Investment Manager's update
22 Febbraio 2008 - 2:47PM
UK Regulatory
22 February 2008
Lewis Charles Sofia Property Fund Limited
AIM: LCSS
Investment Managers Update February 2008
Lewis Charles Sofia Property Fund Limited ("Lewis Charles", "the Fund" or "the
Company") today announces a summary of all the Company's projects in Bulgaria
and an overview of the current Bulgarian property market. The Fund's property
portfolio has a total build area of 567,590 square metres and currently has a
valuation of EUR83,852,536 (approximately GBP63.0 million).
Bulgarian Property Market
2007 was yet another good year for the Bulgarian property market (residential
and commercial). The two most expensive cities in terms of residential
properties are Sofia and Varna. Average prices at the end of 2007 were EUR927
per square metre for Sofia and EUR901 per square metre for Varna. The market in
Sofia has become more competitive with approximately 1.4 million square metres
of build area scheduled for completion between the end of 2008 and 2009. Most
of these residential projects are being sold off plan. This is not expected
however to put downward pressure on prices. There has also been an increase in
interest in new build houses around Sofia (Bistritsa, Marchaevo and Klanitsa)
and other cities. This trend is expected to continue as infrastructure
improves. Prices of holiday homes in mountain resorts increased more than those
along the coast.
The Economy
Bulgaria's real GDP growth rate for Q3 2007 (4th Q not yet released) slowed to
4.5% year-on-year due to the negative effects of the summer drought. This
compares to growth of 6.6% in the previous quarter. Growth was led by
consumption (household debt was up by 33%) and an acceleration in business
investment. Bulgaria's consumers are expected to be the driving force behind GDP
growth for 2008 through to 2010 (convergence report December 2007), reaching 5%
p.a. At the same time, bank lending rose by 58.6% (October) and unemployment
fell to 5.8% (Eurostat). The current account deficit for the first ten months of
2007 reached 15.9% of GDP on the back of strong imports of energy and FDI
related capital goods and raw materials. However, strong FDI inflows covered
more than 100% of the deficit. Bulgaria's government has now approved the 2008
budget plan envisaging a fiscal surplus of 3% (one of the few countries in the
region to run a surplus). The government also unveiled its convergence report
pledging to keep the fiscal surplus close to 3% of GDP through 2010. The ratio
of government debt to GDP declined further to 20.4% at the end of October 2007.
On the negative side, inflation has been much higher than expected due mainly to
food prices which increased by about 25% on the previous year (drought), oil and
wage inflation. Inflation for both November and December was high bringing the
average for 2007 to 6.1%.
Strategy
The Company's strategy is to own a portfolio of real estate projects in varying
stages of maturity, from unregulated agricultural land through to projects in
progress, and in different parts of the country. The Fund's strategy is to
appoint a development manager for each of its projects. Depending on the
different commercial circumstances of the project the Developer may be
incentivised through a profit sharing clause in the Development Management
Agreement in order to align the interests of both parties.
The Fund is now effectively fully invested, in a mixture of land acquisitions
and residential property development projects and has achieved its aim of owning
a substantial land bank; the latter has an estimated buildable area of over
560,000 square metres over a surface footprint of 417,000 square metres.
The properties held in the portfolio as of 31 December 2007 have been valued by
King Sturge and by Forton International at EUR83.9million compared with an
acquisition cost of EUR43.1 million (30 June 2007 value EUR73.0 million compared
with an acquisition cost of EUR37.6). Note that these figures are unaudited.
The Directors are of the opinion that there continue to be interesting prospects
in Bulgarian property and the Fund is well placed to benefit from these.
Lewis Charles Sofia Property Fund Limited
Investments as at 31 December 2007
Area Build Cost Valuatio
Area n
M2 M2 (EUR) (EUR)
1 Govedarci 35,934 34,604 3,449,65 7,782,87
5 3
2 Razlog / Bansko 18,354 26,823 7,409,42 10,845,8
0 65
3 Plovdiv 12,151 12,712 3,751,88 4,475,00
4 0
4 Sofia (Buysell) 50,814 109,744 10,609,8 20,178,5
92 27
5 Veliko Tarnovo 13,443 26,886 2,467,66 3,353,58
8 4
6 Dolna Banya 48,548 57,621 1,661,75 1,962,44
5 6
7 Sofia Kambanite 100,713 100,713 9,189,76 25,093,7
Bistritsa 1 41
8 Banya 121,420 182,130 3,579,45 8,702,59
6 8
9 Other 16,357 16,357 974,809 1,457,90
2
Total 417,734 567,590 43,094,3 83,852,5
00 36
*Options on these properties have been exercised and full ownership will be
transferred to the Fund on satisfactory completion of projects by the developer.
N.B. Figures are subject to audit, and do not include provisions for taxes and
performance payments. Some build areas are estimated subject to planning
approval. Because of the provisions of IAS 2 some of these values may not be
fully reflected in the balance sheet.
1. Govedarci (Crystal Vale)
Over a period of several months in 2006/07 the Fund purchased 16,148 square
metres of land (build area 14,818 sq m) in Govedarci for the Crystal Vale
project for a consideration of approximately EUR1.47 million. The Crystal Vale
development will consist of a main building containing 22 apartments and nine
lodges each containing 13 apartments (a total of 139 apartments). The total
build area will be approximately 13,600 square metres. Crystal Vale will also
contain its own leisure facilities including a swimming pool, restaurant, bar,
spa and tennis courts. The developer for the Crystal Vale project is Anglo-
Bulgarian Real Estate Limited (A-BRE). www.a-bre.com
Sales on phase 1 will be starting in March and detailed information on the
project will be found on (www.crystal-vale.com) from that date. The development
of subsequent phases will commence as and when satisfactory progress is reached
on the first phase.
A feature of the development is the construction of the lodges. These will be a
pre-fabricated Canadian timber based construction. This system incorporates a
very high degree of thermal insulation together with a heat recovery ventilation
system to produce accommodation that is cheap to heat and eco-friendly.
Construction began in autumn 2007 and the entire project is expected to be
completed towards the end of 2009 or early 2010. The first phase is expected to
be finished towards the end of 2008.
The Fund also purchased at the end of 2007 an additional plot of land (19,786
square metres, currently agricultural land), 2 km from Govedarci. This is
approximately 0.5 km from the new ski lifts that have been planned as part of
the Hyper Borovecs* project (Equest and Sultan of Oman hold a significant stake
in this project).
2. Razlog/Bansko
In 2007 the Fund finalised the purchase of 18,354 square metres of land (build
area 26,823 sq metres) in the ski areas around Razlog/Bansko for a total
consideration of approximately EUR7.4 million. The Fund has appointed Westhill
Investments (www.westhilluk.com) to develop the sites. Construction of the first
project (four phases) started in October 2007. Phase 1 comprises 43 luxuriously
appointed apartments, and four three-storey villa style homes of which 14
apartments have already been sold. We are awaiting the construction permit for
Phase 2 which will allow two more buildings comprising a total of a further 33
apartments. Phases 3 and 4 of the development will not commence until sales on
phases 1 and 2 have reached a satisfactory level. The project will eventually
include a bespoke members' clubhouse facility which will include its own spa
facility. The project looks out over the 4th and 5th fairways of the newly built
Ian Woosnam golf course which is expected to open in mid 2008. The project will
ultimately consist of 152 apartments and 6 houses.
The second project is close to Bansko. The original project has a construction
permit and envisages the development of a six-storey residential apartment
building with fitness and spa areas. The intention is eventually to create a
new level of quality and service in the resort. Currently we are leaving this
project in our land bank as we do not wish to develop too many properties in the
same area at the same time.
3. Plovdiv
The Fund finalised the purchases of a total of 12,151 square metres of land for
two projects in Plovdiv (total consideration EUR3.75 million) in early 2007.
The Fund currently holds planning permission to build a total of 12,712 square
metres.
The smaller project is located 2km from the city centre and is situated close to
the historic national rowing club.
The larger project comprises a disused tobacco factory located in the heart of
the city centre with views towards the old town. The development of eight
floors will provide a mixture of luxury apartments and commercial facilities.
Construction is expected to start in 2008. The Fund holds design visas on both
sites and is continuing to work with the architects and the developer, Westhill,
in order to progress planning permission on the two projects.
4. Sofia (Buysell - VitoshaVets, Simeonovo and Krustova Vada)
Progress continues on the six projects that the Fund is currently developing
with BuySell. The fund expects to incur some additional costs which are not
reflected in the current valuation, but hopes these will be offset by rising
sales prices. The projects are located in the Sofia suburbs of VitoshaVets,
Simeonovo and Krustova Vada. The first project was completed in 2007 while the
other five are expected to be completed during 2009. One of these projects is
still at foundation level. The build area for the six projects totals 95,382
square metres. The Fund also own a further 13,170 square metres of land in
Dragalevtsi. Total acquisition cost was EUR10.6 million for the exercise of the
options.
5. Veliko Tarnovo
The Fund purchased 13,443 square metres of land (build area of 26,886 sq metres)
in Veliko Tarnovo in 2007 for EUR2.5 million. This is a large centrally located
plot on which all relevant construction permits for a residential complex have
already been granted. This prime site is currently being held in the land bank
in order to benefit from rising land prices in the area. Veliko Tarnovo has
become a more attractive location for investment following accession of Bulgaria
and Romania to the EU as it is located on the crossroads of two pan European
international corridors and is the first major town south of the only bridge
across the Danube between Romania and Bulgaria. Growth prospects for the city
are expected to be good.
6. Dolna Banya
The Fund finalised the purchase of 48,548 square metres of land at the beginning
of 2007 around the spa town of Dolna Banya. These four sites were bought for a
total consideration of EUR1.67 million and will be kept in the land bank until
further notice.
Dolna Banya is famous for its geothermal springs and the Municipality of Dolna
Banya has recently announced that it has signed an agreement with a German group
who intend to convert and expand the current spa facilities into an upmarket
"Wellness Island". This will be a first for Bulgaria and is expected to comprise
a Health and Beauty Spa with restaurants and other sporting and recreational
facilities. With skiing close by (16km from the Borovecs ski lifts), plans to
build their own ski facilities and an 18 hole golf course under construction,
the Manager expects that property prices in Dolna Banya should perform well.
7. Sofia (Kambanite Bistritsa)
The Fund bought 100,713 square metres of land (build area of 100,713 square
metres) in Kambinite Bistritsa for EUR9.2 million. The land was purchased
during 2006 and was subsequently taken out of agricultural designation. The
Manager is working with architects to identify the best scheme for future
development.
The prices of finished apartments and villas in the area are increasing due to a
couple of new upmarket projects that are nearing completion. Nikmi Bulgaria, a
local developer, is nearing completion of a development of 52 large luxury
houses and has also commenced development of a hotel and leisure complex with a
retail element. The Fund intends to keep this in the land bank for the time
being. In the Manager's opinion, there are few plots of this size in Sofia that
are as well located and it expects the value of this site to continue to
increase substantially over time.
The Sofia subway extension to the Sofia Business Park is expected to be finished
in 2009 and will be within walking distance of the site. In addition, the
widening of the ring road and construction of two bridges over the ring road in
this area is nearly complete. The two bridges offer easy access to the Business
Park and make it easier to drive to the centre of town.
8. Banya (Razlog)
In 2006, the Fund purchased a total of 121,420 square metres of agricultural
land just outside the village of Banya (Razlog Municipality) for EUR2.76
million. The Fund appointed Winslow Developments to regulate and eventually
develop the project. The Banya project is expected to involve the building of a
first-class holiday village consisting of chalets and upscale apartments. The
village is expected to provide all the necessary facilities to ensure the
maximum comfort of its residents such as tennis courts, swimming pools, spa
centre, restaurant and bars. The land has now been taken out of agricultural
designation and the Manager expects to receive all necessary permits by mid
2008.
9. Other
The Fund has also purchased 16,357 square metres of land in relatively close
proximity to one of the Fund's existing projects. The cost of the acquiring the
land purchased to date is approximately EUR1 million. Once the purchase of the
remaining land intended for the plot is complete, the Fund will make a full
announcement as to the location.
*The Hyper Borovecs project is a government approved plan setting exact planning
guidelines for the development of the Borovecs area. Approximately EUR500
million is expected to be invested in the construction of new ski lifts,
apartments and hotels. In addition, a new structural plan for the Govedarci
area has been drawn up by the Samakov Municipality Planning Department. The
plan provides for a further 50 km of new ski runs and associated ski lifts
covering the area between Beli Iskar (Borovecs) Govedarci and Malyovista.
Grafico Azioni Lewis Charles Sofia Prop Fund (LSE:LCSS)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni Lewis Charles Sofia Prop Fund (LSE:LCSS)
Storico
Da Giu 2023 a Giu 2024
