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Victoria Park
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Description: Description: A plot of land equal to 4851 m2. Located in the territory of Sochi National Park, it is in the middle of Krasnaya Polyana settlement at the border with Caucasian biosphere reserve and close to the mountain skiing routes, which are within 2-3.5 km. Status of use: 49 year rental agreement with Sochi National Park Administration Intended use/purpose: To develop a centre for tourism. According to the project there will be following buildings constructed: a hotel with 15 rooms, 5 cottages and a sauna complex. Total building up area according to the project: 3005,57 m2, including 831,4 m2 of passages and parking spaces at the plot. Total construction area according to the project: 3500 m2 Building density: 24%. Owner of the project: A Limited Company whose name will be disclosed after NCND signature with Eurotest London Limited. Potential profit: This depends upon the use of the area and the marketing policy. The average profit from one room in peak season in similar centres is up to $200 per day and a cottage is $1100 per day. In the summer period the profits are $100 and $350 per day respectively. The potential profit is up to $1,000,000 per annum. Considering payments for redemption and building (max $2000/ per m2) – $12,000,000 in total the profitability of investment will be 8,3% per year. Total investment value: $12,075,000 Financial projections: • $5,000,000 = 100% of Limited Company shares (Project value) • $7,000,000 = approximate expenses for the building of hotel with total area of 3500 m2, calculating as $2,000 per m2 at the present time. 3500 m2 is not a final size. At present all project documentation is under consideration and there is a possibility to make changes to best satisfy the investor’s exact requirements. Additional information on the estimated financial data is available upon request after NCND signature. • $75,000 (1,5% from the project value) – consulting and management fees for middlemen. • There is a possibility to reduce the to $1500 per m2. So, the total investment value may be reduced to $10.500.000. Details of the scheme will be disclosed upon request after NCND signature. Payback scenarios and possible risks: Scenario 1: Exploitation with minimisation of taxable income. In the first year the company shall work according to the terms of the standard taxation scheme as a corporate tax payer (24%) and VAT tax payer (18%). Using efficient prime costs and functional management it is necessary to minimise a taxable income and to provide VAT tax return which will be paid during the building works (evaluated as up to $500,000). Then it is necessary to optimise the business, forming several separate points of income with an annual turnover of $850,000 for the transfer to reductive taxation scheme. Income withdrawal will occur through annual dividends. Providing there is occupancy up to 50% during off-season and using effective marketing strategies there is the opportunity to increase the income from $1,000,000 to $1,400,000 per annum. Possible risks: standard – legislation alterations, political situation changes and so on. Also a high competition level related with Sochi 2014 Olympic Games. Scenario 2: Exploitation of hotel complex as private tourist residence complex In this case it is necessary to build 5 private cottages with a size of 180 m2 each. The value of each cottage will be from $720,000 (estimated as $4000 per m2). Today there are a number of cottages on sale in Krasnaya Polyna costing $6000-7000 per m2. The parameters of hotel section correspond with dwelling complex of 15 apartments per 100-110 m2 (in total up to 2500 m2). They may be sold today as a whole share hold property for $4000 per m2. So, the joint gain may be up to $13,600,000 which is 29,5% profitability for 1,5 years, but good marketing is essential. It is also possible to set up a complex maintenance. In elite complexes the maintenance costs up to $13 per 1m2. According to experts opinion the value of maintenance in given area may be $5-6 per 1m2 which adds $120,000-150,000 to annual gain. Positive aspects of this scenario consist in quick return of expenses. Difficulties – it is necessary to find 20 buyers for the apartments. Scenario 3: Instant sale after building completion In this case the period of buyer search may last up to 3 months and the profitability of the project will be up to 17-20%. It may increase to 40% by 2012 considering the wear of funds. Visible positive aspect of this scenario is quite quick return of investments. Negative aspect – it is difficult to find a local buyer for the business with 2-3 years payback period. Occupancy facts: 100% from the middle of December till the end of February (approximately 75 days per year). In off-season the occupancy is approximately 40%. Highlights: The plot of land is located in the same area as the 2014 Sochi Olympic Games. The land is within 2-3.5 km from mountain skiing routes. Before the Olympic Games this centre will be used to accommodate of holiday makers: December-March – winter activities (mountain skiing), April-November – summer activities (hunting, fishing, rafting and mountain tourism). Also the centre may be used for seminars, conferences and other events. Benefits: The plot is richly planted with century coniferous and deciduous trees. The federal highway runs along Sochi-Krasnaya Polyana. There are tourist centres “Krasnaya Polyana” and “Peak-hotel” with a helipad nearby. The plot is included into the future development plans of the Krasnaya Polyana settlement. At present this plot is not included in the Olympic sites placing zone. Presumably, the liquidity of this site may rise by 75-100%. Concerns: There is a small natural decline with overfall of 8 meters Technical condition: The stage of readiness of the project is 90%. The agreement is on its final stage –obtaining of technical approval and installation of communications. At present communications are installed up to the boundary of the plot. Project realisation period: max. 17 months Possible way of transaction: Sale of 100% of project initiator’s shares which is $5,000,000 and project value equivalent. |
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