PROJECT “AZOV VENICE”

 

Partner or Investor Brief

The Project: Land-development of289 hectares(Phase 1) and ca650 hectares(Phase 2) near Azov town, Rostov-on-Don region, Russia. Development improvements are: dredging, creation of water channels, road construction, electricity, dividing the territory into 1000 –1500 m2 land plots for sale for individual house and town-house construction, and bigger-sized land plots for sale to construction companies for individual residence and commercial properties.

 

Key advantages:

  • Situated in one of the best climate zones of Russia:   Azov district of Rostov-on-Don region. This allows to sell properties not  only to locals, but to customers from Northern and Eastern regions of Russia as well.
  • Azov Venice is the only affordable project in  Rostov-on-Don region with direct access to water-ways. Wealthy people from Rostov-on-Don LOVE to have a small yacht or a motor-boat, and are ready to pay for a property with water-parking possibility.
  • Excellent transport connections: 27 km to Rostov-on-Don by car, or 18 km to Rostov-on-Don city center by yacht or motor-boat.
  • 7 km to AzovSea– good possibilities for summer vacations.
  • Excellent fishing and hunting in the delta of river Don – in only 15-20 minutes by boat.
  • Side-by-side with town Azov creates good possibility to use all social and recreational infrastructure of Azov town:  supermarkets, schools, hospitals, night-clubs, ext.
  • The Project “Azov Venice” has good administrative  support on all levels: from Local Administration to Governor of the Rostov-on-Don region. 

Key figures:

  • A share from 25 to 50 % of the Project is offered to Partner or Investor, with a discount on current market price
  • Project  realization time: 5 years
  • Gross margin  47 % p.a. on invested capital
  • Pay-off  period 2,5 years

Short information on Rostov-on-Don area:

  • Situated  in the Southern administrative region of Russia, has the area of 100,8 thousand km2
  • Population  4276,4 thousand people, including 2876,3 thousand people living in cities and towns
  • Main cities and towns close to Azov Venice: Rostov-on-Don,1m925t people in the city and 2m160t people in Rostov-on-Don agglomeration; Azov town with  83t  people
  • Industrial and agricultural region of Russia with developed transport infrastructure
  • Economy of the region is growing by 7.3 % (2011 to 2010), with the same trend remaining in 2012
  • FDI is  active in the region: the biggest East-European plant of Coca-Cola, the Pepsi Frito-Lay plant, and some other enterprises have been started in the last 4-6 years.

 

 

 Key figures and Financial terms:

A share of 25 % to 50 % in Phase 1 of “Azov Venice” project is offered to a financial or strategic partner.

  • According to preliminary price estimation made      for Sberbank of Russia, the current price of 289 hectares  land-plot “as is” (without improvements and undivided into plots) is 35 000  rubles  = ca 900 EURO  per 100 m2, or ca 90 000  EURO per hectare (exchange rate as  of 28-04-2012: 1 EURO = 38,91 rubles).
  • 25 % to 50 % share in the Project if offered for purchase with discount from the current market price; the offer is      30 000 rubles per 100 m2:
  • 25 % share of Project value:216,8m rubles = ca   5 570 547 EURO.
  • 50 % share of Project value:433,5 mrubles = ca 11 141 095 EURO.

This price offer valid till 01 August 2012 or until new independent price-estimation is made.

 

  • Improvements to be made: dredging of territory; dividing the territory into residential plots of 800 –1500 m2, and into  commercial plots sized on request of the buyers; arrangement of rainwater storm drainage; construction of main inner roads; provision of electricity 15 KW  per residential property; preparation of necessary documentation.

 

  • Estimated costs of making of the improvements: 18 000 = ca 463 EURO per 100 m2, or 46360 EURO per hectare (exchange rate as of 28-04-2012).  Each party provides the funds necessary  for improvements proportionally to their share in the project. The improvements are financed step-by-step on agreed schedule.

 

  • Market price of residential land-plots after improvements are from 80 000 rubles to 180 000 rubles per100 m2, or in average 130 000 rubles = ca 3341 EURO per 100 m2, or 334 100 EURO per hectare. The sales of the land-plots to end-buyers is done step-by-step, within the period from 1 to  5 years.

 

  • Thus, the planed gross profit of the project is 130 000 – 30 000 – 18 000 = 82 000 rubles per100 m2= ca 2107 EURO per 100 m2, or 210 700 EURO per hectare. It provides an average 47 % gross margin  per annum on invested capital, taking into consideration the cash-flow with initial purchase of share in the Project, and further step-by-step      financing of improvements, as well as step-by-step sales of the improved land-plots (cash-flow estimation enclosed).

 

  • Project Azov Venice: cash – flow estimation: 50 % of project offered for sale.
Rate   EURO / ruble =

38,91

as   of 28   April 2012
   

unit

Year 1

Year 2

Year 3

Year 4

Year 5

Total

1

Price of land before development

rub /100 m2

30 000

2

Total   land area

100 m2

28 900

3

50   % project share (area equivalent)

100 m2

14 450

     433 500 000

4

Payment 50 % share of the project

rub

       433 500 000      433 500 000

(!) Further calculations are based on 50 % share of the project:

5

Area   to be developed

100 m2

                2 890                  2 890                2 890                2 890                2 890              14 450

6

Land   development costs

rub /100 m2

               18 000                18 000              18 000              18 000              18 000

7

Development costs total p.a.

rub

        52 020 000          52 020 000        52 020 000        52 020 000        52 020 000

8

Total   costs

rub

       485 520 000            52 020 000          52 020 000          52 020 000          52 020 000        693 600 000  

9

Developed land area for sale (*)

%

80%

10

Total land area for sale

100 m2

11 560

11

Average price of developed land-plots

rub /100 m2

             130 000              130 000            130 000            130 000            130 000

12

Sales of land-plots per year:

%

12%

17%

21%

25%

25%

100%

13

Sales   of land-plots:

100 m2

                1 387                  1 965                2 428                2 890                2 890              11 560

14

Sales of developed land-plots:

rub

       180 336 000          255 476 000        315 588 000        375 700 000        375 700 000     1 502 800 000  

15

Gross   margin p.a.

rub

–      305 184 000        203 456 000      263 568 000      323 680 000      323 680 000      809 200 000

16

Own funds in the project, end of year

rub

       305 184 000        101 728 000 –    161 840 000 –    485 520 000 –    809 200 000

17

Gross margin / Own funds, % p.a.

%

47,2%

 
(*) 20 % of area is deducted for inner roads,   electric cables, water channels, common zones, ext.

 Contact William Billeaud or Oleg Alpatkin for more information at +1 214 675 5539 or wbilleaud@lombardglobal.com