Black Sea Property A/S
Org. No. 914 892 902
Sunrise Gardens
January 2018
.
Disclaimer
Black Sea Property AS ("Black Sea Property" or "BSP") has produced this presentation, which speaks as of 7 January 2019. The information contained in this presentation may be subject to change, and Black Sea Property assumes no obligation to update the contents of this presentation. Black Sea Property has made no enquires as to the correctness of the information provided to us by the Developers, and we have not requested or taken part in any due diligence reviews for any of the projects discussed in this report:
Black Sea Property has relied primarily on information provided by the board and management of the Developers in written or oral form;
The information includes non-factual information with regard to forward looking information which intrinsically is subjective and based on "best judgment".
Accuracy and completeness of information:
Although Black Sea Property believes the information to be correct as the time of the issuance of this presentation, there is no certainty that the information is correct or that it is complete. It is fully possible that had Black Sea Property had access to other or more extensive information, the conclusion and information of the report could have been materially different;
The conclusions in this report are made on the basis of a number of important assumptions. Whereas these are made to the best of our ability, based on discussions with management and access to relevant information, there is no certainty with regard to the correctness of these assumptions. Even relatively moderate changes to our assumptions may lead to material changes in to the information herein and the valuation of the developers and developments.
Black Sea Property judgment with regard to non-factual information:
Whereas the information provided to us has been the basis for the valuation and analysis, Black Sea Property has, as far as possible, evaluated the substance of the information independently and made its own opinion with regard to the implication of the information on the value of the developments.
Liability
Black Sea Property expressly disclaim any representation and warranty with regard to the contents of this presentation;
Black Sea Property will not accept any responsibility for the use of or reliance upon the information contained in this presentation whatsoever.
The Development
Achievements and Progress Update
- The Aheloy based resort is to be renamed to "Sunrise Gardens".
- The Resort is expected to open this summer with planned opening the 27th of May. To minimize the risks in connection to opening, focus will be towards opening only block N and M, giving an estimated 1,5 MEUR profit for summer 2019. Apartments in block P will only be opened if this is possible without increasing the risks in connection to opening.
- Agreement with the power distribution company operating EVN has been signed and the building permit is in place. The Resort is to be connected to the national power grid in early 2019.
- The approval for Water & Sewage connection is granted with partial passage plan approved The documentation for building permission submitted with expectation for a permit to be issued within 14 working days.
- BSP is working over last steps prior to utilizing the new EUR 3m construction loan connected to finalizing the mortgage security requirements by the Bank.
- The 13th of September 2018, an new hearing took place with respect to a claim Zlatarsko has brought forward against Aheloy Commercial. The case was once again resolved in EPO Aheloy's favour. The case has now been appealed to the supreme court. The company believe that there are low further risk in connection to this case.
Status Building Works
- The construction works at the Resort are progressing forward, however at slower pace due to late utilization of the construction loan.
- We have finished construction and furnishing of totally 358 units in building "N" and "M." The landscaping works are well advanced and carried out as planned, and in the concept of the future envisioned improvements. Final touches to be made closer to the opening of the Resort.
- The planning and construction works for the Resort's commercial areas are underway, including the construction works of the new Reception building and Second Pool where excavation work has been executed. Building permits for second pool and reception are pending shortly, as an simplified notification procedure will be implemented based on the already prepared structural construction and architecture plans.
- The outside appearance of building "L" facade, windows, roofing and terraces is close to 100% completed. Architect and structural engineer have been engaged to redesign building "K" with concealment works planned to transform the pre-opening appearance of the Resort.
- Building "P" construction works are well advanced, due to BSP's efforts the building now stands with repaired roof, drainage lines, terraces, tiling in apartments and common space repaired, bathroom shower space optimized, central hot water piping, fire notification cabling, interior doors, repaired walls and new interior paint. This building is owned by EPO Aheloy together with certain other investors, where EPO Aheloy is focusing on completing its 85 unis owned and the building's common areas. The Company intend to reach an agreement, through EPO Aheloy, with the external investors as soon as possible on their respective funding contribution before resuming the active construction works.
Financing of EPO Aheloy
- Instead of funding with own equity of EUR 1.5m in combination with building loan of EUR 3m as previously outlined, the company has since November 2017 used towards the project almost EUR 2.0m, with construction loan still not used.
- Due to late utilization of the construction loan the building process has progressed slower than anticipated and therefore it has been difficult to obtain prepayments from tour-operators.
- The pre-opening capital need is in line with the already approved building loan.
- Private Placement of NOK 8.65 million initiated by BSP to fund downpayment to UniCredit Bulbank due 25 January 2019.
Preopening Financial Need EUR 2.9m
| Investment Expenses |
Amount EUR ex VAT |
| CIW building N |
26 000 |
| CIW building M and furniture |
47 000 |
| CIW building L & Terraces |
12 209 |
| CIW Landscape |
232 000 |
| CIW Commercial Areas & Restaurants |
620 742 |
| CIW Second Pool |
237 062 |
| CIW Onsite Sewage Piping |
63 911 |
| CIW Reception |
291 257 |
| CIW Pumping Station |
30882 |
| CIW Sewage Network |
258 650 |
| CIW building P and common areas |
268 335 |
| Planning |
39 199 |
| Architect & structure part plans |
63 059 |
| Construction Supervision |
38 347 |
| Legal |
15 3 39 |
| Acquisition & Administrative fees |
15 3 39 |
| Insurance |
5 1 1 3 |
| Aheloy residence acquisition |
40 903 |
| CIW Existing pool repair |
48 677 |
| CIW Kids club, outside seating |
102 258 |
| CIW "K" cover up |
30 678 |
| CIW Amphitheater |
102 258 |
| Resort management, operations, materials initial cost |
357 904 |
| Security |
25 15 6 |
| Unforeseen |
255 646 |
| Operational VAT |
$-342000$ |
| Total |
2 885 925 |
Hotel Operations 2019 Profit / EBIT (358 units)
| Discretionary Assumptions |
|
|
|
|
|
| Appartment units |
Number |
SQM |
|
|
|
| Building N |
175 |
13 237 |
|
|
|
| Building M |
183 |
12 834 |
|
|
|
| Total |
358 |
|
|
|
|
|
|
|
|
|
|
| Operating N, M |
|
|
|
Profit Euro |
1 583 265 |
| Open days |
days |
110 |
|
Profit per key |
4 423 |
| Available appartments |
appartments |
358 |
|
Income per key |
9 042 |
| At 80% occupancy nights sold |
nights |
31 504 |
|
|
|
| Average Daily Rate |
euro |
91 |
|
|
|
| Costs including Food & Beverage |
% |
44 |
|
|
|
Suplementary
services profit |
euro |
378 048 |
|
|
|
| Adjustment for start up challenges year 1 |
euro |
395 816 |
|
|
|
|
|
|
|
|
|
|
June |
July |
Аugust |
September |
Season |
| Оperating Days |
30 |
31 |
31 |
18 |
110 |
| Price per key |
87 |
93 |
102 |
81 |
91 |
The number presented on this page are projections made by BSP and actual numbers may differ. There has been an adjustement of first year estimated profit with EUR 396 816 to account for start up challenges
BSP's Forward Focus
- In addition to the already established relations with Thomas Cook, other major tour-operators' in the Central European, German, British and Russian markets are introduced to the Resort and invited to collaborate in occupancy filling. Final agreements will be on hold until full certainty of opening date is in place – thus to avoid risk in connection to claims from Tour-Operators. This puts pressure on the Company's pre-opening cash flow position as it cannot rely on tour operator prepayments at this moment.
- Securing CIW financing. Monitoring liquidity, activity time schedule and budget.
- Securing beach access. Exploring options to use better neighboring beach sites.
- Management company activities and to secure tourist pre-bookings. Staff employment.
- Acquiring permits for use of the buildings, categorization of the rooms and commercial licenses.
- Evaluate future possibillities of financing to complete the resort at a faster pace than what is possible with existing loans
- Cushman & Wakefield will be engaged to prepare for new valuation report of the resort
Bulgarian Economy H2 2018
- The Bulgarian economy experienced a recession in 2009 during the Financial Crisis, but the economy is now growing once again. Growth momentum is expected to remain strong, mainly thanks to solid domestic demand, with private consumption supported by real wage growth. Real GDP growth is expected to reach 3.5% in 2018.
- Investment is set to contribute further to the economy's growth, as more projects co-financed by the EU get underway or progress. Overall, headline inflation has further increased and is projected to reach 2.6% on average in 2018. The unemployment rate came close to its pre-crisis low of 6%.
- Revenues are expected to increase significantly as transfers from EU funds accelerate and tax collection improves thanks to both macroeconomic conditions and tax compliance measures. Strong GDP growth and higher wages in the economy are expected to boost tax revenue and balance the expected current expenditure increases. At the same time, EU funds are set to continue finance a large part of public investment growth.
- The Bulgarian economy relies heavily on the Travel & Tourism sector. The direct contribution of Travel & Tourism to GDP was BGN 3,035m, 3.1% of total GDP in 2017 and supported 90,000 jobs (2.9% of total employment). Travel & Tourism investment in 2017 was BGN 1,453 m, 7.4% of total investment.
Tourism H2 2018
- The popularity of Bulgaria as a destination is constantly increasing and every year it is visited by more and more foreign tourists.
- Burgas Airport has served a record 40'000 passengers in one day. The airport served a total of 122 flights on the day in question. The summer season is usually strong for Burgas airport, which takes an average of 84 take-off and landing planes per day. Passenger traffic continues to increase - the airport has served 1 557 000 passengers last summer, up 13% over the same period in 2017.
- The year was successful for the Bulgarian tourism. Foreign tourists in Bulgaria grew by 11.1% on an annual basis, reaching 2 436 394 in the period January - May 2018. Most tourists arrive from the neighboring countries - Romania, Greece, Turkey, Macedonia and Serbia. Immediately after them are the visitors from Germany and the UK.
- One traditionally large group of tourists Russia is only 9th, with tourists dropping 9.7% annually. The explanation for this is simple - the Russians are returning to the holidays in their favorite Turkey and Egypt, instead of Bulgaria. However, more and more Ukrainians come in their place (14.3% more for the period).
- A positive trend is the increase of visitors from 9 out of the 10 strongest market for Bulgarian tourism. The only exception is the Russians. Revenues from international tourists for Bulgaria also increased by 10.8%.
Property Highlights H2 2018
Property Highlights H2 2018
Tourism & Property Highlights H2 2018
Thank you for your attention.