The Black Sea Property Fund Limited

For immediate release
9 May 2007

Further land acquisition, resolution of claim and trading update

The Black Sea Property Fund Limited is pleased to report on progress to 9 May 2007.

Key points

New land purchase at Borovets

The Fund is pleased to announce the signing of a conditional preliminary contract to acquire development land in the area of Borovets. The total purchase price is €10,536,685. Completion of the purchase is conditional on planning permission being received and further legal due diligence being completed. Borovets is Bulgaria's oldest winter resort and is located 61 kilometres from Sofia. There are plans to expand and update the resort as part of the Super Borovets project and, given recent investments in the region by other significant investors, the Manager believes the area has good potential.

The Fund expects to commit total equity of around €11.5 million (including the land purchase). The total development cost (including the land purchase) is expected to be in the region of €55 million. Current "as-built" sale prices, based on comparable properties selling in the region, are estimated by the Manager at €1,150 per square metre including VAT, giving a gross development value for the residential element of the development of €70 million. The associated commercial and hotel elements of the site add a further estimated €12 million, giving a gross development value for the entire site in the region of €82 million.

The Fund intends to develop the land in planned phases into a residential resort complex with associated commercial space and a hotel, for which the Manager will seek to procure a well respected operator. Construction will be financed primarily through a debt finance facility with a local bank, together with deposits from off-plan sales.

Resolution of dispute at original Borovets site

The Fund is pleased to report that it has resolved the complications relating to its original investment at Borovets. This site was affected by a third party restitution claim and, whilst the Fund had received a legal opinion that the claim has no merit, the time required to correct this by going to court meant that proceeding with the site was not attractive. The Fund has therefore agreed to exchange that plot of land for another site in the same area.

This site comprises up to 40,500 square metres of development land, the exact size depending on the detailed zoning plan that will be put in place prior to completion. The purchase price is €85 per square metre of land, equal to a maximum of €3,442,500. The deposit paid by the Fund for the original Borovets site will be credited against the purchase price. The price secured for this site, at €85 per square metre, is €3 per square metre less than that agreed for the Fund's original Borovets site and is, in the Manager's opinion, better located. Completion of the purchase is conditional, amongst other things, on planning permission being obtained and meeting certain minimum standards.

Portfolio Update

The Fund is currently financing four developments by third party developers and has acquired or invested in land for development in three further locations. The portfolio is well diversified, consisting of developments in two ski regions (Borovets and Pamporovo), on the Black Sea coast and in the capital Sofia. The level of each investment is set out in the tables below.

Third party developments

Development (financings) Build Area (m2) Number of Units Cash Investment
Potential profit at
Colliers valuations*
Obzor (Black Sea coast) 27,050 257 5,274,750 5,400,000
Kavarna (Black Sea coast) 24,798 230 4,649,625 3,800,000
Magnolia (Pamporovo ski region) 24,319 348 5,612,825 5,100,000
Nikea Park (Black Sea coast) 8,013 118 4,006,604 500,000
Total 19,543,804 14,800,000

* The figures in the table are based on all of the units financed by the Fund being sold at Colliers International's valuations as at 30 March 2007. If these profits are achieved on these developments, it would equate to 4.0 pence per share (at an exchange rate of €1.4707 to £1). This should not be regarded as a profit forecast since it assumes the sale of all units at the third party valuation, which may not occur. Potential profit figures assume likely sales costs and 15% tax. The figures for Obzor and Kavarna assume that the 90% IRR cap applicable to those investments is not breached.

Land investment/purchases

Land investment/
Estimated number of
Units if
Purchase price/
investment value
Current land valuation
Byala (Black Sea coast) Up to 622 9,709,200 16,020,180
Malinova Dolina (Sofia) Up to 215 4,000,000 4,000,000**
Borovets ski
Up to 1301 13,979,185 13,979,185**
Total 27,688,385 33,999,365

*The numbers of units to be built if the sites are developed are based on current zoning requirements and the Manager's expectations and are calculated based on an average unit size of 80m2.

** These sites were acquired in the last three months and are currently valued at cost.

Sales pipeline

The Manager is working to ensure that a steady stream of the Fund's units is brought onto the market. The table below illustrates the actual and expected release dates for the various developments.

Development Number of units Anticipated or actual
start of marketing
Magnolia 348 September 2006
Obzor 257 November 2006
Nikea Park 118 May 2007
Kavarna 230 July 2007
Sofia Up to 215* October 2007
Borovets Up to 1301* Q2 2008
Byala Up to 622* Q3/4 2008

*estimated based on average unit size of 80m2.

61 units have been reserved at Obzor (approximately 50% of the units released for sale to date). Sales at Magnolia have been suspended while the developer negotiates a potential bulk sale of the entire development.

The Fund expects to announce its preliminary results for the year ended 31 December 2006 on Thursday 10 May 2007.


Development Capital Management     020 7355 7600
Roger Hornett
Andrew Mitchell

Buchanan Communications     020 7466 5000
Charles Ryland
Isabel Podda

Numis Securities Ltd     020 7260 1000
Bruce Garrow
Iain McDonald