5 / 6.3 / 6.2
Inflation (CPI), yoy, avg (%) / 5 / 7.3 / 6.2 / 4.7 / 3.6
Unemployment rate (%) / 10.7 / 9.1 / 8 / 7.5 / 7
Exchange rate/Euro, avg / 1.96 / 1.96 / 1.96 / 1.96 / 1.96
1M SOFIBOR (1), avg of the year / 2.7 / 3.7 / 4.2 / 4.1 / 3.9
Current account/GDP (%) / -11.3 / -14.7 / -14.2 / -11 / -9.5
FDI/GDP (%) / 10.8 / 15.5 / 14 / 10.5 / 9
General government debt/GDP (%) / 31.9 / 25 / 24.5 / 23 / 22
Budget balance/GDP (%) / 2.3 / 3.5 / 2 / 1.5 / 1
Total external debt/GDP (%) / 71.4 / 75 / 81 / 83.5 / 86
(1) Prior to SOFIBOR introduction yield on 3M treasury bonds was used as a benchmark interest rate.
e – Estimate f – Forecast Source: Bank Austria
Bulgaria’s dynamic GDP and per capita income growth rates and increasing economic integration since 2000, have been driven by domestic consumption and investment. Bulgaria’s GDP per head in 2005 was circa $3,500. The country remains the poorest of the CEE states (excluding Russia and Ukraine). Its estimated GDP per capita in 2006 even at Purchasing Power Parity was just 30% of the EU15 average, 35% of the EU25 average and 53% of the EU8 average.
The reform programme launched in the late 1990s led to a steady fall in inflation. However during the period between 2003 – 2006, inflation has varied between 2.3% and 7.3%. Given the rapid GDP growth, it will be difficult to bring down inflation much further in the short term which presents a threat to the country’s targeted accession to the Eurozone in 2010.
Bulgaria’s unemployment level has also been falling since 2000, reaching circa 9% by year end 2006. This is the lowest level since the beginning of transition and compared with approximately 19% in 2000.
The biggest constraint on growth and risk to underlying economic stability in Bulgaria has been its trade deficit. Estimated at approximately 15% of GDP in 2006, it is the highest in the CEE region and is forecast to remain in double figures until the end of 2008. Furthermore, Bulgaria’s fixed exchange rate has made it difficult for Bulgarian exports to remain competitive.
Surging inflows of capital goods in recent years, however, will continue to stimulate export growth, providing sufficient financing for the current account shortfall and as such mitigating much of the associated risk.
Growth Drivers
Bulgaria’s tourism sector generated more than €2 billion of revenue in 2006 from four million visitors enjoying its sun, sand and sea along its 354km of Black Sea coast, skiing opportunities in the winter and mountain landscapes in the interior. The sector accounted for approximately 14% of Bulgaria’s GDP in 2006 and accounts for more than 140,000 jobs.
Bulgaria’s accession to the EU is contributing to a boom in tourism, raising its profile as a major emerging travel destination. Post EU accession, the number of the foreign tourists in Bulgaria have jumped by at least 10% in 2007 and a forecast by the World Tourism Organisation indicates that by the year 2010, the number of tourists in visiting the country will annually exceed 20 million.
Since 2003, Bulgaria has seen booming interest from foreign investors. The driving forces have been the EU accession process and membership; the highly-skilled multilingual workforce with the EU’s most competitive wage; a stable and predictable business environment; the lowest operational costs and tax rate in the EU and tax exemption and investment incentives for qualified investors.
Between January and November 2006, the state exchequer received €3.2 billion of inward investments. This equates to approximately 13% of GDP and more than 100% of current account deficit. Bulgaria has the highest level of FDI as a percentage of GDP in the CEE region.
BLACK SEA HOLIDAY HOME COMMENTARY
Overview
The Black Sea holiday homes market experienced significant growth in 2006 and 2007. In excess of 19,500 residential apartment units were added to the overall supply in coastal resort areas bringing the total to in excess of 50,694 units. A number of additional facilities such as golf courses also emerged during 2007, providing added levels of amenity for visiting tourists. The completed and proposed golf courses occupy both coastal and mountain locations. The emergence of these recreational facilities in the area, is expected to strengthen the demand for holiday properties. The quality of holiday home construction has also improved, in line with increasingly demanding buyer requirements together with the premium pricing levels associated with these exclusive developments.