Investment Strategy

The Board is seeking to create a diverse portfolio of opportunistic and value-added Bulgarian real estate assets, including development land, partially completed construction projects and completed buildings. The portfolio may comprise direct holdings of real estate assets, as well as investments in collective investment vehicles, direct and indirect investments and co-investments in distressed companies holding real estate and real estate assets that need restructuring and further financing, and controlling and non-controlling stakes in real estate companies listed on regulated stock exchanges invested primarily in Bulgaria. The focus will be Bulgaria but exceptionally the Board may look at real estate opportunities and investments in neighbouring countries. The Board will strive to build a portfolio in order to maximise value for its Shareholders.

The Board will seek to invest in the following real estate opportunities:

• Distressed residential projects, primarily in the largest cities in Bulgaria – Sofia, Plovdiv, Varna and Burgas, which are either completed or close to completion and capable of generating sales revenue within 12 months from the initial investment;
• Commercial buildings, primarily in Sofia, with opportunities to improve occupancy through active asset management: for example, renovation, remodeling, remarketing, operational management and optimisation of cost structure;
• Hotels and holiday homes with opportunities to improve operations and cost structure; and
• Investments in distressed companies and assets that need restructuring and further financing, capable of offering a high growth potential.The targeted size of each individual investment is anticipated to be in the range 5-20 per cent of the overall funds under management. The Company intends to use gearing levels of up to 70 per cent loan to value when acquiring real estate assets. Except in the event of a reverse takeover, the proposed asset allocation of the respective types of direct and/or indirect real estate investment averaged on a fully invested basis is:
• 40 – 60 per cent of funds to be invested in residential projects of a minimum lot size of 20 units;
• 20 – 40 per cent of funds to be invested in commercial property with a minimum gross lettable area of 2,000 per square metre; and
• 10 – 30 per cent of funds to be invested in apartments hotels and holiday homes, each investment with a minimum of 20 rooms or units.

Initially, the Board’s focus will be seeking companies where there may be a number of opportunities to acquire interests in undervalued properties. The Company may be both an active and a passive investor depending on the nature of the individual investments. The Board will place no minimum or maximum limit on the length of time that any property/investment may be held. The Board intends to retain sufficient cash resources for prudent management of the Company’s working capital requirements.The Board will however ensure that any investments meet criteria designed to mitigate risks. There will be no limit on the number of properties or investments into which the Company may invest, and the Company’s financial resources may be invested in a number of propositions or in just one investment. The Board believes that the status of the Company as a property investment company will enable it to fund real estate investments or acquisitions using a mixture of cash, equity and/or debt and intends to actively monitor these investments.