Real estate investment with a short-term investment horizon and an attractive return potential.
The Czech Republic is one of the largest, and at the same time one of the most stable markets in new Europe: Since accession to the EU the Czech Republic could exhibit over the years a stronger economic growth than many countries in Western Europe. After an interruption of this growth due to the economic crisis, the Czech Republic observed in 2010/11 again a higher growth than some of its neighbours. For the coming years growth is expected to outperform the EU average again.
At the same time the Czech Republic has a much lower debt level than other European countries: The external debt in the Czech Republic is about 50 % of GDP – in the EU average the external debt is about 80%. The inflation rate in the Czech Republic is currently around 2 % – and is thereby lower than in most other countries in “New Europe”.
PRAGUE – A FINANCIAL AND ECONOMIC CENTRE IN CENTRAL EUROPE
Prague is the financial- and economic centre in the Czech Republic: About 2,3 million people in the catchment area of Prague – more than 20 % of the total population in the Czech Republic. With an unemployment rate under 3 %, the employment rate in Prague is not only higher than in the Czech Republic, it is also higher than in many other cities in Europe.
WHY INVEST IN REAL ESTATE IN PRAGUE? ATTRACTIVE MARKET CONDITIONS FOR REAL ESTATE INVESTMENTS
Prague Prime Homes offers investors the opportunity, to become a co-owner of a selected apartment building in the exciting city of Prague. Investors participate not only in the profit from the re- development of the apartment building, but also on a possible value appreciation upon the sale of the property.
The project Ovenecka 33 is located in Prague Bubenec. It is a former hotel that is been transformed into an apartment building with non-residential units in the ground floor. As part of the reconstruction it is also planned to realize an extension of the building and an underground garage for 29 cars. The property will have a total net area of around 2,850 sqm. The building will be acquired in the current state, Prague Home Invest will take care of the complete reconstruction of the building and will also take the lead in the course of the subsequent sale of the individual units. In total it is planned to create 19 apartments on the upper floors plus commercial areas on the ground floor. The completion of the re-development and sale-off of the apartments is scheduled for the third quarter of 2015, reflecting an investment horizon of around 24 months.
Short-term investment horizon of around 24 months.
Expected return potential from the sale of the apartments of around 23% in total Participation in form of a shareholding in the project company
Minimum investment of EUR 100,000
WHAT YOU SHOULD NOTE AS INVESTOR
- Even though real estates represent actual values, there still may market-related factors, which affect the asset, financial and earning position of the project. Please study the risk factors listed on page 9.
- Even though figures are stated in EUR the purchase price/selling price is CZK denominated andcurrency fluctuations may have a significant impact on your return in EUR.
- Prague Prime Homes Management (PPH Management) receives a fixed fee during the project life-term and is entitled for a performance related share in the project profit. In addition there is an arrangement fee for the debt and Meinl Bank is entitled for a banking fee for placing the equity with investors. Details are disclosed on pages 6/7.
The project is located in Ovenecka street 33 in the district Bubenec, at the border between Prague 6 and Prague 7. The project is situated just a two minutes walk from the Letenska Garden and the Stromovka Garden and the Old Town of Prague as well as the Mala Strana district can be reached by feet within 15 minutes as well.
Prague Bubenec belongs to the preferred living areas in Prague. The district offers a variety of day-to- day shopping opportunities and a wide range of services and the centre of Prague is still within walking distance. Due to the parks it is also an attractive location for families with children. In addition the location has an excellent accessibility by public traffic and an easy and fast access to the city‘s main arteries allows for comfortable and convenient travel by car.
Even though Prague 6 is a preferred residential district property prices in that area of Prague are still lower as in Prague 1 or in Prague Vinohrady. Due to the potential that prices will catch up with prices in adjusting areas an apartment in that part of Prague may be also attractive for end-buyers for investment purposes.
Purchase price before refurbishment including costs relating to the acquisition
Refurbishment costs incl. PPH project management and other costs Interest on debt
Total project costs
EXPECTED PROCEEDS FROM SALES OF APPARTMENTS
Total expected sales proceeds before costs relating to the sale and before taxation
2.900.000 270.000 5.990.000
The property shall be being acquired in form of a share deal, where a Meinl Bank subsidiary as trustee will on behalf of the equity investors be registered in the company register as holder of the project company. The purchase price including costs relating to the acquisition, fees to Meinl Bank for placing the equity with investors (3% on equity) and 1% debt arrangement fee amounts to around EUR 2.8 million. Based on a total usable area including the planned extension of 2,850 sqm this represents a purchase price of around EUR 950 per sqm.
The project Ovenecka 33 is a former hotel that will be transformed and re-developed into a residential building. The seller has already applied for the building permit for the current areas including a new underground parking garage and it is expected that this permit will be granted in September 2013. The application for the permit for the extension shall be filed when the permit for the current part has been granted. It is planned to create in total 19 apartments on the upper floors and commercial units on the ground floor that shall be sold to individual parties using the apartments either for living purposes or as investment. The seller had planned to sell the units in shell & core standard and he has signed already reservation contracts for 10 of the 19 flats. The project includes however also a reserve for the event that some buyers would prefer to acquire the flats completely ready to move in. The total development costs including project management fees and other costs are expected to amount to around EUR 2.9 million. As a result the total project costs including interest for partly debt financing will amount to around EUR 5.99 million.
After completion of the reconstruction the units will be sold to end-buyers, whereby based on current market conditions it is expected to achieve an average sales price of EUR 2,500/sqm in shell & core status resulting in total gross proceeds of around EUR 7.4 million. The net sales proceeds after costs relating to the sale, property transfer taxes and capital gain taxes are expected to amount to around EUR 6.67 million.