Sample Feasibility Study

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FEASIBILITY STUDY

Regarding the construction project of the residential neighborhoodSighisoara Imperial

1.0.INTRODUCTION

1.1. Purpose and objectives

This feasibility study aims at presenting the analysis of the proposed project for construction

of residential neighborhood Sighisoara Imperial, according to town plan, to a financing institution

to obtain necessary financing for this project, but also to support completing the application file

which was addressed to Sighisoara City by which we have asked to be taken over the road costs forthis project by the City Sighisoara.

The project provides a real estate development on land owned by AP Ideal Construction Ro

SRL in collaboration with a real estate builder, through the construction of 15 blocks, each with 28

apartments, medium-cost, at selling price of ~700 euro/sq.m. in order to be completed in phases,

starting in 2011.

This project will be achieved through an investment of the developer SC AP Ideal

Construction Ro SRL in collaboration with the builder-contractor company.

1.2. Short presentation of the developer

SC AP Ideal Construction Ro SRL is a private legal person, with registration number

J26/485/2011, unique registration code 28392079, based in Sighisoara, str. Mihai Eminescu nr.69,

Mures county, founded by two businessmen, with experience in property development, with

managerial skills based on both academic theory and practice on market, Mr. Assias Petros,

manager and owner of the company P. Assias Ideal Construction Ltd based in Cyprus and Mr. Nagy

Zoltan, manager and co-owner of Trustul Cre SA based in Cluj Napoca.

SC AP Ideal Construction Ro SRL has as main activity the property development and

promotion.

1.3. Documentary sources

Documentary sources for this feasibility study are:- Market study to determine the market prices of apartments in Sighisoara city, made in November

2010

- Cadastral plan of the property AP Ideal Construction Ro SRL and the property title of this land

with area of 38.000 sq.m.

Urban planning certificate for the project "Sighisoara Imperial issued by the Sighisoara city.

- Building project of the blocks, created by SC LIL Structural Desing SRL with coordinator Liviu

Cucu Ph.D. from Cluj Napoca.

- Estimate of expenses general summary including description and price of construction works for

the Project

- Urban Area Plan (PUZ) for the project "Sighisoara Imperial" drawn up by architect Mrs. Pojan

Camelia (Mures county planning office manager until 2006)- Geotechnical study prepared by SC Gemael Impex SRL Tg. Mures by geologist Magyari Gy. K.

and

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Streets and parkings construction project made by eng. Sandor Bardosi from SC Geoplan SRL

- Cooperation preliminary agreement between developer AP Ideal Construction Ro SRL, and the

builder-contractor company

all these ensuring the costs and main factors for the implementation of this project, with the

name "Sighisoara Imperial.

1.4. Study Summary

The developer SC AP Ideal Construction Ro SRL is planing to develop the land estate

located in Sighisoara, St. Mihai Viteazu (E 60), no. 94, by construction of a residential complex

Sighisoara Imperial comprising a total of 15 blocks with four floors, totaling 420 apartments,

access roads, parking lots, green areas.

1.5. Land

The land is located in Sighisoara (32,000 inhabitants), which provides administrative, legal

and employment opportunities for the surrounding villages (totaling 20,000 inhabitants). The

location is suitable for housing apartments.Sighisoara is a national and international popular tourist destination, with the only inhabited

medieval town in SE Europe, having on a radius of 100 kilometers the most important tourist

destinations in Transylvania. It is also a popular destination for cultural tourism, through the many

annual festivals (music, dance, traditions, historical traditions). Location is suitable for holiday

apartments.

The land has direct access to E 60, by right of servitude, a road width of 13.5 meters and a

length of 200 meters. This road crosses the shopping complex under construction. The land also

communicates with ANL district (street Miron Neagu). Location is suitable for service apartments.

Located across the street from the E 60 are Tarnava 1 and Tarnava 2 neighborhoods (the

largest residential districts of the city).

Adjoining lands are:

- North: commercial complex of 14,000 sqm (to be built by Midtown Retail SRL SC under the town

plan approved by the Local Council of Sighisoara), SC GST Automotive Safety Ro SRL factory and

factory SC CESIRO SA

East: SC CESIRO SA factory and private owned land areas

- South: private owned land and houses

West: the ANL district (Miron Neagu street).

The land has all utilities (electricity, water, sewer, gas, telephone), and is 80% leveled, in a

city with hilly relief.

Total land area is 38,000 square meters.

1.6. The apartments offered

Products offered for sale from the real estate project development, are studios, suites with

two rooms and apartments with three rooms.

These will be available to customers with:

- Electrical utilities, heating (with individual thermal heating), water supply network and gas

network, sanitary including sewage system.

- Will be equipped with thermal insulation materials according to national standards.

- Offered fresh finish (toilets, heating, kitchen), with medium-quality equipment.

Number of blocks provided in the Project: 15 blocks of similar capacity, and with the abilityof amending the layout of apartments per floor, and thus change the total number of apartments, and

also possibility of changing the last phase (5 blocks) of the project.

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Built area of the flats without common areas, is approx. 1,549 square meters on each block.

Built area of the flats including common areas, is approx. 1,724 square meters on each block

The above areas do not include balconies. Each apartment on floors 1-4 has a balcony with a

width of 1.40 m, with areas between 4.34 sqm and 7.44 sqm.

Number of apartments and their arrangement on the floors of each block:

- Thirteen - studios: 2 each on the ground floor and 1st floor, 3 studios each on floors 2, 3 and 4- Thirteen - apartments with two rooms: 2 each on the ground floor and 1st floor, 3 each at floors 2,

3 and 4

- Two - apartments with three rooms: one each on the ground floor and 1st floor

Total residential apartments: 195 suites (46% of total), 195 two room apartments (46%), 30

three-room apartments (8%).

1.7. Investment presentation

The project involves the construction of a total of 420 apartments, as follows:

- 15 blocks (ground floor + 4 floors), each in a choice of 28 apartments (13 studios, 13 two-room

apartments, 2 three-room apartments), with total usable area for each block of 1,179 sqm +balconies and common areas.

- provides the sharing of utilities and sanitation and a total of 336 parking spaces.

- provides the arrangement of green spaces, parks and playgrounds for children.

- also provides costs of management and promotion of investments.

Signing contract with the builder-contractor at a very competitive price is favored by the fact

that the economic situation of the country goes through a long period of crisis.

The proposed location: the land of the company in Sighisoara, located next to a shopping in

construction and the ANL blocks, opposite the Tarnava district, the largest district of blocks in the

city.

Selling is ensured by a large number of applications for apartments registered by the Town

Hall Sighisoara, and is confirmed by the evaluation report of the local market.

It is not to be neglected that it expects revenues in the summer of 2012, until which a

regulation of the credit conditions for consumers is expected and real estate market will be more

active.

1.8. Commissioning program

Duration of project execution: 20 months starting from November 2011 and end on August 2013.

The program will include four phases:a. Phase A - provides the construction of four blocks located in the center, starting in

November 2011 and completed in August 2012;

b. Phase B - provides for the construction of six blocks located in the east; starting in April

2012 and completed in October 2012

c. Phase C - provides for the construction of five blocks located in the west, with an option to

be started in October 2012 and completed in August 2013

d. Phase D - provides planning green areas, parks and playgrounds for children, starting for

phase A in July 2011 and completion in December 2011, and for phases B and C starting in May

2012 and completed in August 2013

Advances for apartments are expected to be received 3 months before their completion.Estimated maximum duration for sale of the apartments: 5 months after project completion.

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1.9. The investment financing plan

Total project value is of11,000,000 euro, which includes streets construction.

The above costs do not include VAT.

Covering the necessary liquidity for VAT not included above is provided in working capital.

So far, expenses have been made of 110,000 euro for the fulfillment of the studies and

approvals and permits for the project (initial expenses), including partial payment for the land andthe costs of land taxes, notary, further approvals and permits necessary for this project. The rest of

the amount financed by the partners will remain as working capital.

The developer will finance the project with the amount of 4,500,000 euro, with loans from

the financing institution, in three stages, according to the following table:

Date Amount financed Repayment of finance Refund accessories

End of 2011 A) 1,500,000 euro

January 2012 B) 1,400,000 euro

May 2012 C) 1,600,000 euro

December 2012 A) 1,500,000 euro 225,000 euro

January 2014 B) 1,400,000 euro 196,000 euro

May 2014 C) 1,600,000 euro 224,000 euro

Total Amount 4,500,000 euro 4,500,000 euro 645,000 euro

Repayment of debt and the amount estimated at 645,000 euro representing accessories, will

be made in stages. Amount of 225,000 euro forecasted as accessories for the loan of 1,500,000 euro,

calculated to ~ 15 % per year, is justified considering that it is unsecured loan without mortgage

guarantees and is required urgently for a short period, namely 12 months. The remaining credit will

be a line of credit for working capital, totaling 3,000,000 euro, which is more economical, withaccessories calculated to ~ 7 % and will be repaid within 24 months.

The remaining capital required, of 6,400,000 euro, will be provided by self-financing.

The developer had bought the land with price of 950,000 euro. Sale-purchase agreement

provided that the land was sold free of obligations, with the right to use from the date of signing,

and transfer of property rights will be made after paying the full value of the land until 21 December

2011.

1.10. Repayment of investment

Amounts funded by the developer associates will be reimbursed after completion of project

and selling of apartments, after covering all financial obligations.

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2.0 PRESENTATION OF DEVELOPER ECONOMIC AGENT

2.1. Economic agent identification data

AP Ideal Construction Ro SRL is a private equity company, with registration number

J26/485/2011, unique registration code 28392079, based in Sighisoara, Mures County, with the

main object of activity development and promotion of the Sighisoara Imperial project.The headquarters of the company is registered in Sighisoara, Str Mihai Eminescu nr.69,

Mures county, zip code 545400, and is constituted by Assias Petros, manager and owner of P.

Assias Ideal Construction Company Ltd based in Cyprus and by Nagy Zoltan, manager and co-

owner of Trustul Cre SA based in Cluj Napoca.

Contact phone:

Assias Petros: 00357 99612512 Cyprus

Nagy Zoltan 0040 733414444

SC AP Ideal Construction Ro SRL has as main activity the property development and

promotion.

2.2. Legal formPrivate company with limited liability.

With two partners and administrators, Assias Petros and Nagy Zoltan.

2.3. Field of activity

Company's main activity is: CAEN code 4110 property development (promotion)..

2.4. Structure of the shareholders (partners)

Assias Petros majority shareholder - administrator

Nagy Zoltan - minority shareholder administrator

3.0.INVESTMENT OVERVIEW

3.1. Existing Assets description, updated value remaining

On the land exist the following buildings: C158 electrical transformer building, and C139

industrial water tank along the retaining wall of the plot boundary. The old industrial buildings that

existed on this land were demolished.

The value of the land area, after the demolishing of old industrial buildings and changing of

destination from industrial area to residential area, has increased from 950,000 euro (buying price)to ~ 2,000,000 euro (estimated market price).

3.2. Investment Project - presentation and development costs

The project has 14% percent of occupied land area (POT), 0.68 factor of land area usage

(CUT).

The project involves the construction of 15 apartment blocks comprising a total of 420

apartments. Each block will have a total of 28 apartments, as follows:

- 13 studios

- 13 two-room apartments

- 2 three-rooms apartments

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Details of the apartments are presented in the following table:

Type of apartment Number of apartments /

block

Built area / apartment

[sqm]

Usable surface /

apartment

[sqm]

Studios 13 45,16 (Average) 36,45 (Average)

Two rooms apartments 13 54,60 (Average) 43,30

Three rooms apartments 2 87,71 71,11

Common areas per block 175,34

Technical and deposit spaces

per block

16 76,56

Total built area / block (without common areas): 1,549 sqm

Total built area / block (with common areas): 1, 724sqm

Total built area / neighborhood: 25,860 square meters

Areas of land that will be tabulated for each block: 1,013 sqm, composed of 326 sqm block footprintplus 407 sqm surrounding land plus 293 square representing the proportion of green areas.

Upon completion of the project, the land surface will be divided as follows:

Area allocated for the 15 blocks: 16,995 sqm

Total land area: 38,000 sqm

Cost calculations:

Cost of the land including demolition of existing buildings: 950,000 euro

Total cost of construction of the complex: 8,200,000 euro

Total cost of utilities infrastructure: 255,000 euro

Total cost for roads, parkings and green areas: 500,000 euro

Cost of management and promotion / complex: 450,000 euro

Cost of financing: 645,000 euro

Total estimated costs for the investment: 11,000,000 euro.

In these values:

- cost of administration and promotion expenses include marketing expenses, local taxes, notary,

land, inspections by authorities, expenditure on salaries and related contributions, site supervision

and are represented in detail in Annex cash flow

- VAT is not included

are not included costs of installation and commissioning of lifts (15,000 euro for each block), forwhich is stipulated the necessary space in the project (included in costs).

Thus, results:

Average total cost per builded sqm: 425.37 euro / sqm, including all costs (11,000,000 euro

total costs divided by 1724 sq.m / block x 15 blocks = 25.860 sq.m builded area).

3.3. Scheduling and implementation of investment schedule

The investment is expected to take place in four phases, with schedule presented above.

The first and partially the second phase must be assured by credit financing, after that, the self-

financing of the project will start to take place.

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3.4. The plan for financing the investment

Invested capital has the following composition:

a) The developer will participate with an amount of credit 4,580,000 euro (100,000 euro + 4,500,000

euro)

b) The project is self-financing (by sale of apartments completed in developing the whole complex)with the amount of 6,400,000 euro.

The possibility of self-financing is based on

- Good planning of the project (development costs come in stages and allow time to cover them by

income from the sale of apartments),

- Certainty that we have for quickly sale of the apartments (based on data and specialized studies),

- Competitive prices on a market with acute need for housing with average costs

- advantage of this period until the summer of 2012, when the first apartments will be completed, in

which is foreseen a regulation of credit conditions in favor of the consumers and an active real estate

market.

4.0.COMMERCIAL ANALYSIS

4.1. The apartments offered

Medium-cost apartments in finished condition, in an project with 14% POT, CUT 0.68. This

factor is much better compared to the conditions of surrounding area having generally POT of 40%

and CUT of 1.2.

The project provides for sharing of utilities and sanitation, access roads, and a number of car

parking spaces approximately equal to the number of apartments.

4.1.1. Presentation of provided apartments

Studios:

- two studios at ground floor, with areas of 54,85 and 41,13sq.meters, consisting of kitchen,

bathroom and living room without balcony

- two studios at first floor, with areas of 61,30 and 51,88sq.meters, consisting of kitchen, bathroom

and living room with balcony

- three studios each at floors 2, 3 and 4, with areas of 61.02, 56.66 and 51.88 square meters,

consisting of: kitchen, bathroom and living room with balcony.

Two-room apartments:- two apartments at ground floor, with areas of 64.51 and 55.43 square meters, consisting of kitchen,

bath, bedroom, living and hallway, without balcony

- two apartments at first floor, with areas of 76.41 and 65.39 square meters, consisting of kitchen,

bath, bedroom, living and hallway, with balcony

- three apartents each at floors 2,3 and 4, with areas of 58.96, 68.66 and 65.39 square meters,

consisting of kitchen, bath, bedroom, living and hallway, with balcony

Three-room apartments:

- one apartment at ground floor, with area of 93.75 square meters, consisting of kitchen, two

bathrooms, two bedrooms, living and hallway, without balcony

- one apartment on the 1st floor with area of 107.32 square meters, consisting of kitchen, twobathrooms, two bedrooms, living and hallway, with two balconies.

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We specify that the areas mentioned include common spaces and balconies.

4.1.2. The main features of the apartments offered

The apartments are sold equipped with toilets, water plants, sewage, gas, electricity and heat,

along with central heating and radiators, and equipped kitchen (sink and cabinet). Walls, flooring

and ceiling will be finished.

The advantages offered by this project: Fast construction with performant site organization

- Resistant to earthquakes

- Conventional construction

- Insulation according to European standards

- PVC windows, PVC profiles

- Excellent resistance to fire

- Reliability

- Modern design adaptable to market demand

- Development in CUT and PUT smaller than of the surrounding area.

- Optimal environment (job, banking, commercial stores, churches, schools, transportation)

4.1.3. The level of competitiveness on the apartments market

Given the timetable of the project in three phases, and that the 15 blocks have an identical

structure, there is the possibility in the third phase of changing the internal structure of the blocks, as

number and type of apartments, depending on the demand manifest for the first completed ten

blocks.

Taking also into consideration:

- Structural characteristics, particularly thermal and acoustic insulation, resistance to earthquakes

and to physical stress,

- That are new long-life buildings

- Areas of apartments, which are bigger than of the old apartment offered on the market,

- Lower prices reported to the apartments area,

we are assured that in terms of the level of competitiveness on the market, the apartments

offered by the Sighisoara Imperial project are superior to the existing offer.

4.1.4. Life Cycle

The estimated useful life of a building is approximately 40 years.

Since construction solution guarantees solidity of the walls, a resistance to earthquakes and

high winds, while being fireproof and heat and sound insulated, we can consider a superior lifetime.

4.2. Market and trade

Housing market in the city of Sighisoara is characterized by a high demand, with a high level

of prices compared with other cities of similar size in the county.

We can also specify that it is a city that recorded the lowest unemployment rate in Mures

county, with a large supply of jobs, both in industry and tourism and services, with tourism potential

in further development.

Sighisoara is a well-known tourist destination in Romania with potential of being the place

where can be expected sales of holiday apartments.

Sighisoara has registered a population growth which was not accompanied by an increase in

the number of homes in the last 20 years, especially of middle-income people who seek to purchaseapartments.

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4.2.1. Brief history of the evolution of demand and supply

Demand for housing is rising in Sighisoara, taking into account the number of inhabitants

and the age structure of population, and also the number of those with jobs in Sighisoara who come

from villages nearby Sighisoara.

Also, Sighisoara is a tourist destination, by the medieval castle, and the medieval fortificatedchurches of the surrounding area. On a 150 km radius are situated almost all tourist destinations in

Transylvania, the city is located on a European road (E 60) and on one of the major railroads of the

country, which connects the capital and the Western countries. Thus, the opportunity of demand for

real holiday apartments is real.

Regarding the offer, had not been constructed housing blocks for middle-income population

since 1990, except those built by the ANL, which are only for young families, for rent.

4.2.2. Analysis of demand and supply in domestic market

For this purpose a study was prepared on the real estate market in Sighisoara, in particular

with regard to the apartments (studios, two and three rooms), by SC SICo. SRL, by ANEVARassessor Eng Szep Stefan in November 2010. (Annex 2.)

From the conclusion of this study can be observed:

- Market value for apartments with more than a year after putting into operation is 770 euro /

sqm for studios, 780 euro / sqm for apartments with two rooms, and 720 euro / sqm for apartments

with three rooms.

Prices recommended for emergency sale, taking into account the current real estate market

conditions, are of 621 euro / sqm for studios, 626 euro / sqm for apartments with two rooms, and

578 euro / sqm for apartments with three rooms.

4.2.2.1. Defining the target market segments

Potential customers:

- Middle-income families in Sighisoara, as dwellings;

- High income people from all over the country, as holiday apartments

- High income people who buy apartments for renting.

We mention that there is currently a high demand for housing in the City of Sighisoara,

reflected in the fact that there were no blocks of flats built after 1990, except for a few blocks ANL

in 2003 and 2004, although the population increased by almost 10% only in the last five years.

There is a large number of applications for housing allocation from the City Townhall Sighisoara

(1,000 requests for ANL housing), which for financial reasons does not start a new ANL project.Also, the apartments built by ANL are available only for rent, and rents are roughly

equivalent to the monthly installment in case of buying on bank mortgage credit for long periods of

repayment. They are also available for only a certain part of town people and now have 100%

occupancy.

For this cause, we estimate that we can consider as potential customers the ANL current

tenants.

4.2.2.2. Estimated volume structure and domestic market demand

We believe that a structure of demand can be considered depending on the type of

apartments offered as follows:

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- For the 195 studios, with an average area of 45.16 sqm, we believe that potential customers are

singles, young families without children, or pensioners who prefer apartments with lower

maintenance costs.

- For the 195 apartments with two rooms, with an average area of 54.60 sqm, we believe that

potential customers are 1-2 children families with average incomes who can afford buying the

apartment by contracting bank loans, or people with high incomes or cash availability.

- For the 30 three-rooms apartments, with an average area of 87.71 sqm, potential customers arepeople with high incomes or big families.

4.2.2.3. Competition policy, competitive advantages

Competition at this moment is represented by:

- Main market: apartments located in buildings built during the years 1970-1990, with antiquated

equipment and which require improvements and renovations.

- Secondary market: houses, villas located in Sighisoara and surroundings, at much higher prices.

4.3. Commercial Management

Will be provided by qualified personnel, a local establishment, and by operation of all

facilities for the promotion offered by the market today.

Will be supported by juridical counsel and experience of Mr. Zoltan Nagy, administrator of

the company and by Mr. Evlogimenos Ploutarchos, adviser.

Sales strategy is based on the fact that potential customers to whom the offer is addressed are

conservatives and do not trust anticipated transactions, meaning transaction before construction of

the blocks.

Thus, price policy will be adopted at appropriate time after a rigorous study that will allow

rapid sale, to ensure the planned profitability in a way that does not require their modification in

time.

On the other hand, are stipulated advance cashings of a 12% share of total price, starting

three months before completion. This advance payment will be stimulated by a price decline of 5%

on the price offered after completion of the apartments.

In order to maintain the costs, respectively prices of the sale-buy transaction in attractive

limits, will not proceed with the possibility of choosing the ceramic tiles, bathrooms, color and

extras by the client. This will be achieved by separate contract for services with additional costs.

4.4. Promotion and distribution

4.4.1. Methods used to promote

To promote the offer will be used these means of promotion:

- Advertisements in local and national newspapers, local radio and television stations;

- Participation in programs on local radio and television;

- Posted advertisements on the Internet, through sites that specialize in real estate transactions;

- Creation of a web page, on which to be presented the offer, stages of the project, other technical

details, and contact details where additional information may be requested;

- Posting of advertisements on billboards in the city and neighboring towns;

- Working with real estate agents across the country;

- Personal contacts.

4.4.2. Distribution Channels

- Local office

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- Web Site

- Brochures

- Advertisements in magazines

4.4.3. Expenses for sale promotion

Expenses for promotion will depend on the methods used to promote and the time required

for selling the apartments. For this purpose was provided to the project budget amount of 100,000euro. This cost is included in the cost of administration.

4.5. The selling price of apartments

4.5.1. Market Prices

According to market research, market prices of apartments in Sighisoara, in terms of

payment in cash or through bank on the subscription, are between 720 and 723 euro / sqm for a

three-room apartment, between 723 and 783 euro / sqm for apartments with two rooms, and between

742 and 776 euro / sqm for suites.

Also, their surfaces are approximately 30 square meters for a studio, 60 square metersapartment with two rooms and 70-80 square meters for an apartment with three rooms.

Follows, taking into account minimum values, for apartments older than 20 years, a market

price of around 24,000 euro for a studio of 30 sqm, 48,000 euro for an apartment with two rooms of

60 sqm and 68,000 euro for a three room apartment of 70 sqm.

4.5.2. Prices charged

We estimate that the obtainable medium prices, taking into account the market study,

calculated at the average area of the types of apartments, are the following:

- For studios: ~31,612 euro, representing 700 euro / sqm and for the smaller studios with 26.922

euro

- For apartments with two rooms: 38,220 euro, representing 700 euro / sqm and for the smaller

apartments with 35,980 euro

- For apartments with three rooms: 61,397 euro, representing 700 euro / sqm.

It should be noted that:

a) the area of apartments is higher than the old apartment offered on the market

b) the common areas are the minimal possible as are provided by the architectural drawings

c) the benefits of a new building, provided with green spaces and parking spaces.

It can be considered that in the conditions in which is required a quick selling of the

apartments, prices are very good in comparison with market prices. It may be considered even thepossibility of applying a lower gross profitability rate, down to 20%. In this case the medium prices

will be:

- For studios: 23,032 euro, representing 510 euro / sqm.

- For apartments with two rooms: 27,846 euro, representing 510 euro / sqm

- For apartments with three rooms: 44,732 euro, representing 510 euro / sqm.

Final prices will be set according to market demand, location inside the block, orientation,

existing balconies, location of the block in the neighborhood, taking over the common areas.

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5.0.OPERATIONAL ANALYSIS

5.1. The Developer

- Has bought the land provided for the project, with an area of 38,000 square meters, from SC

Nicovala SA by certified sale-purchase contract.

Has ensured the demolition of old industrial buildings and release of the land to be in use of the

project

- Will pay the value of the land until 21 December 2011

- Will take over project management.

- Will sign and fulfill a construction services contract with the builder-contractor that contains

conditions, estimates quantities and values, service and technical presentation, as annexes to the

contract.

- Will provide the necessary funding sources for the Project, inclusive by credit

Will be financier of the carried out works (taken by "Inside Payment Certificate"). Will be the beneficiary (owner) of the constructions undertaken through this project

- Will represent the project to the authorities

- Will provide qualified staff for offices and inspectorate - site supervision.

Will ensure the promotion and marketing activities of the apartments by opening an office in

Sighisoara

- Will ensure communication with local authorities of the City of Sighisoara

- Will make efforts to obtain consent from Sighisoara Municipality for the construction of roads,

parking, public lighting financing to be subsidized from the budget of Sighisoara City Hall

The performance of the developer company of the Sighisoara Imperial project is provided

by the active presence through administration of its partners, as presented by Curriculum Vitae

presented in the appendix.

6.0.MANAGEMENT OF THE ECONOMIC AGENT

6.1. Business strategy

To implement this project, was scheduled to be deployed in two main phases.

The first phase includes the development of four blocks and related infrastructure during

2011-2012, in the center of the land, in order to benefit the most problematic area in relation to theirposition and the most favorable in relation to this activity without after their completion to be

disturbed by the works on the constructions sites.

The most problematic area in relation to their position refers to the fact that is bordered by

the industrial park more than by the rest of the city. This choice was made expecting that the

drawback will be covered by the fact that initial request will be acute.

The second phase includes the development of nine blocks in the years 2012-2013, of which

the last 5 will have the option to be modified as project, higher, creating a greater number of

apartments. These changes will be made depending on the reaction (demand) of the market.

6.1.1. Strategic Objectives

Exploitation of this opportunity now offered to real estate development, namely the best

prices for building materials, available human resources, and when the supply of products (finished

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apartments) in an active trading market stimulated by good credit conditions and increased demand

existing after over three years of long stagnation.

6.1.2. Measures necessary to accomplish the objectives

6.1.2.1. In order to achieve the project, these objectives have been met:

- Study to determine the current market price of apartments in Sighisoara, prepared by SC S.I.Co.

SRL in November 2010.

- Providing the necessary space for project development and was signed the contract of purchase for

the land (with SC Nicovala SA)

- Demolition planning certificate

- Construction planning certificate

- Technical project of blocks execution (obtained from SC LIL Structural Design SRL)

- Geotechnical survey of the land (by SC Gemael Impex)

- Urban Area Plan (by SC Pac Proiect SRL)

- All approvals necessary to receive the demolition permit

- Topographical survey of the land (by PFA Balla Lehel)- The construction of roads and parking lots project (by SC Geoplan SRL)

- Cooperation agreement with the builder-contractor that fixes terms and prices for the development

of the project

- Obtaining a demolition permit from Sighisoara City

- Urban Area Plan approved by Sighisoara City

- Obtaining necessary approvals for receiving construction permit

6.1.2.2. Remain to be achieved the following:

- Obtaining the building permit from Sighisoara City

- Obtaining financing through a loan without mortgage from a financing institution

Signing a contract for construction services with the builder-contractor

- Obtaining financing through line of credit (mortgage loan) from an financing institution

- Development of the project itself.

6.2. Management of the company and quality of the management team

The management of the company will be ensured by the two partners and administrators of

SC AP Ideal Construction Ro SRL, Mr Petros Assias and Mr Zoltan Nagy (CVs attached), together

with regional adviser Mr. Evlogimenos Ploutarchos.

7.0.FINANCIAL ANALYSIS

7.1. The present situation

SC AP Ideal Construction Ro SRL has headquarters based in Sighisoara. The two associates

have financed the company with an credit in amount of 80,000 euro. It should be noted that for the

design works, studies and approvals obtained, as presented in art. 6.1.2.1. have been spent 30,000

euro, representing initial expenses before the establishment of the company.

7.2. Assessment of future activity

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For the presentation of future activity of the company, several scenarios were prepared, of

which will be presented the version with 15 blocks having identical structure, for which is foreseen

that the cashing of revenues to begin in May 2012 by sale of the apartments at local market prices as

are listed on page 10 of market study prepared in November 2010 by SC SICo SRL.

The company is also considering the possibility of amending the project in favor of more

efficient exploitation of the western land by increasing the height of buildings to be completed in the

last stage, possibility in relation to the evolution of market demand.

7.2.1. Results account projection

In order to present incomes and expenses projected to be achieved by developing the project,

the company has prepared a monthly detailed cash flow study, which is an annex to this study.

Below we summarize the main elements of this study.

7.2.1.1. Revenue projection on activities

The company foresees investitions during the project as follows:

- From the funding obtained: amount of 4,600,000 million euro, of which:- 100,000 euro by shareholders contribution in 2011 (and 30,000 euro initial expenses)

- 1,500,000 euro in end of year 2011, non-mortgage credit with duration of 12 months

- 1,400,000 euro in January 2012, mortgage loan with duration of 24 months

- 1,600,000 euro in May 2012, mortgage loan with duration of 24 months

- 6,400,000 euro by self-financing through the sale of apartments, parking and green space

7.2.1.2. Projection of expenditure by activities

7.2.1.2.1. Forecast of operating expenditure

Operating expenses were forecasted, according to the costs presented in chapter 3.2., for the

period during Decembrie 2011 - August 2014, i.e. 21 months.

The project also includes administrative and marketing expenses until finish of the selling of

apartments, and insurance and warranty obligations after the sale, over a period of 34 months.

Estimated value of operating expenses for the development of the project is 10,355,000 euro.

7.2.1.2.2. Forecast of financial expenses

Projected financial expenses consist of:

- Payment of fees and bank interest (accessories) at the end of financing period, totaling 645,000

euro, respectively:

- 225,000 euro for the 1,500,000 euro credit for 12 months with accessories of 15% per year

- 196,000 euro for the 1,400,000 euro credit for 24 months with accessories of 7% / year

- 224,000 euro for the 1,600,000 euro credit for 24 months with accessories of 7% / year

- 21,000 euro for the 100,000 euro credit for 36 months with accessories of 7% / year (this amount is

not included in expenses, will be covered only from the profit)

- Repayment of the loans, amounting to 4,600,000 Euro.

7.2.1.3. Forecast of profits and dividend policy

The company forecasts gaining incomes from activity starting in May 2012, revenues whichwill be by default destined for self-financing building activities until August 2013, when it is

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scheduled completion of work, and continue to fund the administrative and marketing activities until

the end of project development.

Thus, is forecasted to be obtained profits that could be intended for dividend payment

starting with October 2013, ie after full payment of loans.

Company's dividend policy provides that dividends to be paid to the partners at the end of

project development.

7.2.2. Projection of working capital needs

Following the acquisition of land for construction, the company foresees the necessity of

achieving a revolving fund of 3,100,000 euro, meaning that from the amount of 4,600,000 euro as

shown above will be decreased the amount representing the value of land and the amount of initial

expenses.

7.2.3. Cash flow projection

Cash flow is presented in the appendix named cash flow, with the following observations:

- The costs are well defined and schedule of payments is based on builder-contractor's schedule ofpayments, so do not bear another interpretation

- The third tranche of funding, namely the 1,600,000 euro loan will be in the form of covering the

risk of errors in the projection of incomes.

- Income projections are based on specialized studies related to regional market conditions during

the full crisis period with trading prices in November 2010.

As expenses were taken into account, apart from the estimates submitted by the builder-contractor,

representing the hard-cost, also expenses of administration, marketing and local government taxes

and fees, land registry and notary, representing soft-cost.

- In cash flow calculations were detailed presented main VAT charges and their influence over the

analyzed period. In this sense was considered a period, in which by adjustment the company has the

right to receive refund of VAT, larger than the period stipulated in the tax code (45 days), i.e. a

period of 90 days, which will include any delays due to objective and subjective reasons. Also, we

wish to mention that in the calculation of VAT invoicing was considered a 5% level, which the Tax

Code provides for individuals which benefit from this reduction in VAT for the first time.

7.2.4. Sensitivity and Risk Analysis (SWOT analysis)

a) Strengths of the project:

- Fulfilling the objectives as presented in Section 6.1.2.1. Their fulfillment ensures a gained time

and also a clearer vision of the project.- Signing of the preliminary agreement with the builder-contractor ensures settled and very good

costs (low prices of construction materials market in this period) based on which was made this

feasibility study. Also ensures the collaboration with a builder who has credibility in fulfilling the

time schedule and quality assurance.

- Concluding a contract with the builder-contractor will ensure construction costs independent of

fluctuations in market prices of building materials.

- Signing the contract of sale and purchase of land, which gives us very good cost for the land

needed for the project, and a superb location from all points of view (utility facilities, leveled,

friendly environment, accessible).

- Currently non-existence of other city land areas on which to be built blocks in similar favorable

conditions.- Obtaining a demolition contract with zero costs, based on the waste materials recovery by the

demolition company.

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Companys associates and administrators experience in construction, as evidenced by Annex.

- The developer is a newly created company, with activities focusing on this project, without

negative previous.

- Capital contribution of the associates, which includes contribution before the establishment of the

company (30,000 euro) and 100,000 euro in funding along with starting the economic activity of the

company.

- Short-term building of the constructions, with low costs and the fact that fixed costs are reducedtaking into consideration the development period.

- Competitive prices for completed apartments.

- Feasibility study based on well-defined data and an analytic cash flow containing most of the

expenditure and income on the basis of specialized documentation with a result that allows

adjustments (capital resources) for the entire duration of the project, also for the pessimistic case.

- the ability to stop development of the project phases B and C, that is to be developed only four

blocks, with forecasted profitability of 19%, if the sale of apartments is not according to the

forecast. We mention that in this case 70% of the land remains unbuilt, available for other projects.

- must mention that the great advantage of this project that the development is provided in phases,

such the investment can be controlled.

b) Weaknesses

- That is a newly founded company, and cannot present a prior experience, being based only on

previous experience of associates - administrators.

- Amount of financial contribution of the developer smaller than usual conditions required by the

lending companies

c) Opportunities

- The main opportunity is given by the unsaturated market with a shortage of new apartments

- Existing customers, both for residential and for business or holiday apartments

- The possibility to charge a reduced VAT rate of 5%, which helps us maintain competitive prices

- The emergence of better credit conditions offered by banks for mortgage loans

The fact that Sighisoara registers the lowest unemployment rate in Mures County, so there are jobs

and population with income allowing the purchase of apartments

- Lack of competition from other developers in the construction of houses in Sighisoara City

The possibility that the road construction costs to be taken by Sighisoara City

- The existence of an easement right on the access road with a width of 13.5 meters towards street

Mihai Viteazu (E60), according to the contract to purchase that land and land register extracts

- Sale of green areas and parking spaces represents revenues that are not included in this study

- Increase of land use efficiency by increasing the height of the block (higher CUT) in thealternative variant presented by PUZ.

d) Threats

- Lack of budget upward adjustment of the "First House" program in the second half of 2011, the

program by which the state encourages the sale of apartments

- Changes in currency exchange rates for leu-euro by increasing value of the euro will lead to

increased lei prices of the apartments

- To achieve less than 70% of the sales forecasts volume of apartments made in the first phase of

construction, ie for the period May 2012-November 2012

- Changes to VAT legislation on upward- Appearance of other developers to offer apartments more quickly than those achieved by this

project (diminished possibility considering their lack at all in the last twenty years).

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8.0. FEASIBILITY STUDY CONCLUSIONS

The project aims to build a residential neighborhood, easily marketable apartment, fresh

finish, good quality, at a price lower than the market prices, with high profitability.

The project will be made in phases, and allows a high profitability and this giving us the

possibility to change the apartments price policy, volume of investment (to make only first phase)and to insure enough cashing for eventually negative tolerance of the incomes.

The project has the great advantage of rapid completion, of a volume of 420 apartments.

Repayment of investment will come quickly, and is provided by the large existing demand

for apartments and holiday homes in Sighisoara, and the opportunity to practice a competitive price.

The project itself has taken account of market demand, relative to the number of rooms,

apartment size and configuration, and build quality suitable with current regional requirements .

The project represents a potential opportunity in financial terms (high yield) and commercial

return (project completion and repayment of investment in very short term).

Made by

Administrators of SC AP Ideal Construction Ro SRL

Eng Assias Petros

Eng Nagy Zoltan

through collaboration with Evlogimenos Ploutarchos.

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Sample Feasibility Study

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Transcript of Sample Feasibility Study