Black Sea Property AS

Report Publication Announcement • Sep 29, 2017

BLACK SEA PROPERTY AS: SEMI-ANNUAL FINANCIAL REPORT AND INFORMATION UPDATE

BLACK SEA PROPERTY AS: SEMI-ANNUAL FINANCIAL REPORT AND INFORMATION UPDATE

Semi-annual financial report

Please find attached the semi-annual financial report of

Black Sea Property AS (the "Company"), for the period 1

January 2017 - 30 June 2017.

Information update

The construction works at Aheloy Beach Resort (the "Resort")

are progressing forward. In addition to the previously

announced completion of 175 units in building "N", we are

now close to finishing construction of the 183 units in

building "M" (expected to be finished in October 2017). The

landscaping works are well started, however the final

touches must be made closer to the opening of the Resort.

The prepatory works for the Resort's commercial areas are

well underway and the construction works for these spaces

are expected to commence during October 2017. The Resort

(building P, N and M with a total of 603 units) is still

expected to be ready for opening next summer.

Building "P" is currently being prepared for construction

works. However, as this building is owned by EPO Aheloy (a

subsidiary of the Company and the holding company for the

resort) together with certain other investors, we intend to

reach an agreement with the external investors on their

respective funding before starting actual construction

works. The building is well conserved with repaired roof,

drainage lines, terraces, insulation and internal

unrepairable damaged elements removed.

As previously announced, there has been several legal

disputes between Aheloy Commercial AD (the company owning

the commercial areas of the Resort) and the bankruptcy

estate of the original developer of the resort, Aheloy

Residence OOD (and related company Zlatarsko OOD). A new

court proceeding commenced at 13 June 2017. A local court

has dismissed this court proceeding, but an appeal over the

decision to dismiss has recently been lodged. The Company is

working in close co-operation with our Bulgarian legal

counsel to handle the ongoing legal procedures and believes

that a satisfactory solution will be reached, however the

Company is uncertain of when the processes will be

concluded.

The process of acquiring additional apartments are moving

into the final stage. In addition to the 99 apartments

acquired during first half of 2017, we have now managed to

take control of the Resort's land and the "K" building.

Regarding Water and Sewage connection, we are pleased to

inform that, at a municipality hearing, a new connection

point for the Resort has been initially approved, based on

the preliminary plans we have prepared and submitted. The

next step will be for the municipality to approve a parcel

plan for the passage of the infrastructure, together with a

building permit, based on detailed plans prepared by EPO

Aheloy, for construction and the technical solutions for the

required infrastructure (sewage line). We are working close

with our advisors in this matter, and believe that we are on

track for getting water and sewage in place to opening of

resort.

As to Electricity, we have recently had meetings with the

EVN (a Bulgarian power distribution company) responsible for

connection approvals of new clients in the Burgas region. We

will now apply formally to connect and aim to reach an

approval for connection to the electric grid in line with

the terms that have been discussed earlier. At the same

time, we are increasing the capacity of the planned

emergency power generators to avoid any risk in respect to

the opening of the Resort for next summer.

A number of Hotel Managers and Management teams have been

interviewed to find the best candidate for opening of the

resort. After careful evaluation, an agreement has been

reached with Sunset Resort where the management team in

Sunset will also be responsible for pre-opening and the

first year of operation for Aheloy Beach Resort. Sunset

Resort are today managing around 770 units, and have broad

experience both on the commercial and operation sides of

running a hotel resort. This agreement will lead to low

immediate cost expenses, lower the operational risks and

gives us the possibility to capitalize on the commercial

experience in this organization. Our partner in Bulgaria is

currently also involved in Sunset Resort and we firmly

believe that this is the best solution in the Resort's first

year of operation. We will going forward make sure that

further personnel are allocated to the management company in

order to have sufficient resources for the opening of the

resort.

During the last couple of months, it has also become clear

that tour operators are requiring additional investments in

commercial areas (such as additional swimming areas), and

completion of facades of buildings "K" and "L" (originally

planned at a later stage of the construction). Further,

signals so far indicates that prepayment from tour operators

could be challenging to receive prior to opening. The

combination of additional investments and lack of

prepayments gives us a liquidity shortage in EPO Aheloy,

which is currently estimated to be up to 3.5 MEUR in EPO

Aheloy. The Company is therefore evaluating different

alternatives, including raising debt or raising capital in

several stages, for funding our respective part of this

liquidity gap (75%) and will inform the market in due time.

The Bulgarian holiday property market is continuing its

positive development, and has again experienced an upswing,

as political factors in Turkey and North Africa implies that

Bulgaria is considered a safer destination and also offers

more competitive prices than Greece. Holiday property in

Bulgaria is also currently attracting a wider range of

buyers from around the world than previously. The Company

anticipates that these trends will affect the Resort

positively going forward.

For further information, please contact:

Egil Melkevik, Chairman

Tel: +47 90 77 09 76

E-mail: egil.melkevik@imenco.com

About Black Sea Property AS:

Black Sea Property AS is a real estate company with holdings

in a real estate project on the Black Sea

coast called Aheloy Beach Resort. Aheloy Beach Resort is a

partially-completed project and will upon

completion comprise over 1,000 apartments as well as

significant commercial space. Black Sea Property AS owns

indirectly 75% of the project. Black Sea Property AS will

work to finalize Aheloy Beach Resort, to realize the

project's added value through the sale of residential units

and hotel operations.